When 2018 there was much expectation and most Canadian cannabis stocks began positioning themselves to reap the gains of the nascent sector. Most companies have been struggling with cash problems and although the coronavirus pandemic might have halted operations several operators have reported an increase in sales in the recent quarter.
Although the cannabis sector has been beaten down in the past year recent result and performance in the last few weeks suggests that there is hope going forward. Most Canadian cannabis stocks have lost most of their value but in recent weeks some have been showing strong recovery despite still being off their highs.
Aurora has right-sized as it chases positive EBITDA
One stock that has been on the rise is Aurora Cannabis (NYSE:ACB) since it reported inspiration results for the March quarter. The company’s sales were $54 million and the management indicated that they expect to report positive EBITDA by the September quarter. Its cash flows for the quarter were negative CA$46 million.
Over the last year the company has been cutting costs as it works towards posting a positive EBITDA. The company stopped construction of the Aurora Nordic 2 project in Denmark and the Alberta Aurora Sun. the company has been reworking its debt agreements and laid off 500 employees. With the cost reduction measures Wall Street is predicting that the company will generate revenue of CA$278 in fiscal 2020 and loss of CA$1 per share.
Canopy Growth among Canadian stocks with a strong balance sheet
Canopy Growth Corp (NYSE:CGC) is one of the Canadian cannabis stocks that are full of potential. Just like Aurora the company has also been cutting costs and has laid several employees and it permanently shuttered the Delta indoor and Aldergrove facilities and halted plans of bringing online the Niagara Lake facility. The company has cut its capacity by almost 45%.
Canopy Growth is in a strong position financially thanks to the backing of beer maker Constellation Brands (NYSE:STZ). The company is ahead of other peers after it launched its Cannabis 2.0 derivative products. Under the leadership of David Klein, right sizing and a strong balance sheet with $2.2 billion in cash the company is in a prime position to succeed.
Cronos has cash and investments for $1.3 billion
Another cannabis stock in a strong financial position is Cronos Group (NASDAQ:CRON) thanks to its support from Altria Group (NYSE:MO). This stock is expected to rebound in the second half thanks to its strong balance sheet with the company having around $1.3 billion in cash and investments. The strong cash position can help it weather the short term demand issues resulting because of Covid-19.
Also the huge cash balance gives Cronos adequate firepower that will help the company is investing in growth opportunities post coronavirus. This will help the company to leverage the growing surge in demand for cannabis thus paving way for massive growth in the coming quarters.