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While most equity markets are trading near record highs, Canadian cannabis companies have lost significant momentum in the last 30 months. Domestic marijuana producers are trailing the broader markets for a variety of reasons, including slower-than-expected demand. Cannabis giant Canopy Growth (TSX:WEED)(NYSE:CGC) has been rangebound in 2021 but is down 71% from all-time highs.
Canopy Growth continues to burn cash
One of the largest cannabis companies in the world, Canopy Growth has seen its revenue rise from $77.94 million in fiscal 2018 to $546 million in fiscal 2021 ended in March. However, its operating loss has also widened from $78.87 million to $586 million in this period. Bay Street now expects the company’s sales to rise to $703 million in 2022 and to $944 million in 2023. Comparatively, its loss per share is forecast to narrow from $4.69 in 2021 to $0.42 in 2023.
In the June quarter, Canopy Growth increased sales by 23% year over year to $136.2 million. But it was lower than the revenue of $148.4 million for the quarter ended in March 2021, which is not in line with the robust growth of the Canadian cannabis industry this year.
Canopy’s asset impairment charges stood at $89.2 million in fiscal Q1 of 2022, significantly higher than the year-ago figure of $12.8 million. Another area of concern for investors is Canopy’s cash burn that stood at $165.8 million in Q1 compared to $118.5 million in the prior-year period.
Despite the stock’s massive pullback since early 2019, Canopy Growth is valued at a forward price-to-sales multiple of almost 12 times given its market cap of $8.36 billion. While Canopy Growth stock will remain volatile going forward, we can take a look at another cannabis company south of the border that is positioned to crush the broader markets in the upcoming decade.
Trulieve Cannabis is down 49% from record highs
Shares of cannabis giant, Trulieve Cannabis (CNSX:TRUL) are also down 50% from record highs. In the second quarter of 2021, Trulieve increased sales by 78% to $215.1 million, while adjusted EBITDA rose by 55% to $94.8 million. Trulieve has, in fact, increased sales from $103 million in 2017 to $521 million in 2020.
Wall Street forecasts sales to touch $902 million this year and $1.34 billion in 2022. Its earnings per share are also estimated to improve from $0.53 in 2020 to $1.41 in 2022.
A key revenue driver for Trulieve’s revenue growth is the company’s upcoming acquisition of Harvest Health for $2.1 billion, which will also add 42 dispensaries to the company’s portfolio. Harvest Health sales rose to $231.4 million in 2020, up from $116.78 million in 2021.
Trulieve sales and net income have both surged by 89% year over year in the first six months of 2021 to $408.9 million and $71 million, respectively. Comparatively, its adjusted EBITDA has risen by 87% to $185.7 million in this period.
Trulieve enjoys a leadership position in Florida’s medical marijuana market with a share of 46%. It is now looking to expand to other states, which will allow the company to grow revenue and improve profit margins in 2021 and beyond.
