APHA Stock: Aphria Inc Projection Still Weak Following Quarterly Report

APHA Stock: Aphria Inc Projection
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APHA Stock Falls

I’ve had a complicated relationship with Aphria Inc (NYSE:AHPA). APHA stock was once one of my favorite marijuana stocks, but I’ve had to turn 180° on the company ever since it had some sketchy dealings regarding the acquisition assets that sent shares tanking.

Aphria shares are once again being battered following a weak quarterly report, which is only reinforcing my choice to jump ship from APHA stock. The stock is down a whopping 22% over the past week following the quarterly report’s release on April 15.

The numbers, at first glance, aren’t all that disappointing.

Net revenue of CA$73.6 million was up 240% from the prior quarter and 617% from the prior year. Gross profit similarly doubled from the previous year. (Source: “Aphria Announces Third Quarter Fiscal 2019 Financial Results,” Aphria Inc, April 15, 2019.)

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But those numbers belie several deeper issues: missing analyst expectations, taking on huge amounts of losses, and decreasing in terms of kilograms sold from one quarter to the next.

Aphria sold 2,636.5 kilograms (about 5,812 pounds) in the quarter, down significantly from the previous quarter, where the company sold 3,408.9 kilograms (about 7,515 pounds).

Analysts were also disappointed when the numbers came in.

The company showed an adjusted quarterly loss of CA$0.20 per share, more than the loss of CA$0.05 per share that analysts were expecting on average, while the company’s CA$73.6-million revenue fell short of the CA$83.5 million that was expected. (Source: “Aphria hits reset button amid ‘stunning’ third-quarter loss,” BNN Bloomberg, April 15, 2019.)

On top of all that, the company registered losses of CA$108.2 million. Aphria Inc had to take a one-time $50.0-million impairment charge because of its Latin American operations that were investigated due to short sellers calling foul on the buys in December.

The company also said that the losses could be attributed to packaging restraints and supply shortages across Canada, which have plagued many marijuana stocks besides Aphria.

The overall picture, however, is bleak for APHA stock.

Chart courtesy of StockCharts.com

APHA Projections

“Aphria’s been through a lot over the past three months … Just think of what we’ve been through and what we’ve been able to deal with,” said Chairman and Interim CEO Irwin Simon.

“This is a new industry and Aphria has come out and said we look to do $1 billion [in revenue] by 2020. It’s not what we’re doing today – it’s what we’re ultimately going to do.” (Source: Ibid.)

But no matter how the execs may try and reason away the issues that APHA stock is facing, there is no easy answer, nor an easily foreseeable solution.

For a long while, I expected APHA stock to bottom out and then return to gains, much like many other stocks did in 2018. But those gains never came.

Sure, it’s had a fairly good run so far in 2019 (the last week notwithstanding), gaining over 30% year-to-date. But compared to the 50%–100% gains we’ve seen among other pot companies, that’s quite weak.

Of course, it was keeping up with the lower end of the top pot stocks before the collapse, but compared to a company like OrganiGram Holdings Inc (OTCMKTS:OGRMF, CVE:OGI) that faced similar difficulty with its quarterly report, Aphria’s drop has been more significant and its recovery slower to start, showing weakness.

Furthermore, the company is beset on all sides by deep-seated issues. The Latin America fiasco, where assets were said to be overvalued in order to benefit certain shareholders, has led to a loss of credibility in Aphria. And now the weak sales numbers are only going to make investors that much more worried about the company’s future.

With so many good options on the marijuana market right now, it’s hard to support APHA stock.

Analyst Take

Aphria Inc is in trouble.

While not doomed, it certainly has an uphill battle ahead of it. I don’t foresee APHA stock making a strong rally anytime soon, and I would look elsewhere for gains in the meantime.