Bruce Linton tempers expectations as larger licensed producers Canopy Growth, Aurora Cannabis brace for disappointing earnings reports this week
Canopy Growth (TSX:WEED) (NYSE:CGC) CEO Bruce Linton continued his months-long media tour with a stop by Yahoo Finance on Thursday, in what appeared to be an attempt to temper expectations as his company prepares quarterly earnings reports for later this week.
Despite a brilliant upturn for marijuana stocks in January that saw Canopy shares gain 76 percent, Linton suggested to the industry that a bubble was on the horizon.
“I think it’s entirely true that cannabis has become frothy and I’m not saying that necessarily specifically about our [stock],” Linton told Yahoo Finance on Thursday. “But you could list 85 or 90 names that are probably publicly listed that I as the operator of one of the first and most dominant [companies] have never heard of those companies.”
— Canopy Growth (@CanopyGrowth) January 16, 2019
“I think you’re going to find that the bubbles break with the small ones first because there’s not actually a probability that they’re going to put a billion dollars of revenue up or that they’re going to have a major scientific breakthrough or they’re going to have a 30-per-cent market share,” he continued.
Canopy has been the darling of the marijuana stock market over the past 60 or so days, more so since the company announced a $150 million investment in the U.S. hemp industry in New York state. That number was recently upped to $500 million as Canopy announced it would expand its operations to several other states.
Bruce Linton on Yahoo Finance
Major losses on the horizon for Canopy, Aurora as investors prepare for earnings reports
Still, analysts predict major losses for Canopy and fellow licensed producer Aurora Cannabis (NYSE:ACB) ahead of expected earnings reports this week. According to some experts, Canada’s top two cannabis companies may be held back by their extensive investments in smaller weed companies in the sector.
As MarketWatch noted late last week, despite the banner start to the year for marijuana stocks, most big names in the sector have seen losses since cannabis went legal in Canada on October 17.
Horizons Marijuana Life Sciences Index ETF (HMMJ.TO), is down 14 percent, while Tilray Inc. (NASDAQ:TLRY) lost around 40 percent on top of watching its lock-up shares expire recently. Even Canopy Growth, with its big numbers in January, has fallen 9.8 percent overall since mid-October.
In fact, only Cronos Group (NASDAQ:CRON) has been in the black over the oast few months, a result of the company’s groundbreaking deal with Altria Group which saw the tobacco giant invest $1.8 billion.
According to reports, Aurora Cannabis expects sales in the neighborhood of CA$50 to CA$55 million ($37.6 million to $41.4 million), far less than investors were hoping following the legalization of cannabis in Canada. Aurora has significant investments in a number of cannabis entities throughout the industry.
According to MarketWatch, analysts over at FactSet predict losses of CA$0.6 ($0.45) a share and sales of CA$51.8 million ($38.99 million) for Canada’s number two cannabis company. Those same analysts are calling for sales of CA$84.7 million ($63.76 million) with losses of CA$0.17 ($0.13) a share for Canopy Growth.
Speaking to Yahoo Finance, Linton also wondered why more people weren’t investing in Constellation Brands because of Canopy.
“I don’t understand why everybody isn’t buying Constellation stock,” he said. “Their stock traded down since they’ve put the money in [to Canopy] to where they’ve almost made that free.”
Header Image: Canopy CEO Bruce Linton sells cannabis on October 17/Source: Facebook