We noted from last weeks activity in the cannabis space, that Canopy shares (CGC) were on track for their biggest gain in 18 months, after the company posted a narrower-than-expected fiscal third-quarter loss and revenue that rose above forecasts, amid strength in business-to-consumer sales. The company reported a net loss of 35 cents a share, on net income of C$75 million, which beat the consensus for a loss of 52 cents a share.  Shares rallied on large volume as short covering and new 2020 buyers came back into the stock.

Net revenue rose 49% to C$123.76 million ($93.46 million), above the consensus of C$105.0 million. Recreational business-to-business cannabis sales fell 11% to C$53.5 million, as a 42% increase in dry cannabis sales was offset by an 86% drop in oil and softgels.

Recreational business-to-consumer cannabis sales increased 32% to C$15.2 million, as dry cannabis sales grew 24% and oil and softgels jumped 183%. Canadian medical cannabis sales fell 7% to C$14.8 million and international medical sales rose nearly sevenfold (up 593%) to C$18.7 million.

The company’s path to profitability remains unclear and Kirk is waiting for the earnings call for details on Cannabis 2.0, the second phase of Canadian legalization that allows derivatives, including edibles and beverages. On the company’s earnings call with analysts, new Chief Executive David Klein said he has started a full review of the company’s footprint to help define a path to profitability. The executive, who came to Canopy from its biggest shareholder Constellation Brands Inc., said the company will take the first steps to right-size the business in the next 90 days.

“[W]e need to align our resources and investments with the size and growth rate of the market as it exists today,” Klein said, according to the transcript.

Aurora Cannabis (ACB) reported a more than C$1 billion quarterly loss,  news that was widely expected, however, after Aurora unveiled a major overhaul of its management and operations last week. The company’s new interim Chief Executive Michael Singer is now tasked with turning the company around, instilling a culture of discipline and driving it to profitability.

CannTrust Holdings Inc.’s stock rose 8%, after it said it plans to submit documents to regulators that detail how it has fixed the issues at its Niagara, Ontario facility and in support of the reinstatement of its license there. The company said that it plans to finish efforts to fix a second site at Vaughan, Ontario in the second quarter of 2020. CannTrust was growing pot illegally at the Niagara facility, and the Vaughan facility was not compliant with standards, regulators have alleged.

U.S. cannabis stocks also got a boost after Cantor Fitzgerald initiated coverage of 10 U.S. multistate operators (MSOs), saying they are attractively valued with solid fundamentals.

“The current regulatory environment in key large U.S. “restricted” states provides a unique opportunity for U.S. MSOs to build out assets with a limited pool of competitors and be in a position of strength when full legalization comes,” analyst Pablo Zuanic who wrote in a note to clients. “The boom and bust seen in Canadian stocks has, unwarrantedly, dragged down U.S. MSOs also and masked strong underlying growth trends.”

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