Canadian weed giant Canopy Growth (CGC) on Friday said it would delay the launch of its cannabis beverages, saying "the scaling process is not complete," just weeks after saying it expected the drinks to be available early this month. Canopy stock rose, along with most marijuana stocks.
Friday's announcement marks yet another forecasting stumble for what is still a new industry, and could raise further trust issues after last year's steep slump for marijuana stocks. Beverages and other new products — like vapes and edibles — are finding their way to Canada's pot-shop shelves after regulations took hold last year.
The company on Friday said it remained "very confident in the underlying beverage science and in its ability to scale production." Canopy received a license for its beverage-producing facility in late November.
"Canopy has had seven weeks to work with THC in the brand-new beverage facility to scale processes and IP it has developed in the R&D environment," said David Klein, Canopy's new CEO. "In order to deliver products that meet our customers' high standards we are electing to revise the launch date while we work through the final details."
Canopy didn't provide a new timeline but said it didn't believe the delay would have a "material impact" on its fiscal 2020 sales. Management plans to provide an update on the matter when fiscal third-quarter earnings come out.
Canopy was not immediately available for comment. Neither was Constellation Brands (STZ), the parent of Corona that has invested $4 billion in Canopy.
Klein is Constellation Brands' former CFO. When Canopy received the license for its 150,000-square-foot beverage facility in November, the marijuana producer praised Constellation for helping Canopy plan out the building, equipment design and staffing for the facility.
Marijuana Legalization 2.0 Stumbles
But Wall Street was not so forgiving, suggesting the delay is a self-inflicted problem.
"We also note there appears no excuse for this announcement," Jefferies analyst Owen Bennett said in a research note, "with the delay caused by lack of clarity internally rather than unforeseen external factors, which is even more worrying."
Canopy, he noted, has already backed away from its full-year sales target of 1 billion Canadian dollars. Bennett also said that he didn't think Canopy would be able to hit its year-end margin goal of 40%, either.
Bennett also said that listings of the newly legal products on the Ontario Cannabis Store, the online weed shop run by the government in Ontario, suggested "an underwhelming rollout to date."
Those products appeared on the site on Thursday. He said that of the 77 products launched on the site, 45 were out of stock. Canopy had two chocolate products and new beverages and vapes.
By comparison, Auxly had 20 products. Aurora Cannabis (ACB) had 13. Aphria (APHA) had eight. Cronos Group (CRON) had seven.
"Considering the amount of time with which to prepare, the balance sheet strength (and investments to date), and the backing of Constellation, we believe the market would have been expecting evidence of a more robust rollout," Bennett said. "And on beverages, this was supposed to be their key differentiator that they have spent significantly behind."
Cannabis beverages aren't nearly as popular as buds and vapes, and make up only a small portion of the legal market.
Marijuana Stocks Rally
Canopy Growth stock rose 2.4% to close at 24.89 in the stock market today. The stock is off lows reached in November. But its Composite Rating is a weak 12. Its EPS Rating, similarly, is 17.
Marijuana stocks have moved well behind the broader market as they continue to lose money, or run out of money, and fail to live up to others' — and their own — financial forecasts.
Among other marijuana stocks, Tilray (TLRY) rose 2.6%. Cronos Group jumped 5.2%. Aurora Cannabis stock dipped 0.9%. Aphria gained 1.5%.