Canopy Growth (NYSE:CGC) has been talking about releasing a line of cannabis-infused beverages for years. So once the latest round of legalizations passed, the company quickly began making plans to launch its line of cannabis beverages. After all the hype, you’d think CGC stock would have taken off.
Canopy received a license for its 15,000 sq ft beverage facility in early November. And management announced its plans to launch its first line of cannabis-infused beverages in early January.
The lineup included 11 different beverages ranging from premixed canned beverages to a line of sparkling water drinks. Everything seemed good to go, until it wasn’t. Last week, Canopy Growth announced it was delaying the launch of its beverages.
Why the Delay?
The company stated that’s it’s revising its launch time while it works through the final details of the process. Management did not state when it expects the launch to take place.
CEO David Klein released a statement saying, “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.”
While management is happy with the progress Canopy Growth has made developing its beverage line, it needs more time to ensure it’s meeting the standards of its customers. The company doesn’t expect the delay to affect its 2020 revenue.
How is Wall Street Reacting to the News?
Wall Street is still on the fence when it comes to CGC stock. Of the 15 analysts currently reviewing the stock, nine recommend holding and six recommend it as a buy.
According to Jefferies analyst Owen Bennett, the announcement certainly won’t help Canopy Growth. He believes this latest delay will erode investor confidence in the company’s abilities.
However, RBC Capital Markets analyst Douglas Miehm said the announcement was surprising, but quickly reaffirmed his confidence in the company’s abilities. “The issues likely rest in translating the quality, taste, and consistency generated in a lab setting to large-scale commercial manufacturing,” Miehm added.
The Bottom Line on CGC Stock
In many ways, the delay is understandable. The company only had seven weeks to develop an entirely new product line.
And ultimately, the delay may not hurt the company’s revenue. The stock fell slightly after announcing the product delay but quickly rebounded.
But it is kind of embarrassing and it does impact the company’s credibility. In many ways, this situation is very typical of what we’ve come to expect from the current Canadian cannabis companies. So often, these companies over-promise and are then unable to meet the guidance they set for themselves.
And it remains to be seen how successful cannabis-infused beverages will be. Canopy Growth’s press release stated that these beverages will have “disruptive power” in the marketplace, but that’s an untested theory at this point.
And thanks to the product delay, we’ll have to wait a bit longer to find out whether or not it’s true.
As of this writing, Jamie Johnson did not hold a position in any of the aforementioned securities.
