Canopy Growth the Canadian cannabis cultivator have had their revenue estimates slashed by Scotiabank analysts, who have warned that expectations for the cannabis sector are far too optimistic given the “tepid post-legalization” sales figures. Ben Isaacson and Oliver row pulled back their revenue estimation for Canopy Growth’s fourth quarter by over 25% to $87 million USD. The Canadian based cannabis giant reported $83 million USD in net revenue in the period ending December 31st 2018, which year to year was showing a 283% increase.
The dreary outlook of Canopy Growth’s sales outlook is contrary to remarks made last week by Constellation Brands CEO Bill Newlands, who is calling for Canopy Growth to hit $1 billion USD in annual sales, over the course of 2019 The US beer and wine maker holds a 38% ownership stake in Canopy. With the recent downgrade from Scotiabank analysts Canopy Growths share price fell 1.98% down to $55.04 on Thursday. Scotiabank has maintained their ‘sector perform’ rating on the company with a one year price target of $56 USD per share.
Isaacson and Rowe’s take on the cannabis industry, which is still somewhat a new sector extends beyond its largest player by market capitalization. The Scotiabank analysts said investors have been looking too far forward, past the ‘teething pains.’ Since the onset of legalization of recreational cannabis sales in Canada, they are expecting lower sales in January than in December, now that the dust has settled, and this trend can be seen to continue into February with more declines. This is expected due to far fewer than expected physical store locations being opened. In the analysts note to investors this week they said “We see street estimates being far too high, which we expect to result in large earnings misses next quarter,” they continued “We expect aggregate calendar year first-quarter 2019 cannabis revenue to be below fourth-quarter 2018, while the street is looking for a 35 per cent increase.”

Harold Wright – Middleton Associates