Pot producer Canopy sinks after disappointing quarterly results

© Reuters. FILE PHOTO: A sign featuring Canopy Growth Corporation's logo is pictured at their facility in Smiths Falls, Ontario, Canada, January 4, 2018. REUTERS/Chris Wattie

By Ruhi Soni

(Reuters) -Canopy Growth Corp on Friday reported a fourth-quarter loss that was far bigger than analysts had feared as stiff competition in Canada's fledgling cannabis market choked demand, sending the company's shares down 15%.

In a country that legalized marijuana three years ago, options available to customers are galore, including cheaper black markets, which is hurting Canopy that had first aimed to turn profitable by the second half of 2022.

"Not that demand is down, the competition is still too high," said Canaccord Genuity's Matt Bottomley.

Canopy, in its bid to turn profitable, has shifted its focus to premium high-potency offerings as well as cut costs through layoffs, exiting some international markets and store closures.

Canopy expects to achieve a positive EBITDA in fiscal 2024, excluding certain investments.

"We believe even this lackluster guidance is aggressive, and our outlook does not suggest the company can achieve positive EBITDA with the current cost structure," wrote Stifel analyst Andrew Carter in a note.

Canopy said it was withdrawing its medium-term targets for revenue and cash flow that it had set in February last year.

"Shifting consumer preferences, low barriers to entry in the Canadian recreational market, and slow regulatory progress across Canada and U.S. make it difficult for us to provide near- to medium-term targets," Chief Financial Officer Judy Hong said.

The company posted adjusted core loss of C$122 million for the fourth quarter ended March 31, compared with C$94 million a year earlier. Analysts were expecting a loss of C$63.80 million, as per Refinitiv data.

"What's translated down into operating losses, is a lot more than all the analysts, myself included, were anticipating," Bottomley said.

Canopy was also hit by asset impairment and restructuring costs of over C$241 million.

Revenue shrunk 25% to C$111.77 million, also missing estimates.

($1 = 1.2745 Canadian dollars)