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Marijuana Stocks Fall As Aphria Reports Mixed Results, Lower Pot Prices

Aphria (APHA) on Thursday reported mixed fiscal first-quarter earnings as adult-use cannabis prices remained under pressure. Aphria stock and other marijuana stocks sold off.

Aphria Earnings

Estimates: Zacks forecasts a loss of around 4 Canadian cents per share, as revenue jumps 24% to 155.49 million Canadian dollars.

Results: Losses narrowed to 2 Canadian cents a share from 7 cents a year ago, on revenue of 145.7 million Canadian dollars, up 16% from a year ago and down 4% from the prior quarter.

The average selling price of adult-use cannabis, before excise tax, sank 20.7% to 4.15 Canadian dollars per gram.

Aphia ended the quarter with 400 million Canadian dollars in cash and cash equivalents

Aphria Stock

Aphria stock tumbled 18.4% to close at 4.80 on the stock market today. On Wednesday, the stock was trying to clear a cup base with a 6.25 buy point.

Among other marijuana stocks, Canopy Growth (CGC) fell 1.6%, and was consolidating. Cronos Group (CRON) lost 2.3%. Aurora Cannabis (ACB) sold off 5.3%. Tilray (TLRY) sank 6.9%.

Aphria has the highest Composite Rating of any of those marijuana stocks. That rating is 74. Its EPS Rating is 29.

Too Much Weed?

Prior to the company's earnings, analysts pointed to Aphria's cash position, and its movement toward positive free cash flow, as a source of strength, amid worries earlier this year about money in the bank for Canada's marijuana industry. In the past, some data has suggested its premium weed brand, Broken Coast, has been popular.

Cannabis sales in Canada's pot shops have increased over recent months. Stores are reopening following coronavirus-related service restrictions. Ontario, the nation's most populous province, licenses more retail locations.

However, Stifel analyst Andrew Carter pointed out the imbalance between how much marijuana Aphria has produced and how much it sells. In the last quarter, for example, Aphria produced 52.4 metric tons of weed, while selling 12.6.

He believes the company's ability to utilize its cultivation space would improve. But he noted the possibility of inventory write-downs, which have happened elsewhere in the industry.

MKM Partners analyst Bill Kirk, in a recent research note, said something similar about Aurora Cannabis.

"Please Stop Growing So Much Weed," the note's headline read. He said there was no demand for the 35,000 kilograms of pot the company expects to grow, on average, per quarter.

Decriminalization Prospects Lift Marijuana Stocks

Marijuana stocks jumped last week after U.S. Democratic vice-presidential candidate Kamala Harris said a Joe Biden presidency would work to decriminalize marijuana and expunge records for people convicted of pot-related offenses.

Canada's pot sales went fully legal in 2018. Some Canadian companies have tried to grab a piece of the U.S. market for hemp and CBD. But they have run up against retailers' reluctance to sell products, amid what they have said is unclear guidance from the FDA.

Acreage Holdings, a pot company based in the U.S., plans to sell Canopy Growth's THC-infused beverages in Illinois and California starting next summer. Canopy has a deal to buy Acreage outright when pot becomes legal on a federal level in the U.S. The deal also gave Acreage access to Canopy Growth's brands and other intellectual property.