Two cannabis groups are reporting Q2 earnings soon. The Cronos [CRON] share price gained 5.62% since the start of the year to 2 August, while the Canopy Growth [CGC] or “Canopy” share price fell 23.70% in the same period. However, both stocks have followed similar patterns to each other throughout the year. Both surged to a peak on 12 February, with the Cronos share price closing 124.06% up for the year at $15.55 while the Canopy share price reached $52.17, up 111.73%.
Both stocks then entered a period of steep decline, till 8 March when the Cronos share price closed at $9.44 and the Canopy share price at $30.86. After a short rally, the decline continued. On 13 May the Cronos share price was down at $7.18 and the Canopy share price at $22.12.
The stocks’ performance really began to diverge between the two companies on 28 May, when a rally for both saw the Cronos share price gain 15.22% on the previous day, but the Canopy share price only managed 5.54%. Both stocks have dwindled since and the Canopy share price has gained just 2.84% over the past 12 months, compared with the Cronos share price, which has gained 11.91%.
Sales hitting highs
Both Cronos and Canopy Growth are set to report their Q2 2021 earnings before markets open on 6 August.
Zacks analysts estimate that Cronos will report loss per share of $0.07, a 63.16% improvement on the equivalent figure from last year of $0.19 loss. CNN Money, however, is slightly more pessimistic, with a consensus estimate of $0.08 loss. Either way, both panels seem confident that Cronos will report smaller losses than Canopy, which Zacks expects to report EPS loss of $0.19, a 5.00% year-over-year improvement. By contrast, CNN Money’s panel expects Canopy’s earnings to fall 5.00% to $0.21 loss per share.
Zacks expects Cronos’s sales to come in at $18.68m, 89.07% above the $9.88m generated a year ago. CNN Money is significantly more pessimistic, with a consensus sales estimate of $15.3m. Canopy is forecast by Zacks to generate $127.78m in sales, 48.74% up from last year’s equivalent figure of $85.91m, while CNN Money’s consensus estimate puts Canopy’s sales at $124.0m.
$127.78million
Canopy Growth's forecasted Q2 sales
Between both panels, there is a lot of variance in sales forecasts. Zacks range of estimates for Cronos runs from $14.00m to $21.10m, so the range is more than 50% of the lower bound. CNN’s is slightly narrower, with a low estimate of $14.0m and a high estimate of $18.0m. Zacks estimates for Canopy’s sales stretch from $112.75m to $140.35m, while CNN Money’s for Canopy ranges from $112.8m to $136.2m.
Zacks forecasts Cronos’s sales to increase 80.74% to $84.44m through 2021 and to grow a further 86.43% in 2022 to $156.41m. Losses are expected to total $0.73 per share for 2021 before gaining 71.18% to $0.21 per share in 2022. Canopy, meanwhile, is forecast to see sales grow 43.67% to $622.64m in the current financial year (to March 2022), and a further 41.49% to $881m the year after. Earnings are expected to gain 72.22% this year to $0.60 loss per share, and another 70.83% the following year to $0.17 loss.
Harvesting gains
In 2021, both the Cronos share price and the Canopy share price have lagged behind the broader cannabis industry, which on the whole is enjoying a buoyant run.
The Global X Cannabis ETF [POTX] gained 16.36% in the year to 2 August, while the ETFMG Alternative Harvest ETF [M] gained 24.60%. Both funds recorded the same dramatic spike in February that the Cronos share price and the Canopy share price experienced, a consequence of the spate of meme trading that led to a short squeeze on cannabis stocks.
Canopy is POTX’s top holding with 10.10% of net assets as of 2 August, while Cronos comes in third on the list with 9.16%. Canopy and Cronos come third and fourth in the list of MJ’s top holdings, with 6.96% and 6.28% respectively as of 31 July. The relative overperformance of fellow cannabis and pharmaceutical company Tilray [TLRY], which gained 76.88% in the year to 30 July, may explain MJ’s overperformance compared to POTX. Tilray is MJ’s second-largest holding but POTX’s fourth-largest (although its weightings are, interestingly, similar in each: 8.75% in MJ
Disclaimer Past performance is not a reliable indicator of future results.
CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.
CMC Markets does not endorse or offer opinion on the trading strategies used by the author. Their trading strategies do not guarantee any return and CMC Markets shall not be held responsible for any loss that you may incur, either directly or indirectly, arising from any investment based on any information contained herein.
*Tax treatment depends on individual circumstances and can change or may differ in a jurisdiction other than the UK.
Continue reading for FREE
- Includes free newsletter updates, unsubscribe anytime. Privacy policy
