What a difference a week can make.
The markets weren’t kind to the cannabis sector over the last month and last week looked to be more of the same. Negative news from
The Green Organic Dutchman Holdings Ltd. (
TSX:TGOD) and
HEXO Corp. (
TSX:HEXO) on Thursday led a large decline, and on the back of recent poor quarterly results from major Canadian LPs, all eyes were on
Aphria Inc. (
TSX:APHA) this week to deliver a positive swing.
Needless to say, Aphria delivered and then some. The Ontario-based LP posted its
second straight quarterly profit Tuesday and significantly beat analyst estimates, with $16.4 million in net income versus expectations of a net loss. Though revenues were a bit lower than analyst estimates ($126 million vs. $130.6 million), Aphria more than made up the difference with an increase in recreational sales and pharmaceutical sales in Germany.
In response, the cannabis sector celebrated. Sector indexes were up across the board as many of the LPs swelled in trading, including
Organigram Inc. (
TSX:OGI) up 11.27%. Without a doubt, the overall sentiment for the sector feels a lot stronger going into tomorrow’s legalization of
the next wave of cannabis products.
The big question for investors and analysts alike is whether or not Aphria’s strong quarter will signal a recovery for the sector as a whole. At the very least, it gives the competing LPs something to focus on for their own improvements. A
large chunk of Aphria’s revenue came from the Company’s German pharmaceutical division, as well as an increased market share of recreational cannabis in Canada.
Again, the focus turns to new stores and new products with
“Cannabis 2.0” on the horizon. Aphria may have captured some market share from its competitors, but there is plenty still left up for grabs with new markets opening and the
recent woes of companies like
CannTrust Holdings Inc. (
TSX:TRST), which also seems to be on a recovery path.
The tide for the overall cannabis industry definitely seems to be turning positive. A rough week like the last hurts in the short term, but positive news like Aphria’s strong quarter, an expanding market in Canada, and
increased business access in the US are positive long term indicators.
And Aphria’s results are doubly impressive considering the company’s
poor start to the year. After being commonly targeted by short sellers, it has posted a remarkable turnaround to lead the cannabis sector’s recovery. More than anything, if Aphria can turn around successfully, there’s no stopping anyone else.
Now the question is, who's next? Leave your guesses and outlook in the comments!
For more info on the cannabis sector, including tips on how to invest, check out the Cannabis Stocks hub on Stockhouse.
FULL DISCLOSURE: HEXO Corp. and Organigram Inc. are clients of Stockhouse Publishing