By Ciara Linnane, MarketWatch
Cannabis stocks fell for a third straight session on Wednesday, as Tilray’s third-quarter earnings failed to light a fire under the battered sector.
Tilray shares /zigman2/quotes/209129655/composite TLRY +2.64% slid 1.3% as analysts weighed in on its report with Benchmark analyst Mike Hickey slashing his price target in half to $40 from $80.
“We remain cautious on the Canadian regulatory construct, and expect on-going near term supply and distribution constraints,” the analyst wrote in a note to clients. He maintained his buy rating on Tilray stock.
MKM analyst Bill Kirk said where other cannabis companies have missed on the top and bottom line, Tilray only missed on the bottom line.
“We like Tilray’s strategy around: 1) entering the U.S. via hemp seed food products, which serves as a launch pad as regulations change; 2) cultivating in Portugal to service the European markets; and 3) being open to less capital intensive raw material sourcing,” Kirk wrote in a note to clients. The analyst has a neutral rating on Tilray stock, which has fallen 69% in 2019.
Cronos stock /zigman2/quotes/206842762/composite CRON +5.17% /zigman2/quotes/202715342/delayed CA:CRON +5.47% fell 6%, after Kirk cut his fair-value estimate to C$12 from C$14 in note titled, “Cronos doesn’t find Canada exciting, neither should investors.”
The note came after the company’s third-quarter earnings showed a profit, thanks to a one-time gain, but revenue that missed estimates. “To frame the small revenue figures another way: Cronos nearly earned as much in interest income (C$11.7mn) from the Altria cash as it generated from selling product (C$12.7mn),” he wrote in a note.
Canadian securities regulators announced Tuesday that they expect cannabis companies to strengthen corporate governance disclosures, including in instances where executives have holdings in companies that are acquired.
“As the market has expanded, many cannabis issuers and their directors and executive officers have participated in the financing of other cannabis issuers, resulting in higher than usual crossover of financial interests,” the Canadian Securities Administration said in a release.
The news comes after MarketWatch’s Max A. Cherney reported on a deal in which Cronos paid $300 million for CBD company Lord Jones which was partly owned by a fund co-founded by Cronos CEO Michael Gorenstein, and board member Jason Adler, giving them about 40% of the purchase price.
Charlotte’s Web shares /zigman2/quotes/205374221/delayed CWBHF +0.09% /zigman2/quotes/212650907/delayed CA:CWEB +0.09% fell about 6%, after the company reported third-quarter earnings that showed it swung to a loss while revenue fell from the second quarter and we below estimates. The company said it had a net loss of $1.3 million, or 1 cent a share, after income of $1.8 million or 2 cents a share, in the year-earlier period. Revenue came to $25.1 million, up from $17.7 million. the FactSet consensus was for EPS of 5 cents and sales of $31.9 million.
Elsewhere in the sector, market leader Canopy Growth Corp. /zigman2/quotes/200603886/composite CGC +2.43% /zigman2/quotes/202205609/delayed CA:WEED +2.84% was down 2.5%, Aphria Inc. /zigman2/quotes/207425803/composite APHA +1.54% /zigman2/quotes/205566616/delayed CA:APHA +1.62% was down 5.4% and Aurora Cannabis /zigman2/quotes/210559470/composite ACB -0.93% /zigman2/quotes/203734337/delayed CA:ACB -0.72% was down 1.7%.
The ETFMG Alternative Harvest ETF /zigman2/quotes/204332491/composite MJ +0.32% was down 2% with 27 of its 36 constituents trading lower. The Horizons Marijuana Life Sciences ETF /zigman2/quotes/208856346/delayed CA:HMMJ +0.93% was down 2.6%. with 42 of its 54 member stocks lower.