RE:RE:RE:So hear me out...IrishCanuck wrote: Hey Homestretch, a few questions. As long as you don't tank the sector on Tuesday I'll be happy. But I think that has less to do with your earnings and more about US hopes than anything so you're kinda in a lose-lose. not losing a billion in cash is a low bar for you to tout as success. But:
1) So you keep bragging about owning dispensaries in US. I don't know the number I think Canopy has 50+ stores in Canada now while Aphria has zero. Why does Aphria have the largest market share in Canada if clearly the formula is owning more stores?
Oh it's because Aphria got into the flower and vape categories because that's where the money was. And now as markets shift towards drinks and edibles they have Tilray's portfolio too. Funny that. Same plan with the states, Aphria won't need to own dispenaries any more than Smirnoff needs to own liquor stores. Dispensaries will carry our products whatever legislation ends up becoming. There is no indication those licenses will mean anything because liegislation hasn't even been written. When Congress makes a plan we can act, but there is no reason to think they'd make something federally legal but shut an international border down because of it, plus there's the USMCA which is a pretty substantial thing you need to think about in economics. American companies would want cheaper weed provided from Canada. You could export from Smith Falls, Aphria could export from Leamington, why do you think all the companies built greenhouses in CANADA instead of saving cash to wait and buy in America if it's such an open and shut argument you're making? Thinking is free, you should try it.
2) Canopy was supposed to be the leader in Cannabis 2.0 products so why aren't they? They expanded too quickly with bad products they wanted to push on consumers rather than listen to consumers. Jeez sounds like they should learn their lesson before entering the world's biggest market.
3) Nice star studded line up. Is Snoop Dogg packing the baggies for free to help your margins? Nope, high costs with higher revenue can still cause you losses. Calculators are free online and easy to use if you want to check.
4) So clearly we both acknowledge there will be other competitors in America. Why are your products going to be better than Cresco, Trulieve, GTI? Yea, they won't be. CGC, APHA and TLRY are all on the NASDAQ already smart guy, simply being on them isn't the advantage.
5) Canopy and Aphria are both restricted to the same advertsing restrictions in Canada, so that's not an excuse you're losing if you have the "best vapes in the world". So why isn't Canopy winning? Because Aphria understands the marijuana culture and designed brands for the five main consumer segments, are trusted by budtenders and are always recommended. Just like Sweetwater we're in a culture that gets synergistic advertising brands while making profits in alcohol. Is Constellation putting Tweed on the Corona bottle? No. So is your increased marketing expenses going to increase revenue in America? Probably short term yea, but you'll have massive costs up front you better recoup before the competition gets in there and undermines you again.
6) To your ponder comment, if Constellation gives you cash and you get Acreage, let's say your market cap goes up by another 30% (to 26 billion CAD) who gets the gain? You're not getting $73 per shares, the share float becomes 475M or whatever your agreement is going to be. But you becoming $73 at 475M shares OMG that market cap without a profit LOLLLLL You think you're a $200 stock? My god. You'll need to sell a lot of doggy CBD treats to make up that gap. You should start thinking about market cap and profits you investing wizard you...
3 Signs Aphria Is Heading for Trouble
And its merger with Tilray may only make things worse.
Aphria (NASDAQ:APHA) released its latest earnings report on Jan. 14 for the second quarter ending Nov. 30, 2020, and investors were excited by the company's growth and bottom line. The stock jumped more than 20% on the news. However, the numbers weren't all great for Aphria, and there are signs that the stock could be headed for trouble.
Below, I'll look at three potential problems for the company moving forward, and examine why despite the seemingly positive results, investors may want to be careful with Aphria.
1. There was minimal growth in Canada
In Q2, Aphria's sales of 160.5 million Canadian dollars were up 10.2% from the previous quarter, and there wasn't a whole lot of growth in its home market. In North America, sales of CA$67.5 million only grew 6.4% from the first quarter, for the period up until Aug. 31, 2020. The main driver for the growth was Europe, where sales totaled CA$91.4 million and were up 13.3% from the CA$80.7 million that Aphria reported for that segment in Q1.
While Aphria's presence and growth in Europe provide great diversification, the North American numbers should be stronger, especially given the strength of the Canadian market this year. According to Statistics Canada, during the months of June 2020 through August 2020 (the period covering Q1), retail cannabis sales in Canada averaged CA$228.5 million per month.
For September and October of 2020 (the most recent available data), the average was CA$263.5 million -- an increase of about 15.3%, far higher than Aphria's rate of growth. And given the rising sales trend, November's results would likely push the retail numbers up even higher. This suggests that the company is losing market share in Canada.
Without a strong performance on its home turf, Aphria's sales could start to slow down in the quarters ahead and rely more on its European business. In Q2, sales from its German subsidiary CC Pharma totaled CA$90 million and made up the bulk of its revenue.
2. Gross margins are declining
In Q2, Aphria's gross profit before fair value adjustments was CA$43.8 million, or 27.3% of its top line. In the previous quarter, its gross margin was 29.7%.
A sliding gross margin means that even though Aphria's sales are rising, it's not seeing as much of that incremental revenue flow through its costs of goods sold to cover its operating expenses. For instance, if Aphria's gross margin remained at its Q1 rate, the company's gross profit would have been CA$47.7 million -- close to CA$4 million higher than it actually was in Q2.
Given that Aphria incurred a net loss of CA$120.6 million this past quarter, a slightly higher gross margin wouldn't have been enough to make a big difference this time around. However, without stronger margins, it's going to be difficult for Aphria to get close to breakeven. And especially with the company merging with Tilray, bringing down expenses is going to be even more important, since the British Columbia-based company has incurred net losses totaling $268.1 million over the past three quarters. For the newly combined company to have a chance of posting a profit, costs will need to come down and margins will need to be higher.
3. Inventory levels are higher and could be vulnerable to writedowns
One of the biggest problems in the Canadian cannabis industry is that companies are making too much pot -- more than they can sell. This can be dangerous because investors don't usually notice this until a company records a writedown. As of the end of Q2, Aphria's inventory was worth CA$321.5 million, which was relatively unchanged from the previous quarter, but it's 21.6% higher than the CA$264.3 million Aphria reported at the start of its fiscal year.
Fair value adjustments of CA$104.9 million have increased the value of the company's cannabis inventory, but those are estimates that can change, especially if products aren't moving to market quickly enough. The government-run Ontario Cannabis Store recently announced that it would be removing products from store shelves that weren't meeting sales targets. That means in the near future, cannabis companies could be writing down a lot more slow-moving inventory.
Not only will it have the above Aphria-related issues to deal with, but Tilray's own operations aren't in great shape, either. That's why investors may be better off looking at other cannabis stocks.
There is negative article written everday . Aphria is not immune . You just hunt out ones that support your narrative .