APHA Stock Soars on Huge Q1 Earnings Beat, Breathes Life into Struggling Market
A lot was riding on this morning’s Q1 earnings announcement from Aphria (TSX: APHA) (NYSE: APHA). The entire Canadian cannabis industry held its breath over the long weekend hoping Aphria could pull through for the sector once again. The company did not disappoint after releasing stellar first-quarter financial results that crushed analyst expectations.
Aphria reported net income of $16.4 million for fiscal Q1 2020 or $0.07 per share on total revenue of $126.11 million. Adjusted EBITDA for the quarter came in at $1.0 million. Analysts had projected the company would report a loss of $0.02 per share on revenue of $130.6 million. Year over year revenue increased by over 848% from $13.3 million. In the previous quarter, Aphria reported net income of $15.8 million or $0.05 per share and adjusted EBITDA of $0.2 million.
The jump in revenue was attributed to an increase in adult-use sales as well as the company’s German pharmaceutical distribution business.
Aphria reported selling 5,969 kgs of cannabis in Q1 for total cannabis revenue of $30.8 million. The previous quarter saw Aphria bring in $28.6 million on 5,574 kgs sold, up nearly 8% Q over Q. Production cost per gram increased from $2.35 per gram to $2.52 per gram.
Aphria ended the quarter with a strong balance sheet including $464.3 million of cash, cash equivalents and liquid marketable securities. The company is in a great position to fund its Canadian and international growth initiatives.
“We are pleased to report a second consecutive quarter of profitable growth with strong contribution from our Canadian cannabis operations. Our success was also driven by our international business and the strength and growth of our brands, particularly Broken Coast, despite a small fire at our British Columbia facility at the end of the quarter. This solid start to the year keeps us on track to achieve our fiscal year 2020 financial outlook. Going forward, we remain focused on our highest-return priorities both in Canada and internationally as our team furthers the development of our medical and adult-use cannabis brands to drive growth through innovation and return value to shareholders.” stated Aphria Chairman and Interim CEO Irwin Simon.
Fiscal 2020 Guidance
Aphria reiterated its financial guidance for the fiscal 2020 year. The company projects net revenue to come in between $650 million to $700 million. Aphria expects distribution revenue to make up over half of the company’s total net revenue.
The company also predicts adjusted EBITDA for the year to come in at approximately $88 million to $95 million.
Aphria’s back to back surprise profitable quarterly earnings could not have come at a better time for the cannabis sector after HEXO Corp. (TSX: HEXO) (NYSE-A: HEXO) nearly destroyed the market with its comments as the company lowering its Q4 net revenue guidance and withdrew fiscal 2020 guidance altogether.
A month ago, Aurora Cannabis (TSX: ACB) (NYSE: ACB) reported its Q4 earnings which saw the company miss analysts’ expectations after posting net revenue of $98.9 million for its quarter. Analysts had Aurora’s net revenue pegged at $100 million – $107 million.
Both Aurora and HEXO blamed slower than expected Ontario store rollouts and lower than expected product sell-through.
The Green Organic Dutchman (TSX: TGOD) (OTCQX: TGODF) also contributed to the poor market conditions after the company announced it was struggling to secure traditional financing at reasonable terms to complete the construction of its Ontario and Quebec facilities. TGOD had previously hinted to the market that it had adequate funding for the completion of these projects.
APHA Stock Lifts Entire Sector
Shares of APHA are trading up over 16% on the day with the stock currently changing hands at $7.21 per share. As expected, Aphria’s strong Q1 earnings gave the cannabis sector a much-needed jolt of confidence and lifted the share prices of industry peers in the process.
Today’s noteworthy gainers are:
- CannTrust (TSX: TRST) (NYSE: CTST) | +45%
- Organigram (TSX: OGI) (NASDAQ: OGI) | +11.8%
- Green Organic Dutchman (TSX: TGOD) (OTCQX: TGODF) | +10.9%
- Supreme Cannabis (TSX: FIRE) (OTCQX: SPRWF) | +7.8%
- Tilray (NASDAQ: TLRY) | +6.7%
- Cronos Group (TSX: CRON) (NASDAQ: CRON) | +6.7%
- MediPharm Labs (TSX: LABS) (OTCQX: MEDIF) | +6.5%
- Canopy Growth (TSX: WEED) (NYSE: CGC) | +3.7%
- Aurora Cannabis (TSX: ACB) (NYSE: ACB) |+3.5%
- HEXO Corp. (TSX: HEXO) (NYSE-A: HEXO) | +2.5%
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