These Marijuana Stocks Reflect Escalating Corporate Clampdown On Industry $CGC $STZ $HEXO
Canadian cannabis giant Canopy Growth (CGC) on Thursday appointed the CFO of Constellation Brands (STZ), its biggest investor, as its new board chair, while rival Hexo (HEXO) crashed after the company withdrew its outlook for the next fiscal year. Marijuana stocks fell.
Taken together, the two announcements reflect the escalating corporate clampdown on money-losing marijuana stocks and the difficulties of Canada's rollout of legal recreational weed. Hexo on Thursday said it would focus more on profitability. Canopy in recent weeks has said roughly the same thing.
Canopy said that the CFO, David Klein, would become chair of its board immediately. He joined the board as a director last year, as part of Constellation's agreement to invest $4 billion in the pot producer.
The investment deal also brought to Canopy's seven-seat board three other higher-ups from Constellation. Constellation, a beer and wine company, is best known for distributing beers like Corona and Modelo.
The shuffling within Canopy's board announced Thursday will strengthen Constellation's influence over Canopy, as Wall Street ratchets up pressure on the industry to get out of the red.
John Bell, who served as interim chair, will remain a director, Canopy said on Thursday. Bell became chair after Canopy's board ousted former co-CEO Bruce Linton in July.
Shortly before the departure of Linton — a charismatic, media-friendly figure in North America's cannabis industry — Constellation said it was "not pleased" with Canopy's most recent round of results. The company in June reported a far steeper loss than analysts expected.
Canopy Growth Stock, Marijuana Stocks
Canopy Growth stock lost 3.7% in the stock market today. As with other marijuana stocks, its ratings from IBD are weak. Those ratings are weak because the industry has lost money to expand. Sales have also come up short of expectations. Canopy Growth has a Composite Rating of 5 out of a best-possible 99. Its EPS Rating, which measures profit growth, is a worst-possible 1.
Among other marijuana stocks, Aurora Cannabis (ACB) fell 2%. Tilray (TLRY) edged 0.8% lower. Cronos Group (CRON) fell 1.5%. Aphria (APHA) lost 3.7%.
Hexo stock nose-dived 19%.
Hexo's Outlook Cloudy
Hexo said it would withdraw its fiscal 2020 outlook, citing an array of "uncertainties" in the business.
Among them: A thin supply of pot shops in Canada, as well as lack of regulatory clarity from area to area. The company also said decisions in different jurisdictions to "limit the availability and types of cannabis derivative products" had also made doing business unpredictable.
"Slower than expected store rollouts, a delay in government approval for cannabis derivative products and early signs of pricing pressure are being felt nationally," the company said in a statement. "The delay in retail store openings in our major markets has meant that the access to a majority of the target customers has been limited."
New derivative products, like vaping devices, edibles and beverages, are set to become available near the end of the year.
The company said it expected net sales for the fiscal fourth-quarter to come in at $14.5 million and $16.5 million. Hexo said it expects full-year net sales of around $46.5 million-$48.5 million.
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