When Canopy Growth (WEED) (CGC) reports its third-quarter earnings next week, we’ll see if the company can maintain its margins. The competition has heated up. Cannabis players will have to deal with pricing pressures to gain market shares.
Canopy Growth plans to introduce several products this year. More profit is expected to come from unique differentiated products, which command a premium. Canopy Growth has boasted about its intellectual property portfolio, which will enable it to drive the innovation and introduction of cannabis-derivative products. Read New Formats Canopy Growth Plans to Introduce to learn more.
Canopy Growth is expected to report a gross margin of ~40%, which will likely contract from 58% YoY (year-over-year). Sequentially, the company’s gross margins are expected to expand from 28%. Recently, OrganiGram (OGRMF) reported its earnings and saw a smaller gain in sales YoY. As a result, the company’s gross margin increased to 75% as a percentage of sales in the first quarter—compared to 25% in the first quarter of 2018.
In contrast, Canopy Growth’s peer (HMMJ) Aphria (APHA) reported a contraction in its gross margin to 46.9% from 67.7% YoY.
Next, we’ll discuss Canopy Growth’s EPS expectations.