08/15/2019 11:07 EDT | Updated 08/15/2019 11:09 EDT

World's Largest Cannabis Firm Sees Shares Tank On Lower Sales Volumes

Canadian cannabis prices are likely to keep falling, analysts say.

Chris Wattie / Reuters

Canopy Growth Corp., the world’s largest cannabis company by market value, saw shares fall more than 10 per cent in early trading Thursday after the company reported disappointing earnings and a lower volume of recreational cannabis sales.

The numbers suggested the company fell behind Aurora Cannabis, the world’s second largest cannabis firm, in its Canadian market share, Bloomberg News reported.

The Smiths Falls, Ont.-based company reported Wednesday it lost $1.28 billion during the three months ended June 30, its fiscal first quarter of 2020, compared with a loss of $91 million in the first quarter of fiscal 2019 (before recreational marijuana was legal).

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A surge in revenue was offset by a 215 per cent increase in operating expenses to $229.2 million.

The company said the increased loss is mainly due to a non-cash loss of $1.18 million on the extinguishment of warrants held by alcohol giant Constellation Brands Inc., which invested $5 billion last November.

It also saw a significant decrease in quarter-over-quarter gross margins, or the difference between sale price and costs, as the company has been focused on investing in rapid expansion.

 Analysts took a dim view of the news, with RBC Capital Markets particularly worried about the implications of the company’s growing stockpile of unsold cannabis.

Eight Capital suggested there is an oversupply in the legal market, saying Canopy Growth’s harvest alone could service the vast majority of the demand in the legal Canadian market in its existing form.

With additional production capacity being added by large pot firms, overall cannabis pricing in Canada will continue to soften, analysts at Compass Point predicted.

― HuffPost Canada, with files from Reuters and The Canadian Press