Medical Marijuana Producer Has a Good Thing Growing
Aphria Inc hits record highs on back of latest earnings report — and Snoop Dogg.
Shares of Canadian medical marijuana producer Aphria Inc were up last week after the firm released an earnings report showing strong revenue growth — although a certain U.S. rapper may have helped the stock get even higher.
Aphria’s revenue increased 58 percent to CA$ 4.3 million (US $3.26 million) for the three months before August 31 compared to 2016’s previous quarter. The gains helped bump Aphria’s share price 7.53 percent on Friday to CA$ 3.57 a share.
Aphria attributed the revenue growth to higher demand and low production costs, with the firm selling 586 kilograms (1,291 pounds) of cannabis in the latest quarter, up from 340 kilograms (750 pounds) the quarter before.
“Aphria continues to deliver on all operating metrics,” CEO Vic Neufeld said in a press release. “Patient onboarding , harvest yields, delivering in-demand strains, kilograms sold and low production costs have again generated stellar top line and bottom line results.”
But that wasn’t the only factor pushing prices up last week. Aphria stock briefly hit an all-time high of $4 per share on Thursday after news broke that Snoop Dogg was launching a line of marijuana products in Canada called “Leafs By Snoop” with rival cannabis grower Canopy, although Aphria’s stock’s prices quickly retreated by the end of the trading day.
Snoop’s sponsorship signaled a rising interest in Canadian marijuana production as full-blown legalization of the product — which has been legal for medical purposes since 2001 but not recreational ones— inches closer.
The ruling Liberal government is to introduce legislation legalizing the drug in 2017, with an implementation task force created in June expected to deliver its recommendations next month.
While it is still unknown how the government will regulate recreational marijuana production, Aphria, which received its production license for medical marijuana in November 2014, has made no secret of its plans to capture a chunk of the legal marijuana market, which CIBC World Markets has estimated could be worth up to CA$ 10 billion.
Aphria bought 11 acres of neighboring greenhouses in the latest quarter and plans on having the capacity to produce 18 tons of cannabis per annum once its various expansion projects are completed, ensuring it will have adequate supply when demand ramps up.
Without clear guidelines in place yet, it’s unknown to what extent producers like Aphria will profit off legalization.
But Maxwell Richardson-Davis, director of sales with marijuana consulting firm GreenSea Distribution in the US state of Oregon, said that larger-scale Canadian marijuana producers were “much more prepared for legalization than anyone producing in the United States.”
That’s because Canadian medical marijuana producers work closely with the government’s nationalized healthcare system, while American firms — even in states like Oregon which have legalized recreational use — cannot work on the federal level, where marijuana remains illegal.
However, the fact that Canadian marijuana producers are better-established could create a downside for budding consumers.
“In Canada, I know larger companies are lobbying to have first access to the recreational market. That would ruin the mom-and-pop businesses creating quality product from being able to establish a foothold as they have in the United States where cannabis is legal,” Richardson-Davis said.
Unsurprisingly, that doesn’t seem to worry Aphria. “We have a good thing growing,” its earnings report noted.
