Aphria shares rose sharply on January 14 after the company reported sales that exceeded expectations. The company expects to close the merger with Tilray in the second quarter. Shares of other canadian producers of cannabis also rose strongly. However, there are both positive and negative factors for sales growth.
Aphria shares (APHA), an increase of 131% over the past 12 months, rose by 21.1% on Thursday amid a better quarterly report than expected Wall Street analysts.
Manufacturer of medical and recreational cannabis reported that for the quarter ending on 30 November 2020, its revenues grew by 33% compared with the same period value to $126.6 million (160,5 million canadian dollars). This is 10% more than in the previous quarter, and above analysts ‘ forecasts of $119,39 million
A large part of this income – From$91,74 million – came from CC Pharma, a German distributor of medical cannabis purchased Aphria in 2019. With the remaining$67.9 million of revenues from sales of recreational cannabis, it’s 7% more than in the same quarter last year, but less than the 18% growth in the previous quarter. This quarter was the seventh consecutive for Aphria growth of income from sales of recreational cannabis.
Aphria however, the company still remains unprofitable, with the balance C$120,6 million or C$0.42 loss per share, compared with C$7.9 million and C$0,03 per share in the same quarter last year.
However, the company said Aphria strong balance sheet and liquidity in the amount of C$320 million, which it plans to use to support growth in Canada and abroad.
Key accomplishments include Aphria this past quarter identified the following:
The completion of the first delivery of dried cannabis and cannabis oil to Germany in accordance with GMP standards of the EU;
Obtaining permission to import the first batch of cannabis oil EU-GMP for sale and distribution in Malta;
The completion of the first supply of medical cannabis to the company Canndoc for distribution in Israel;
The supply agreement with ODI Pharma AB, expanding the international presence of Aphria in Poland.
Aphria has also completed the strategic purchase of SW Brewing Company, which will allow to diversify the product range and expand the coverage of consumers.
The completion of the merger Aphria with Tilray is expected in the second quarter
Shares of Aphria has received the stimulus for growth a month ago, when on 15 December it was announced on the final merger with the company Tilray (TLRY). Under the agreement, shareholders of Aphria will control 62% of the combined company, and shareholders Tilray will own the remaining 38%. Aphria will cease to use its trade name and will conduct business under the brand name of Tilray.
The combined company will take the first place in the world in sales of cannabis, ahead of current leader Curaleaf, its share in the legal cannabis market of Canada will amount to 17.3%.
Tilray and Aphria are expected to increase the competitiveness of the combined company and cost savings of over C$100 million over the next two years.
Positive and negative factors for growth stocks cannabishigh companies
Shares cannabishigh companies increased after the US elections in November amid high expectations that a democratic President and Senate will quickly pass laws that facilitate the activities of companies producing cannabis.
In the United States allowed to issue a limited number of licenses, which creates great opportunities for market access and profitability.
So, the shares of Aphria, Tilray, Canopy Growth (CGC), Aurora Cannabis (ACB) for the last month increased by: 41%, 63,7%, 13% and 17.4%, respectively.
In November in the article “Canopy Growth, Tilray Cannabis and Aurora announced quarterly results” Marketinfo.pro posted mixed financial results of companies on the background of growth of the stock after the residents of five States including Arizona, new Jersey and Mississippi, voted to legalize the use of cannabis regardless.
And although market experts as a whole positively assessed the results of 2020 for the legal cannabis industry and believe that 2021 will be another successful year, the canadian company may encounter a number of difficulties. The main ones are: competition with American manufacturers (Item 9 Labs, Jushi Holdings and KushCo), price war and forced lower prices because of competition from illegal producers.
Against the backdrop of difficult macroeconomic conditions and high competition investors and analysts will give preference to those companies that demonstrate greater financial stability to overcome it.