Today, Canadian cannabis company Canopy Growth (NASDAQ:CGC) has continued to drop throughout the day. At the time of writing, CGC stock is currently down nearly 13% from yesterday’s close.
Indeed, this daily price action follows the longer-term trend with CGC stock. Since hitting its 52-week high earlier this year, Canopy Growth has been on a continuous decline. Today, CGC stock is now approximately 75% below its earlier highs, as investors appear unwilling to touch cannabis stocks right now.
There are a number of reasons for this. Demand for legal cannabis and cannabis-related products simply hasn’t materialized as expected. As with other hypergrowth areas of the market, if the results don’t match up with expectations, investors can be left holding the bag. Such appears to be the case with Canopy Growth right now.
Let’s dive into what’s driving shares of CGC stock lower today.
CGC Stock Plummets Following Disappointing Earnings
Today, Canopy Growth announced second-quarter earnings, much to the chagrin of investors. These earnings were far worse that expected, highlighting what appears to be deteriorating demand for cannabis.
Wait, what? Weed sales dropped?
Well, legal weed sales within Canopy Growth’s system did. The company reported net revenue that was 3% lower on a year-over-year basis. For what was supposed to be a hypergrowth stock, these numbers are more than disappointing.
Additionally, the company reported another bottom line loss of -C$16 million. Free cash flow also came in at -C$101 million. These numbers are less than flattering for a company that’s been working on becoming profitable.
Now, there was some good news in this earnings report. Canopy Growth announced the launch of more than 40 new SKUs during this past quarter. Additionally, the company’s planned acquisition of Wana Brands is a big move into the edibles space. As a Canadian cannabis producer, Canopy Growth doesn’t have much exposure to the U.S. market. Accordingly, investors are looking at the Wana deal as a key driver of growth in the U.S. market.
That said, these numbers speak for themselves. Investors looking for growth stocks simply appear to be rotating into other names right now.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.