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Why Canopy Growth Stock Jumped Today

By Joe Tenebruso – Aug 10, 2020 at 6:51PM

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The cannabis leader's turnaround strategy is taking hold.

What happened

Shares of Canopy Growth (CGC 3.94%) climbed 7.8% on Monday, following the release of the marijuana producer's better-than-expected fiscal 2021 first-quarter results. 

So what 

Despite the coronavirus-related challenges that have weighed on recreational cannabis sales in its core Canadian market, Canopy's revenue rose 22% year over year to $110.4 million Canadian ($82.7 million). The gains were fueled in part by higher medical marijuana sales, which more than offset a decline in adult-use sales.

A rising stock chart is superimposed on cannabis plants.

Canopy Growth's stock rose on stronger-than-anticipated earnings results. Image source: Getty Images.

Better still, cost reductions are helping to reduce Canopy's cash burn. The cannabis company generated a net loss of CA$0.30 per share, a significant improvement from the CA$0.54 per-share loss it posted in the prior-year quarter, and far better than the CA$0.35 loss analysts had expected. 

"Following our previously announced restructuring actions, we have substantially reduced our expense and cash burn in this quarter in addition to reducing headcount by over 18% since the beginning of this calendar year," CFO Mike Lee said in a press release. "Our marketing and R&D investments are being reallocated to programs with high-return potential in order to drive sales."

Now what 

Canopy's cannabis-infused beverages are off to a strong start with a No. 1 market share in Canada. Canopy is also gearing up for a push into the U.S. market with a focus on cannabidiol (CBD) products. Recent partnerships with National Football League star Patrick Mahomes and popular media personality Martha Stewart should help to drive Canopy's growth in the year ahead.

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Stocks Mentioned

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CGC
$2.85 (3.94%) $0.11

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