Aprhia stock and most marijuana stocks sold off Wednesday after the Canadian cannabis producer reported worse-than-expected fiscal fourth-quarter losses, lower cannabis sales and higher costs largely due to a charge it took related to the coronavirus pandemic.
The results come after Aphria (APHA) became the rare pot stock to break out of a base, after weak sales growth, financing concerns and the coronavirus pandemic pulled the industry lower through last year.
Aphria reported a net loss of 39 Canadian cents a share, or 29 cents. That was far worse than expectations for a loss of 4 Canadian cents per share.
Revenue of 152.2 million Canadian dollars, or $113.85 million, was up 18% from a year ago and up 5% from the prior quarter. Wall Street had expected 136.73 million Canadian dollars, or $102.31 million.
Net cannabis sales came in at 53.066 million Canadian dollars. That was down from 55.566 million in Aphria’s fiscal third quarter. Kilograms or equivalents sold also fell.
The average retail selling price of medical cannabis, before excise tax, increased to 6.63 Canadian dollar per gram from 6.41 in Q3. The average selling price of adult-use cannabis fell to 5.23 per gram from 5.47 per gram in the prior quarter.
The company recorded non-cash impairment of 64 million Canadian dollars in the quarter, related to “measures taken with respect to certain of the Company’s international businesses in response to the COVID-19 pandemic.”
Those charges also raised non-production costs to 116.6 million, from 50.9 million in the prior quarter and $60.0 million a year ago.
Shares plunged 19% to 4.85 in the stock market today. On Monday, Aphria stock cleared a 5.35 entry of a consolidation pattern. But that breakout has now failed.
APHA stock was well off highs it held when it first began trading in late 2018. Canada’s marijuana industry is still laying off employees and closing facilities, after a global expansion that turned out to be overambitious.
Aphria stock has a 78 Composite Rating and a 37 EPS Rating. Those are the highest ratings for any of the pure-play marijuana stocks tracked by IBD.
Among other marijuana stocks, Cronos Group (CRON) fell 4.7%. Canopy Growth (CGC) lost 5.1%. Cronos Group was in a cup base with an 8.23 buy point. Canopy Growth was consolidating.
Tilray (TLRY) fell 7.3%, and Aurora Cannabis (ACB) dropped 8.55%.
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Aurora Cannabis Merger Talks
BNN Bloomberg reported this month that Aphria and rival Aurora Cannabis discussed the possibility of merging. But talks fell through, after neither side could agree on the makeup of the board and executive compensation.
Even as analysts worry about Aurora’s thinner cash stockpile, they’ve praised Aprhia stock for its own reserves. Stifel analyst Andrew Carter, in a research note on Monday, said cannabis consumption trends “suggest Aphria has consistently outperformed peers by gaining share in the Canadian market.”
Canopy Growth, when it reported results in May, said it lost some recreational-weed market share.
Still, the pandemic forced Canadian shops in Ontario to temporarily close. Provinces that buy product from the big weed companies have cut back on what they keep at distribution centers, potentially threatening sales. Aphria’s rivals are selling cheaper pot brands in an effort to compete with the illicit market, where marijuana tends to sell for lower prices.
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