Canopy Growth stock tumbled over 7% Friday, a day after the world’s largest pot company reported that recreational pot sales in Canada declined from the previous quarter.

Canopy Growth Corp.

CGC, -8.12%

WEED, -7.61%

 reported Thursday fiscal fourth-quarter net losses of C$323.4 million ($245.2 million), or 98 cents a share, from a loss of C$54.4 million in the year-ago quarter. Much of that loss — more than C$130 million — was on paper, as Canopy had to account for the growth of its stock price in the first three months of the calendar year because of rules regarding the company’s convertible debt. Still, the company claimed an operational loss of C$174.5 million.

Revenue, net of excise taxes, rose to C$94.1 million from C$22.8 million in the year-ago period, and were up sequentially from C$83 million in the third quarter. According to FactSet, analysts on average modeled losses of C$95.2 million, or 25 cents a share. Net of excise taxes, analysts expected Canopy Growth to bank C$90.6 million in fourth-quarter revenue.

While overall revenue gained from the fiscal third quarter, when marijuana was officially legalized in Canada, recreational sales did not. Canopy said it took in C$68.9 million in the quarter from sales of recreational pot, down from C$71.6 million the quarter before, when legal sales began two weeks into the quarter.

When asked in the conference call Friday about the sequential decline, Canopy Growth co-Chief Executive Bruce Linton said that was a result of both the company’s production in prior quarters and the fact that bricks-and-mortar retail is slow to open in provinces such as Alberta and Ontario.

“Obviously when Alberta needed to pause, in their opinion, the additional licensing of stores and Ontario got going in April, that kind of made the platform static,” Linton said in the conference call. “What we’re seeing is a lot more stores opening obviously in Alberta and we’re seeing quite a bit more discussion and rumor about whether Ontario will do some more sooner. So the channel is growing.”

Also read: Canopy Growth’s quiet co-CEO on the pot company’s ambitions in the U.S. and more

In its announcement, the company stated that it was still ramping production of cannabis to meet demand, with harvest size doubling in its fiscal fourth quarter — the first calendar quarter — and expected to double again in the current quarter. Canopy claimed a gain of more than C$77 million in biological assets, or marijuana that was produced in the quarter but not sold, which boosts the bottom line.

Executives said Friday in the conference call they expect a fiscal first quarter harvest of 34,000 kilograms that will largely be sold in the second and third quarters. Linton said in the call that he expects about half the provinces will be able to launch edible products immediately on Dec. 16 when sales are set to begin, adding that the private companies involved are reacting more quickly than the government-run stores. Linton also said that the company believes it can hit a C$1 billion revenue “run rate” by fiscal fourth quarter 2020, that will mostly arrive from Canada sales.

Chief Financial Officer Mike Lee, who joined Canopy Growth from Constellation Brands Inc.’s

STZ, -1.08%

 said in the conference call that he plans to implement several changes to the company’s accounting policies. Executives said Canopy planned to issue segmented revenue in the future, are moving the company’s accounting policies to U.S.-generally accepted accounting principals and will attempt to integrate acquisitions more quickly, among other things.

Canopy announced results just minutes before after-hours trading closed in the U.S., and shares closed the extended session up 0.7%. The stock plunged more than 7% in morning trading Friday. The U.S.-listed stock ended the regular session Thursday up 2.2% at $43.71, which gave the company a market capitalization of $15.1 billion in U.S. dollars. Shares have gained 62.7% so far this year, as the S&P 500 index

SPX, -0.13%

 has increased 17.8%.

In April, Canopy Growth said that it planned to pay Acreage Holdings Inc. shareholders $300 million for the right to acquire Acreage in the future for $3.4 billion in stock. Shareholders from both companies approved the transaction Wednesday. Canopy has said it plans to license several of its brands to Acreage for the American market.

Part of the reason Canopy Growth was able to make such a substantial investment in the U.S. — at a time when American multistate cannabis companies are unable to easily access cash — is Constellation Brands’ $4 billion investment in the company. Constellation said Friday that it’s share of Canopy Growth’s fourth-quarter losses was $106 million, or $78.2 million after including tax benefits.

“If they didn’t have the cash then it would be unlikely they could do such a deal as it would be very difficult to raise capital in the debt markets for a right to buy when that rights not even certain anytime soon,” Jefferies analysts Owen Bennett wrote in a note to clients when the deal was announced.

For more: In ‘the marijuana ghetto’ at Davos, Canopy Growth found its American pot partner

Canopy Growth has been touting its investments in its U.S. hemp and cannabidiol, or CBD, operations since the farm bill passed last year. On Wednesday the company said that it has hemp or CBD operations in seven states with a full capacity of 4,000 acres. Currently, it is planing high-CBD hemp plants and industrialized hemp plants suitable for textiles, proteins and bioplastics.

In the conference call, CEO Linton said that in the long run, Canopy Growth will have the capacity to use its hemp facilities to grow and process marijuana once it’s legalized under U.S. federal law. For its current hemp and CBD operations, Lindon said that there are a number of states that will allow a “full spectrum” of CBD products including drinks, edibles — so long as Canopy doesn’t make health claims.

In the past three months, Canopy Growth’s U.S.-traded stock has fallen 7.3% as the S&P 500 index rose 3.6%.

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2019-06-21