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Nov. 12, 2019, 6:54 a.m. EST

Cannabis earnings: How much worse can it get for underperforming weed companies?

After previous disappointments slashed large valuations, a swath of weed earnings is about to hit just ahead of reporting deadline

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By Max A. Cherney

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Aurora Cannabis Inc.

Aurora /zigman2/quotes/210559470/composite ACB -3.97%   /zigman2/quotes/203734337/delayed CA:ACB -2.99%  disappointed investors the last time earnings were reported, and the numbers are expected to get worse this time around.

As a result of the increased amount of weed available, sales of recreational cannabis are expected to decline by roughly 7% compared with the prior quarter, according to Azer. Azer wrote in a note that Aurora has said that its wholesale business — which delivered C$20 million in the fiscal fourth quarter — is unlikely to produce revenue for the fiscal first quarter.

The company originally targeted profitability on an “adjusted earnings before interest taxes depreciation and amortization” basis by the fourth quarter, but failed to come through.

Read: Aurora Cannabis covets California’s weed culture, but can’t pronounce one word correctly

“We forecast ACB’s loss to expand in 1Q20, driven by lower operating leverage from the reduction in revenue from the wholesale segment,” Azer wrote. The analyst added that she expected medical weed sales in Canada and abroad to be flat.

Analysts expect losses of 5 cents a share on sales of C$89.7 million, according to FactSet. Aurora is expected to release results after the market closes Thursday, and a conference call with analysts is set for 6 p.m. Eastern.

Canopy Growth Corp.

The world’s largest cannabis company by market value avoided tumult during the quarter more than it has in the past, and recently announced a product lineup for changing regulations that will allow sales of edibles, drinks and vapes in Canada. Azer notes that Canopy /zigman2/quotes/200603886/composite CGC -6.96%   /zigman2/quotes/202205609/delayed CA:WEED -3.64%  sales have mostly been flat since recreational legalization, and may remain so for a while.

“We would expect another similar quarter, normalizing for the 1Q20 oil adjustment, although we believe that the company is setting up for more robust growth in the December Q (3Q20), mostly reflecting the impact from newly added new stores,” Azer wrote.

See also: Drake is trying to trademark Canada’s pot warning label, and may be in for a fight

Azer also said that Canopy may pick up more medical patients from CannTrust Holdings Inc. /zigman2/quotes/201332942/composite CTST -10.03% , which has halted all weed sales after revelations surfaced that it had been growing weed in unlicensed rooms.

One new wrinkle to watch for: Canopy executives have said the company will move to reporting under U.S. generally accepted accounting principals, or GAAP, like Tilray. Currently, like most Canadian companies, Canopy reports the international financial reporting standards, or IFRS.

Wall Street expects second-quarter losses of 41 cents a share on sales of C$101.5 million, according to FactSet. Canopy is set to release financial results before the market opens Thursday, and will host a conference call at 8:30 a.m. Eastern. Acreage Holdings Inc. /zigman2/quotes/205165963/delayed ACRGF -9.74%  , which Canopy has purchased the right to buy in the future upon changes to marijuana’s legal status in the U.S., is set to report Tuesday after the market closes. Its conference call is scheduled for 8:30 a.m. Eastern on Wednesday.

Canopy Rivers Inc. /zigman2/quotes/214109402/delayed CA:RIV -1.05% , which was spun out of Canopy Growth because of changes in how Canadian exchanges viewed companies holding U.S. cannabis assets, is scheduled to report its results before the market opens Thursday, with a conference call at 10 a.m. Eastern.

The rest

• Sundial Growers Inc. /zigman2/quotes/213489825/composite SNDL -2.05%  reports earnings Wednesday after the closing bell. The call is at 5 p.m. Eastern. MarketWatch has previously reported the company had to return a half-ton of bad weed.

• Aleafia Health Inc. /zigman2/quotes/203485112/delayed ALEAF -6.41%   /zigman2/quotes/200214885/delayed CA:ALEF -5.66%  reports third-quarter results Tuesday before the opening bell and its call is scheduled for 8:30 a.m. Eastern time.

• Terra Tech Corp. /zigman2/quotes/201977259/delayed TRTC +0.53%  is expected to report earnings after the closing bell Tuesday and has scheduled a call for 4:30 p.m. Eastern.

• Charlotte’s Web Holdings Inc. /zigman2/quotes/212650907/delayed CA:CWEB -5.01%   /zigman2/quotes/205374221/delayed CWBHF -7.68%  is scheduled to release earnings before the opening bell Wednesday and has a call at 8 a.m. Eastern.

• Green Organic Dutchman Holdings Inc. /zigman2/quotes/206870535/delayed CA:TGOD -9.26%   /zigman2/quotes/204266798/delayed TGODF -11.83%  is expected to report results after the closing bell Thursday and has a conference call scheduled for Friday at 9 a.m. Eastern.

• The Supreme Cannabis Co. Inc. /zigman2/quotes/209645734/delayed CA:FIRE -8.82%   /zigman2/quotes/203819708/delayed SPRWF -13.46%  is expected to report earnings Thursday.

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$ 25.44
-0.96 -3.64%
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US : U.S.: NYSE
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N/A
Market Cap
$106.11 million
Rev. per Employee
$133,643
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/zigman2/quotes/205165963/delayed
US : U.S.: OTC
$ 4.01
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Feb. 27, 2020 3:59p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$305.20 million
Rev. per Employee
N/A
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/zigman2/quotes/214109402/delayed
CA : Canada: Toronto
$ 0.94
-0.01 -1.05%
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Feb. 27, 2020 6:26p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$182.36 million
Rev. per Employee
N/A
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/zigman2/quotes/213489825/composite
US : U.S.: Nasdaq
$ 1.43
-0.03 -2.05%
Volume: 816,298
Feb. 27, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
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Rev. per Employee
N/A
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/zigman2/quotes/203485112/delayed
US : U.S.: OTC
$ 0.37
-0.03 -6.41%
Volume: 716,313
Feb. 27, 2020 3:59p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$108.37 million
Rev. per Employee
N/A
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/zigman2/quotes/200214885/delayed
CA : Canada: Toronto
$ 0.50
-0.03 -5.66%
Volume: 707,005
Feb. 27, 2020 1:50p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$147.27 million
Rev. per Employee
N/A
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/zigman2/quotes/201977259/delayed
US : U.S.: OTC
$ 0.13
+0.0007 +0.53%
Volume: 526,323
Feb. 27, 2020 3:59p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$15.29 million
Rev. per Employee
$141,142
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/zigman2/quotes/212650907/delayed
CA : Canada: Toronto
$ 6.82
-0.36 -5.01%
Volume: 401,020
Feb. 27, 2020 1:49p
P/E Ratio
30.07
Dividend Yield
N/A
Market Cap
$704.84 million
Rev. per Employee
$298,445
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/zigman2/quotes/205374221/delayed
US : U.S.: OTC
$ 5.00
-0.42 -7.68%
Volume: 893,431
Feb. 27, 2020 3:59p
P/E Ratio
29.19
Dividend Yield
N/A
Market Cap
$531.66 million
Rev. per Employee
$229,925
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/zigman2/quotes/206870535/delayed
CA : Canada: Toronto
$ 0.49
-0.05 -9.26%
Volume: 1.95M
Feb. 27, 2020 1:27p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$168.88 million
Rev. per Employee
$10,924
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/zigman2/quotes/204266798/delayed
US : U.S.: OTC
$ 0.36
-0.05 -11.83%
Volume: 958,079
Feb. 27, 2020 3:58p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$128.19 million
Rev. per Employee
$8,428
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/zigman2/quotes/209645734/delayed
CA : Canada: Toronto
$ 0.31
-0.03 -8.82%
Volume: 1.70M
Feb. 27, 2020 1:48p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$120.54 million
Rev. per Employee
N/A
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/zigman2/quotes/203819708/delayed
US : U.S.: OTC
$ 0.23
-0.04 -13.46%
Volume: 911,467
Feb. 27, 2020 3:59p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$92.18 million
Rev. per Employee
N/A
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Max A. Cherney is a MarketWatch reporter based in San Francisco. Follow him on Twitter @chernandburn.

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