Tim Seymour On Canopy Growth's Earnings: 'A Huge Exhale'

St. Valentine came bearing gifts for Canopy Growth Corporation CGCWEED shareholders, as the stock traded up following strong results for the third-quarter of fiscal 2020.

Net revenue of CA$123.8 million ($93.5 million) was up 49% year-over-year, but the adjusted EBITDA loss of CA$92 million was higher than last year’s CA$74.8.

Over the course of the third quarter, Canopy Growth named David Klein as its new CEO, cemented its leading position in the Canadian retail market by boasting a projected 22% of the adult-use market share, and concluded the first shipments of cannabis edibles and JUJU Power 510 batteries.

Seymour’s Take

Tim Seymour, portfolio manager of the Amplify Seymour Cannabis ETF CNBS and co-host of CNBC’s “Fast Money,” has been bullish on Canopy for a while. In fact, it represents the biggest holding in his fund.

Chatting with Benzinga, he qualified the earnings report as a “huge exhale on what has been a difficult few weeks for Canadian LPs as the still the most important company in the sector beats on top line and margin.”

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Seymour was most impressed by Canopy’s gross margin improvement. The margin rose from 13% to 34%, beating consensus estimates of 25%. The company attributed this to “significant write-offs over previous quarters and higher selling prices this quarter on 2.0 products,” Seymour explained.

He then moved on to the top-line beat, driven by a combination of gross cannabis revenues (+18%) and “other” revenues, “including major contributions from accessories and skin care lines.”

Also worth noting, Canopy ended this fiscal quarter with $2.3 billion in cash on its balance sheet. This is “a king’s ransom in this market at a time when assets are trading at discounts to NAV,” Seymour told Benzinga.

“With a fiscally-focused, former Constellation Brands CFO at the helm, this company should be well positioned for the next round of asset allocation.”

After a few tough weeks where major Canadian LPs announced executive changes, mass layoffs, and poor financial results, Canopy’s report is encouraging.