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Aphria stock soars as it becomes first big pot firm to turn a profit

Aphria Inc. became the first major Canadian cannabis company to report a net profit, sending its U.S. shares up 33 per cent in pre-market trading Friday.

The Leamington, Ontario-based pot producer said Thursday it earned $15.8 million in the quarter ended May 31 on revenue of $129 million. The revenue figure beat the highest analyst estimate, and was up 75 per cent from the prior quarter.

The results are a remarkable shift from last quarter, when Aphria reported a significant drop in gross margin, revenue that missed expectations and a C$50 million writedown on its Latin American assets.

“In the context of poor sector sentiment, profitability becoming an increasing focus, and guidance scarce, this print is very reassuring and supports our conviction in the name,” Jefferies analyst Ryan Tomkins wrote in a note. He’s among 9 analysts carrying a buy-equivalent rating on the stock. “Names who can show a route to profitability (or are there now) have the greatest likelihood attracting near term investor interest.”

Key Insights

- Revenue from recreational cannabis sales was $18.5 million, up 158 per cent from the prior quarter, on 5,574 kilograms of cannabis sold

- It also cost Aphria less to produce pot, with cash cost per gram of dried cannabis falling to $1.35 from $1.48

- Aphria said it expects to generate net revenue of $650 million to $700 million in fiscal 2020, which ends May 31, and adjusted earnings before interest, taxes, depreciation and amortization of $88 million to $95 million.

- Analysts expected revenue of $701 million and Ebitda of $46 million

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