Shares of Canopy Growth plunged about 15 percent on Thursday, in the aftermath of a dismal first quarter earnings report.

The biggest cannabis company in the world reported losses of $2.78 (C$3.70) per share ー or about $960 million (C$1.28 billion) ー on revenue of $67.95 million (C$90.5 million), although about $886 million (C$1.2 billion) of the massive losses were actually an intentional accounting maneuver by Canopy's largest shareholder, Constellation ($STZ), which postponed exercising warrants to buy more shares.

Sticker shock aside, the cannabis company still reported disappointing revenue and adjusted EBITDA to the tune of a $69 million (C$92 million) in losses. On a Thursday morning conference call with investors, Canopy executives said weak cannabis oil and soft gel demand was partially to blame for slowing domestic sales, as consumers instead opted to buy lower-priced cannabis flower products. Having overestimated demand for those products, Canopy ($CGC) compensated its wholesale customers about $6 million (C$8 million).

Executives also admitted the company had lost some of the early mover advantage it had at the start of legalization, as competitors bring their own operations up to speed.

"Canopy had incredible success coming out of the gate in October," CEO Mark Zekulin said. "But what's happened in eight months, competitors have begun to ramp up their own supply they are able to increase revenue from a lower base."

Canaccord Genuity analyst Matt Bottomley noted that Canopy may have been eclipsed by rival Aurora Cannabis ($ACB) in terms of market share.

But all is not lost for the cannabis giant. The company is quickly getting its factories and manufacturing facilities online, which should help with underuse expenses that cost the company about $12.15 million (C$16.2 million) this quarter. Plus, the company is gearing up to bring new form factors to market, like cannabis-infused beverages, for Canada's second wave of cannabis legalization this fall.

"From the beginning our company has had different aspirations. We don't think success should be judged by selling dry flower," Canopy CFO Mike Lee said, adding that true opportunity will be driven by the company's moves into consumer packaged goods and the medical space.

Analysts also pointed out that the company's strong harvest and plans to bring CBD products to the U.S. market by the end of fiscal 2020 were bright spots on the report.

The Constellation Brands-backed company has invested heavily into cannabis beverages ー like the company's 197,000-square-foot bottling facility in Smith Falls, Ontario ー and executives say the idea has been well-received by cannabis boards across Canada, who believe new form factors could be key in driving consumers to the legitimate cannabis market from the illicit one.

In spite of Canopy's losses, executives remain confident the company can recover. Zekulin said he expects the firm will hit a revenue target of about $750 million (C$1 billion) by the end of fiscal 2020, and will show gross margins surpassing 40 percent. Margins in this latest quarter shrunk to 15 percent, down 28 percent from the year-ago quarter.

This latest financial report comes under the shadow of former CEO Bruce Linton's dismissal. The high profile CEO was fired after Constellation CEO and President Bill Newlands expressed disappointment in Canopy's earnings last quarter.

On the Thursday morning call with analysts, Zekulin announced that the search for Linton's (and his own) replacement was underway, and that a recruiter had already identified "several exceptional candidates." A full transition is expected within the next several months.

In spite of Canopy's recent ups and downs, executives of the cannabis giant and of Constellation expressed their commitment to the April agreement they struck with U.S.-focused multistate operator Acreage Holdings.

"With the combined strengths Constellation Brands, Canopy Growth and Acreage Holdings bring to the table, no team is better positioned to win in the U.S. market when cannabis becomes federally permissible," Constellations' Newlands said in a statement for Acreage's recent earnings.

Once a suitable triggering event occurs, the $3.4 billion deal is still expected to move forward, solidifying Canopy's grip on U.S. cannabis.

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