After some goodwill from Canopy Growth Corporation (TSX:WEED) (NYSE:CGC) boosted pot stocks yesterday, the industry is seeing mostly green again today. Aphria Inc (TSX:APHA) (NYSE:APHA) released its Q2 2020 report, and the reviews are mixed.
While all growth is good growth, the news for APHA isn’t all sunshine and rainbows. The cannabis space remains a long-haul journey towards value. Luckily, Rich is here to help navigate that journey.
“I think Aphria can do great,” he says. “Aphria can lead the sector in revenue, and while what we’re seeing isn’t the resurrection, hopefully this kind of thing continues.”
Aphria’s Revenue is Up
According to the company’s Q2 fiscal report, revenue for adult-use cannabis came to $29.0 million. This represents a quarter-over-quarter increase of 46%.
Net revenue came to $120.6 million. That’s up 457% from the prior year, but down 4% from the prior quarter. Adjusted EBITDA came to $1.9 million, making this Aphria’s third consecutive quarter of positive adjusted EBITDA.
The company retains $497.7 million of cash and cash equivalents. This will be used to fund both domestic and international growth.
Chairman and Chief Executive Officer of Aphria, Irwin D. Simon, said of the report:
“We are very pleased with our strong growth and execution in Canada demonstrated by our increase in adult-use cannabis revenue and positive adjusted EBITDA as a result of our compelling brands and market positioning. We are continuing to expand our capabilities internationally with solid progress during the quarter in Germany and South America and look to monetize non-core assets.”
Outlook for 2020 is Down
Aphria now expects net revenue for its 2020 fiscal year to be between $575 million and $625 million. Previously, it was predicting revenue to be between $650 million and $700 million.
Likewise, the company slashed its adjusted EBITDA projection to between $35 million and $42 million. That’s less than half of its previous estimate, which was between $88 million and $95 million.
Ultimately, Aphria reported a net loss of $7.9 million or $0.03 per share for the quarter ended November 30. APHA stock dipped 8.6% during early trading today, from $7.10 to $6.49. It has since recovered slightly and now sits at $6.73.
Aphria Chief Financial Officer Carl Merton said the earnings miss is a result of difficulties expanding into Ontario and getting vape products on shelves in Alberta. Both efforts are being hampered by provincial regulations. The company also had to buy third-party cannabis to keep up with demand.
In November, Health Canada granted a cultivation license for Aphria Diamond. Going forward, this will double the company’s cultivation capacity.
Where Does APHA Go From Here?
While Q2 might not have been what some investors were hoping for, APHA still shows a lot of potential. Aphria’s previous quarter was a huge step forward, and there’s still a lot of reason for optimism.
“As we’ve seen, if Aphria runs then the sector will run,” explains Rich. “We’re going to have some down days along the way, we won’t necessarily go up from here, but we are near the bottom.”
He also reminds his viewers to follow trends, not spikes. It’s worth watching Aphria’s stock in the coming days to see if investors are confident despite quarterly results.
Keep watching RichTV Live for more updates about the cannabis sector and the stock market at large.
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