Aphria stock has dropped 15% since posting its Q1 fiscal 2020 results just over a month ago but has showed signs of a recovery this week as the market moves closer to the launch of cannabis 2.0.
The Earnings Surprise
Aphria Inc (TSX:APHA) (NYSE:APHA) surprised investors on October 15 by posting its second consecutive quarter of profitability, a serious rarity in the first year of legal cannabis. Aphria stock popped as much as 17% after the Canadian cannabis firm reported a net profit of $16.4 million CAD or 7 cents per share. While revenue of $126.1 million CAD narrowly missed analysts' expectations of $131 million CAD, it was still an improvement from the $13.3 million CAD posted in the same period last year.
Initial Optimism Short-Lived
The initial optimism from the surprise profit did not last long as Aphria stock dropped to a 2019 low of $5.03 less than a month later. While the entire pot market appears to be pinning its hopes for 2020 on the launch of the 2.0 market, increasing uncertainty regarding the use of vapes, particularly those with THC, has added uncertainty to many pot stocks. Aphria Inc is one such case, having rolled out its range of vape products at the end of October.
Aphria's vapes have been described as having “enough high-potency THC in those containers to keep everyone in Windsor stoned for a month.” However, Aphria spokesperson Tamara McGregor moved to allay fears that the vape crisis would hamper Aphria stock in 2020, saying that “obviously, it’s concerning,” and added that Aphria has been looking into the reports and determined most, if not all, of the documented pulmonary illnesses and deaths point to “products coming off the illicit market.”
Aphria Stock Recovers
The company's attempts to allay fears regarding the vape crisis appear to be yielding dividends, with Aphria stock gaining over 20% this week as we near the launch of the 2.0 market on December 17. The company announced earlier this month that it would be doubling its capacity after recently obtaining a cultivation license for its Aphria Diamond facility. Perhaps the real driver behind Aphria stock is the release of its competitors' results, emphasizing just how much the company is outperforming the broader market. Either way, 2020 looks like Aphria Inc's year.
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