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On Friday, Canopy Growth (NASDAQ:CGC) (TSX:WEED) released its first-quarter financial results for the fiscal year 2022, ending on June 30, 2021.
Shortly after, Cantor Fitzgerald's Pablo Zuanic issued an analysis of the earnings, maintaining a Neutral rating for the Ontario-based company. Zuanic placed a 12-month price target of CA$30.5 ($24.3) against a price of $18.9 at the time of this writing. He highlighted 23% revenue growth in the first quarter of this year versus the same period last year.
Total sales of CA$136 million ($108 million) did not reach consensus of CA$151 million. The same occurred with adjusted gross margins of 21%, which fell behind consensus of 28%.
“The lack of profit margin and cash flow improvement is concerning to us,” Zuanic wrote.
Nonetheless, the analyst recognized that despite today’s miss, Canopy management has taken a holistic approach to improving domestic recreational sales.
The company still has March 2022 as a break-even EBITDA date.
Canopy’s acquisition of Supreme Cannabis Co. (TSX: FIRE) (OTCQX: SPRWF), which closed in late June, could help this goal by strengthening the company’s premium segment capabilities.
"We're continuing to drive cost savings and operational efficiencies across the company, and remain broadly on track to our target of $150-$200 million in fiscal 2022- fiscal 2023," Mike Lee, Canopy’s CFO said.
The company also acquired the Ace Valley cannabis brand in April.
“Other than a strong balance sheet and the backing of Constellation Brands, Canopy Growth still has to prove that it has the skills and capabilities to excel in the US and overseas – given mixed results in Canada so far, this is not obvious to us yet,” Zuanic concluded.
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