Marijuana Stocks: Why Canopy Growth (TSX:WEED) Is Beating Aurora Cannabis (TSX:ACB)

Canopy Growth Corp (TSX:WEED)(NYSE:CGC) and Aurora Cannabis Inc (TSX:ACB)(NYSE:ACB) are two of the biggest marijuana stocks by revenue and market cap. With a combined $173 million in gross revenue in their most recent quarters, they control the lion’s share of the Canadian medical and recreational pot markets. Both companies are also rising forces on the world stage, leading the group of Canadian companies that are increasingly dominating the global cannabis market.

In light of this, it’s no surprise that Canopy and Aurora have rewarded investors richly over the years, with both companies gobbling up many thousands of percentage points since their IPOs. As two of the fastest-growing companies in a market where even the weakest stocks usually grow revenue by 100% year over year, Canopy and Aurora are high-growth superstars.

However, between the two of them, Canopy is emerging the clear winner, with greater revenue and, recently, superior profitability metrics. After some close quarters that saw Aurora inching close to Canopy, the latter came out decisively ahead this year and hasn’t fallen behind since. Here are the main reasons why:

Canopy’s ever-improving production techniques

One of Canopy’s key advantages lies in its constantly improving production techniques. In its most recent quarter, the company reduced its cost per gram 18% quarter over quarter and an impressive 32% year over year. While Aurora also lowered its cost year over year in Q3, the 7% trimming is nothing compared to Canopy’s 32%. Canopy’s increasing cost efficiency is partially the result of R&D, but also its ever-growing production space, which allows it to take advantage of economies of scale.

Aurora’s disappointing Q3 earnings

Another factor that’s keeping Canopy ahead of Aurora is the fact that Aurora’s Q3 results were widely seen as disappointing. Whereas Canopy’s most recent quarter was perceived as its best ever, leading many to claim the company could hit $1 billion in sales this year, Aurora’s Q3 missed analyst estimates. Granted, when you’re growing at 367% year over year, it’s hard to beat yourself up too much because analysts expected even more, but a miss is still a miss.

Canopy’s cash horde

A final thing Canopy has going for it is a massive $4.1 billion cash horde, which will allow it to pursue big acquisitions for years into the future. This pile of cash is the fruit of last year’s Constellation Brands investment, which was such a major story at the time that it sent the entire cannabis sector on a months-long rally.

So far, Canopy has been reticent to spend its $4 billion, pursuing only a handful of acquisitions this year, such as the $343 million Acreage deal. This may be a sign of wisdom on Canopy’s part, thereby demonstrating that it intends to pursue acquisitions only when they are sure to improve its bottom line. On the other hand, investors will want to see the money put to good use sooner or later, especially since it came from a deal that resulted in significant equity dilution.

5 TSX Stocks for Building Wealth After 50

BRAND NEW! For a limited time, The Motley Fool Canada is giving away an urgent new investment report outlining our 5 favourite stocks for investors over 50.

So if you’re looking to get your finances on track and you’re in or near retirement – we’ve got you covered!

You’re invited. Simply click the link below to discover all 5 shares we’re expressly recommending for INVESTORS 50 and OVER. To scoop up your FREE copy, simply click the link below right now. But you will want to hurry – this free report is available for a brief time only.

Click Here For Your Free Report!

More reading

Fool contributor Andrew Button has no position in any of the stocks mentioned.

Source: The Fool
Marijuana Stocks: Why Canopy Growth (TSX:WEED) Is Beating Aurora Cannabis (TSX:ACB)
The Fool

The Motley Fool
Contributor for
The Motley Fool is dedicated to helping the world invest — better. Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, mutual funds, and premium investing services.

In all we do, we take a different approach.

We believe – and have proven over decades – that the individual investor can beat the market.

We believe that anyone can do it, even if they don’t have a lot of time or money to devote to investing.

We believe in a long-term outlook, helping people build wealth over time.

We believe that the person best positioned to take care of your financial future is you.

And we work tirelessly on behalf of our hundreds of thousands of members who are enjoying the opportunities that come with having enough money to do the things that matter to them.

While we are headquartered in Alexandria, Va., The Motley Fool advocates for the individual investor around the globe with offices in the UK, Australia, Canada, Singapore, and Germany.

Related posts