Aphria Inc (NYSE: APHA) stock generates >69% returns in one month

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Aphria Inc (NYSE: APHA) stock rose over 69% in the last four weeks (Source: finviz.com) after the company reported that the company had swung to net income of C$4.96 million ($3.53 million) from a loss of C$108.27 million, in the year-ago period. However, the pull-backs from wholesale buyers across Canada due to COVID-19 has forced the company to rescind guidance for the full year. The company has halted new significant capital expenditures and cut its marketing budget by C$4 million in the fourth quarter. However, the company has sufficient funds for the next 12 months, a cash balance of C$515 million and no debt maturities for the next year.

APHA in the third quarter of FY 20 has reported the adjusted earnings per share of 2 cents, beating the analysts’ estimates for the adjusted loss per share of 4 cents, according to the FactSet consensus. The company had reported the adjusted revenue growth of 65 percent to C$55.6 million in the third quarter of FY 20. Recreational cannabis sales formed for C$44.7 million of its total pot revenue. On the back of the production delays at one of its facilities, Aphria had bought C$30 million worth of weed from the spot market through the second and third quarter, half of which it had sold by the quarter’s end for C$20 million.

During the second and third quarters, the company had purchased almost CAD30 million of dried flower on the wholesale market, out of which approximately half was sold during Q3. The sale resulted in approximately CAD20 million in net revenue with a gross profit of over CAD5 million. If the company was able to produce the product ourselves, it could have recorded an additional CAD7.6 million of gross profit and adjusted EBITDA in the third quarter and an incremental 1,360 basis points on the adjusted cannabis margin.

Meanwhile, several provinces such as Ontario, Alberta and British Columbia were closed to deliveries for a week at the end of March to perform year-end inventory counts, and several have scaled back purchasing overall. Ontario, the country’s most populous province, had cancelled two weeks of cannabis purchases due to COVID-19. Alberta is ordering 40% less pot and in British Columbia, stores are closing voluntarily as they convert to curbside pickup.

Aphria’s success will continue to be led by its differentiated portfolio of brands, products and a delighting distinct consumer segments. The company intends to launch the edibles, beverage and topicals in the near future.

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