What happened
After posting the latest in a long string of discouraging quarterly earnings reports, Canopy Growth (CGC 2.41%) saw its share price dive by almost 8% on Thursday. That was notably worse than the generally flat performance of the S&P 500 index.
So what
That morning, Canopy Growth divulged that its net revenue inched up by 3% year over year to land at nearly 109 million Canadian dollars ($81 million) for its first quarter of fiscal 2024. Net loss narrowed considerably, to CA$41.8 million ($31.1 million) from the year-ago deficit of over CA$2.1 billion ($1.6 billion). The latest shortfall equated to CA$0.07 ($0.05) per share.
Although both key line items showed improvement, little about the latest set of earnings comforted investors. In one particularly alarming passage in the Canadian marijuana company's 10-Q regulatory filing, it wrote that its current financial struggles "raise substantial doubt about the Company's ability to continue as a going concern," for at least the next year.
That's not only because of Canopy Growth's lengthening series of bottom-line losses. In the 10-Q the company wrote for the second quarter in a row that it has "material" debt obligations coming due in the near future, and -- as ever -- will need additional funding to maintain its operations.
However, its habit of issuing fresh stock to raise capital has diluted shareholders considerably, and its ability to secure new borrowings could be very limited.
Now what
Meanwhile, the tough conditions of the Canadian weed market are unlikely to improve. Competition is heavy, and the pervasiveness of black-market product badly affects licensed producers and sellers like Canopy Growth. The future continues to look dim for this company.
