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Cannabis Summary for Oct. 15, 2020

2020-10-15 20:02 ET - Market Summary

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by Stockwatch Business Reporter

The S&P/TSX Cannabis Index lost 7.79 points to 118.35, while the CSE Composite Index lost 2.41 points to 504.89. Earnings season kicked off with a big fumble as one of Canada's largest licensed producers, Aphria Inc. (APHA), slumped $1.35 to $6.35 on 18.4 million shares, after releasing its financials for the fiscal first quarter ended Aug. 31. The financials failed to live up to the market's expectations. To be clear, with the stock having rocketed to around $8 from $5.62 over the last three weeks, anything other than an extraordinary report was all but guaranteed to cause a sell-off.

Unfortunately for shareholders, this report did not cross that threshold. Although Aphria's net loss was far better than analysts were predicting, at $5-million rather than the predicted $9.5-million, this was overshadowed by an unexpected drop in revenue. Net revenue for the fiscal first quarter came to $145.7-million, down from $152.2-million in the fiscal fourth quarter and below analysts' predictions of over $159-million. Aphria's international division was largely to blame. Particularly in Germany, COVID-19 had fewer people going to doctors' offices or pharmacies, hurting Aphria's medical cannabis revenue. Here in Canada, fortunately, people flocked to the company's recreational brands. Adult-use revenue took a quarter-over-quarter leap to $69.6-million from $56.7-million. Yet the popularity of Aphria's value brands (low-margin products intended to compete with the black market) caused gross margins to worsen to 49.7 per cent from 52.9 per cent.

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