Aphria Stock Skyrockets After Earnings Announcement, Lifting Cannabis Sector

Canadian cannabis company Aphria Inc. (NYSE: APHA) saw its stock jump over 40% in trading on Friday after the company delivered profits that pleased traders and gave a rosy outlook for 2020. The company reported net income of C$15.8 million or $11.9 million versus last year’s loss of C$5 million for the same time period. Sales jumped to C$128 million over the previous year’s C$12 million.

The move helped polish what was starting to be another dismal quarter for cannabis stocks. Most cannabis indices got a sympathetic lift on the rise in Aphria stock on Friday. The second quarter saw most cannabis indices down by 15-20%. The third quarter also started with continued selling, but this may have put the brakes on some sell tickets.

“It’s a new day at Aphria. Our team’s solid execution across key areas of our business resulted in strong adult-use revenue growth and a profitable fourth quarter,” stated CEO Irwin D. Simon. “Over the last six months, our organization identified immediate priorities to help generate substantial progress near-term and long-term.”

The company stated that the higher revenue in the quarter was driven by $99.2 million of distribution revenue from CC Pharma and other distribution companies and $33.5 million of revenue from cannabis produced. Net revenue includes over 3,228-kilogram equivalents sold for the adult-use market and 1,417-kilogram equivalents for medical cannabis sales.

It is worth mentioning that the company received $50 million cash from the failed Green Growth Brands takeover attempt and that it will get another $39 million in November. The company also ended the quarter with a strong balance sheet including $571 million of cash, cash equivalents and liquid marketable securities, which Aphria said it plans on using to fund Canadian and International growth.

While some on Twitter pointed to an unrealized gain on convertible debentures creating a non-operating income of $40 million, that pales in comparison to the revenue from CC Pharma, which was acquired in 2018. CC Pharma is a leading distributor of pharmaceutical products to pharmacies in Germany as well as throughout Europe. European sales were double North American sales for the company.

Looking Forward

Aphria said it is forecasting fiscal 2020 revenue net of excise taxes to be C$650 million to C$700 million. The company has also projected an adjusted EBITDA of approximately $88 million to $95 million. Jefferies analyst Ryan Tomkins rates the company as a Buy and wrote, “In the context of poor sector sentiment, profitability becoming an increasing focus, and guidance scarce, this print is very reassuring and supports our conviction in the name.”

The company is also said to be considering buying some of the assets of CannTrust (NYSE: CTST) as the company is currently in a death spiral following reports of illegal growing.  Bloomberg News reported that Irwin said his company was eyeing parts of the company.

Debra Borchardt

Debra Borchardt is the Co-Founder, and Executive Editor of GMR. She has covered the cannabis industry for several years at Forbes, Seeking Alpha and TheStreet. Prior to becoming a financial journalist, Debra was a Vice President at Bear Stearns where she held a Series 7 and Registered Investment Advisor license. Debra has a Master's degree in Business Journalism from New York University.

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