Cannabis stocks are falling across the board Wednesday after MKM Partners said in a note that it expected the latest round of quarterly results to miss estimates.
"[The] next reported quarter will not show meaningful net sales acceleration," analyst Bill Kirk wrote. "Increased costs, without the hoped-for sequential revenue growth," result in "profitability that is likely to disappoint."
Kirk expects the Canadian cannabis market leader, Canopy Growth, (CGC) - Get Canopy Growth Corporation Report to reach profitability on an Ebitda basis by first-quarter 2021, a year behind the consensus forecast of profit based on Ebitda by 2020.
"We think a looming weak reporting season will gradually push consensus expectations toward ours," Kirk said.
Canopy Growth shares were falling 2.1% to $21.37.
"We are already beginning to see the cracks in Canada: Pricing is down and consumption per federal license is contracting," Kirk said.
"To us, this means the future presents a less profitable system than exists today."
Save 57% During Our Fall Sale. Join Jim Cramer's Action Alerts PLUS investment club to become a smarter investor. Click here to sign up and save!