Aleafia Stock Fails to Sustain the Rally: Should You Worry?

Aleafia stock

Aleafia stock has been finding continual hurdle despite reporting solid quarterly earnings earlier this month. Let's do a quick analysis of Aleafia Health (TSX:ALEF) (OTCQX:ALEAF).

Struggling to Hold Gains

After months of disappointment, the marijuana sector seems to be getting back into its groove in this earnings season. Cannabis stocks had been struggling for some months as much of the optimism went out of the sector; however, the better than expected earnings from many of the leading companies have sparked the sector once again.

Aleafia Health is one of those companies that released its financial results for Q2 2019 this month, and its numbers were impressive. Aleafia stock had started off the year at a canter, but after the highs of February, it is now down by as much as 17% this year.

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In Q2 2019, the company generated $3.95 million CAD in revenues, which reflects a hefty rise of 159% from its first-quarter performance, when Aleafia Health generated $1.5 million CAD in revenues. The net revenues for the quarter stood at $3.83 million CAD, which reflects a sequential rise of 152%. However, the most important takeaway from the performance is the fact that Aleafia managed to post a gross profit of $2.9 million CAD. In the previous quarter, the company made a loss of $58,000 CAD, and hence, this reflects a remarkable turnaround.

At the time of writing, Aleafia stock is down 3% at $0.78 on the OTC market.

The cash position has improved significantly from the previous quarter as well. In Q1 2019, Aleafia had $36.8 million CAD in cash, but at the end of the latest quarter, it reported that its cash position has now grown to $58 million CAD. The company’s revenue growth has been nothing short of extraordinary as it managed to post the biggest haul in its history. More importantly, its cannabis sales grew tremendously in the quarter.

On a sequential basis, cannabis sales grew at a highly impressive rate of 377% and contributed as much as $2.53 million CAD to the revenue figure. Last but certainly not the least, Aleafia Health also managed to cut costs substantially in the quarter. The expenses were cut by 41% from the first quarter.

Aleafia stock has fallen over 25% year-to-date.

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