Analysts Cut Short Of Millions from Tilray, Canopy, Aurora in 2022
Analysts have slashed hundreds of millions of dollars off their 2022 sales forecasts for three Canadian cannabis producers, reflecting an increasingly competitive landscape across the adult-use industry, falling overall prices, and poor execution by some executive teams.
Lowered expectations for those producers – New York-based Tilray, Ontario-based Canopy Growth, and Alberta-headquartered Aurora Cannabis – are at least partly attributable to their loss of market share last year to smaller, more nimble rivals.
Estimated market share in the October-December period, via Ontario-headquartered cannabis analytics firm Hifyre data and reported by New York-based investment banking firm Cantor Fitzgerald, was:
- 7% for Tilray, down from about 15% in the previous quarter.
- 6% for Canopy, down from 10% in the third quarter.
- 8% for Aurora, down from 3.7% in the previous quarter.
In April 2021, by comparison, the market share for Tilray/Aphria, Canopy/Supreme, and Aurora was 18%, 15%, and 6%, respectively.
In the meantime, competitors such as Toronto-based Auxly Cannabis, New Brunswick-headquartered Organigram, as well as some craft producers, have experienced steady growth.
Auxly’s 7.4% market share in October-December is up from about 4% in April 2021.
Organigram’s 7.6% share in the fourth quarter of 2021 is up from about 5% last April.
Lower expectations
Analysts have slashed revenue expectations for Tilray consistently since its merger with rival Aphria was finalized last year.
Shortly after the merger closed in May 2021, analysts broadly expected the company to see revenue of around $1 billion (1.28 billion Canadian dollars) in fiscal 2022.
However, the latest sales estimates for the year range from $650 million on the low end to a consensus of $840 million.
New York financial services company Cowen recently lowered its forecast for Tilray’s 2022 net sales to $671 million “to reflect lower adult-use sales.”
Last May, New York-headquartered investment banking company Jefferies expected the newly united Tilray to record more than $1 billion in sales in 2022. Still, that forecast has subsequently been lowered to $700 million.
Jefferies, which still calls Tilray the “most attractive Canadian operator,” said the newly lowered forecast “reflects ongoing discount share pressures from smaller operators.”
It’s a similar story for rival producer Canopy.
The latest consensus estimate of CA$570 million in sales for fiscal 2022 is almost CA$200 million lower than earlier forecasts.
BMO Capital Markets in Toronto lowered its revenue forecast for Canopy, citing:
- Supply-chain issues cause Storz & Bickel’s underperformance.
- Lower forecasted industry sales stemming from expected retail store closures this year.
- Management’s bearish outlook for German medical sales.
“We are left feeling uneasy that after almost two years at the helm, this management team is still being out-competed by smaller LPs,” BMO analyst Tamy Chen wrote in a note to investors last November.
The latest forecasts are markedly lower than earlier projections.
In 2019, analysts broadly estimated Canopy’s fiscal 2021 sales would come in well over CA$1 billion.
Aurora, too, is confronting lowered expectations.
Analysts now expect the company’s fiscal 2022 sales to come in around CA$250 million.
That’s down sharply from September 2020, when Canadian investment bank CIBC expected fiscal 2022 sales to come in around CA$435 million.
Competitors’ gain?
Craft producers and large cultivators such as Organigram and Auxly appear to be gaining at their competitors’ expense.
Auxly’s projected revenue is already up about 50% this year.
Analysts at Alberta-headquartered ATB Financial expect Auxly to post sales of more than CA$150 million in fiscal 2022, compared with an earlier estimate of CA$100.2 million for the year.
Analysts with Cantor Fitzgerald raised their revenue expectations for Organigram to CA$142 million in fiscal 2022, up from approximately CA$120 million earlier.
Organigram CEO Beena Goldenberg said her New Brunswick company is taking advantage of competitors who were busy doing big acquisitions and mergers “and maybe taking the focus off the core business a little bit.”
“A smaller, more nimble organization like Organigram that is completely focused in the cannabis space might be able to take advantage of that,” she said in a phone interview with MJBizDaily.
“We’re just a pure-play cannabis company that’s focused. And I think we can take advantage of that sometimes.
“So we’re not as distracted.”
Disclaimer: https://mjbizdaily.com/analysts-cut-hundreds-of-millions-from-tilray-canopy-aurora-marijuana-sales-forecasts
