Aphria (APHA) is a Canada-based global cannabis company. The company will report its earnings for the first quarter of fiscal 2020 on October 15. September wasn’t a good month for the cannabis industry. Various headwinds impacted the sector including Canopy Growth and Aurora Cannabis’s earnings results. On Tuesday, the stock fell 1.6% when Aleafia Health (ALEAF) (ALEF) announced the termination of Aphria’s supply agreement for wholesale cannabis. Read Aphria-Aleafia Health Deal Axed: How Stocks Reacted to learn more. As of Wednesday, the stock has gained 3.8%. Let’s see what we can expect from the company’s first-quarter results.
Analysts’ estimates determine how they think the company is doing. Aphria’s revenues could be around 134.2 million Canadian dollars for the first quarter of 2020 compared to 13.2 million Canadian dollars in the first quarter of 2019. Analysts expect the company to report a loss of 0.01 Canadian dollars per share in the first quarter. However, the estimate is lower than what Aphria reported in the first quarter of 2019.
Aphria also has a positive outlook for fiscal 2020. The company expects to generate net revenues of approximately 650 million Canadian dollars–700 million Canadian dollars. Aphria also expects to report an adjusted EBITDA of approximately 88 million Canadian dollars–95 million Canadian dollars. The company expects to fulfill its annual production capacity after all of its facilities are fully licensed.
Aphria’s profitability will likely decrease
Analysts expect Aphria to report a negative EBITDA of 0.56 million Canadian dollars. The EBITDA measures a company’s profitability.
Aphria reported a positive EBITDA of 0.20 million Canadian dollars in the fourth quarter of 2019. A negative EBITDA implies that the company’s operating expenses are higher than its profit.
Meanwhile, Aurora Cannabis (ACB) reported a negative EBITDA of 11.7 million Canadian dollars in the fourth quarter of 2019. The company didn’t report a profit or loss in the fourth quarter. Aurora Cannabis is expanding its edibles business for Cannabis 2.0. The company is also developing its medical cannabis product line by launching a new product with CTT Pharma. Read Aurora Cannabis: New Product Launch with CTT Pharma to learn more.
Cronos Group (CRON) reported a negative EBITDA of 19.6 million Canadian dollars in the second quarter of 2019. The company reported a profit of 0.22 Canadian dollars per share in the second quarter. Cronos Group is also preparing for expansion after the second wave of recreational marijuana legalization hits Canada this month. Will cannabis companies’ growth initiatives drive their profitability?
Price coverage and stock performance
After Aphria’s strong results in the fourth quarter of 2019, many analysts updated their target price for the stock. Even Jim Cramer, CNBC’s Mad Money host, favored Aphria over Canopy Growth. The stock’s target price was reduced to 14.9 Canadian dollars compared to 15.19 Canadian dollars before its earnings. To know more about analysts’ estimates for Aphria, read Aphria: Analysts’ Target Price and Ratings.
Aphria stock has fallen 26.4% since it reported its fourth-quarter results on August 1. The stock fell 17.0% in September. The stock has fallen 5.2% year-to-date. In October, Aurora Cannabis has fallen 6.3%, while Cronos Group has fallen 5.3%.
Cannabis sector in October
The last two months weren’t positive for the cannabis sector due to various headwinds. The headwinds included regulation scandals as well as Canopy Growth and Aurora Cannabis’s disappointing results. Also, vaping concerns made investors question cannabis companies’ future. The companies plan to expand into the vaping business. Marijuana legalization also picked up. More states stepped up to legalize cannabis including Wisconsin, Pennsylvania, and South Dakota. Mexico might legalize marijuana this month.
The Horizons Marijuana Life Sciences ETF (HMMJ) fell 15.8% in September. HMMJ tracks the North American cannabis industry. So far, HMMJ has fallen 3.8% in October.
The company’s outlook and analysts’ views look promising. Stay with us for an in-depth discussion of the earnings call after Aphria’s results. The stock performance depends on how the earnings are for the quarter. Read Aphria versus Aurora Cannabis: A Valuation Update to learn about the company’s valuation.