All events considered, last week was a rather good one for marijuana stocks. Encouraging fundamentals in some quarterly results announced last week added to overall bullishness for the sector, while a bill introduced in Congress to classify cannbidiol (CBD) as a dietary supplement provided new hope for companies involved in the CBD product segment.
Overall, the shares of cannabis companies rose during the five-day trading period, at times substantially. Here's a glimpse at a couple reasons why.
Tilray's C-suite changes
The Canadian company has a new CFO and COO after announcing it had drafted Michael Kruteck and Jon Levin, respectively, for the positions. Kruteck comes to Tilray from well-known beer company Molson Coors, where he held a series of finance jobs, while Levin was previously high up in the managerial hierarchy at storied cosmetics name Revlon.
Of course, as we've seen many times throughout many business sectors, tapping a veteran manager from a famous company doesn't guarantee success or even improvement. But it's a good sign and an investor confidence builder that the company is able to attract such talent from the ranks of more-traditional consumer goods companies. Given Tilray's struggles, it could certainly use their wisdom.
Results, results, results
Last week was stuffed with marijuana stock earnings reports. Aphria (NYSE:APHA) and OrganiGram Holdings (NASDAQ:OGI) unveiled their latest results, and GW Pharmaceuticals (NASDAQ:GWPH) published a set of preliminary numbers. These ranged from disappointing to downright encouraging.
Let's go from "worst" to best in order to finish strong, shall we? Aphria's Q2 of fiscal 2020 net revenue fell on a sequential basis, although not steeply (4% was the damage). It did not meet the average analyst estimate. The company flipped to a loss on the bottom line, to the tune of over 8 million Canadian dollars ($6.1 million), which broadly met expectations. In Q2 2019, the company booked a profit of almost CA$55 million.
This isn't as concerning as it looks, in my opinion. Aphria's EBITDA still landed in the black, if slightly; its key CC Pharma subsidiary in Germany is doing well despite some headwinds, and it finally secured a permanent CEO (by removing the "interim" from provisional chief Irwin Simon's job description).
Meanwhile, the preliminary Q4 2019 net sales reported by GW Pharmaceuticals (considered a marijuana stock because its drugs are derived from cannabis) were robust. Thanks to the star of the pair, epilepsy treatment Epidiolex, revenue rose to $108 million from the Q3 tally of $91 million. Cash and equivalents, meanwhile, more or less held steady over that period.
Due to Epidiolex's limited patient base (it's only used to treat seizures arising from two relatively uncommon forms of epilepsy), the drug has done well in the early stages of its commercialization. It still has room to grow, particularly in the European Union, where it recently won regulatory approval. That, plus the company's healthy pipeline of CBD-based drugs, bodes well.
Finally, we have the week's marijuana stock star: OrganiGram. The company blasted past analyst estimates for Q1 fiscal 2020 with a quarter-over-quarter increase of almost 55% in net revenue. This was due to better-than-expected production figures, helped by a happy reduction in product returns. OrganiGram landed slightly in the red on the bottom line, but flipped to positive EBITDA on a quarter-over-quarter basis.
There were other positive developments with OrganiGram during the quarter, most notably its shaving of production costs, which should help lift profitability. Investors, thirsty for such good news in the beleaguered cannabis sector, bid the stock up by more than 61% last week, and it should go higher if the company can maintain these positive trends.