Aphria's Slow Rollout Forces It to Lower Revenue Guidance

Aphria, the Canadian cannabis company, reports weaker-than-expected fiscal second-quarter revenue and lowers its guidance.
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Shares of Canadian cannabis company Aphria (APHA) - Get Report dropped 8% Tuesday after the company reported weaker-than-expected fiscal second-quarter revenue and lowered its guidance.

The company reported a net loss of C$8.2 million ($6.3 million), or 3 cents a share, on revenue of $C120.6 million ($92.2 million). Analysts were expecting a net loss of 3 cents a share on revenue of C$129.8 million.

The company also announced that it was revising its fiscal-year revenue guidance downward to C$575 million from C$625 million due to a slow rollout of retail locations in Ontario, where more than 40 store openings are still pending.

“We believe our brands, cultivation expertise, cash position and balance sheet will continue to differentiate us in the cannabis industry, and we remain focused on the highest return opportunities for growth,” said CEO Irwin Simon, despite the disappointing results.

The stock declined 8.07% on Tuesday to $5.01.

Meanwhile, Jefferies analyst Owen Bennet said he believes that overall Aphria’s second quarter bolsters his bullish case on the stock.

“On sales trends, recreational sales were up 46% QoQ with volumes up 68%, while they also saw a need to buy wholesale in the quarter due to demand outstripping supply,” Owens wrote in a note. “This bodes well for further supply due to come online from the Diamond facility, and should give confidence that Aphria’s products will continue to take share.”

Real Money analyst Timothy Collins agreed with that assessment, saying that the pullback in the stock is a good buying opportunity as he expects Aphria to remain a major player in the cannabis industry.

“Guiding the full-year range lower by C$75 million after only missing by C$10 million this quarter doesn't paint a pretty picture for the year, but investors need to remember the bulk of Aphria's revenue is actually led by CC Pharma in Germany,” Collins said. “This offers us little insight on the cannabis side of the business after Germany's government changed its medical reimbursement model.”