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Why Marijuana Stocks Are Plunging Today

By Eric Volkman – Jul 29, 2020 at 3:12PM

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One of them posted a bottom-line loss that was almost six figures deep.

What happened

After notching two straight days of gains, on Wednesday marijuana stocks again obeyed gravity by falling Earthward.

The catalyst was a steep quarterly net loss from Aphria (APHA), which not only pulled down that stock by 17% but also peers Aurora Cannabis (ACB -1.64%), Canopy Growth (CGC 4.41%), and Curaleaf (CURLF -7.14%), down a respective 9%, 4%, and 3% in late afternoon trading.

A hand gripping a marijuana plant.

Image source: Getty Images.

So what

Aphria's fourth quarter prominently featured a heavy bottom-line loss of 98.8 million Canadian dollars ($73.9 million). That's in stark contrast to the modest profit (CA$5.7 million, or $4.3 million) it booked in in the third quarter and far worse than analysts had estimated.

Although much of it was due to what are basically accounting moves (coronavirus-related impairment charges and a revaluation of convertible debentures), it starkly illustrates the persistent difficulty marijuana companies have in simply turning a net profit.

On top of that, Aphria filed the regulatory paperwork to float up to CA$100 million ($75 million) worth of new stock. Dilutive stock issues are all too common in the marijuana business, and like those constant bottom-line losses, investors are losing patience with them. 

Now what

There were positive aspects of Aphria's fourth quarter, such as better-than-expected revenue growth and a cash position that remains strong. But losses and dilution are what jump off the page when looking at the results. Aphria -- and the wider cannabis industry -- needs to get past these negatives to win favor with investors again.

 

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Canopy Growth Stock Quote
Canopy Growth
CGC
$2.84 (4.41%) $0.12
Aurora Cannabis Stock Quote
Aurora Cannabis
ACB
$1.20 (-1.64%) $0.02
Curaleaf Holdings, Inc. Stock Quote
Curaleaf Holdings, Inc.
CURLF
$5.20 (-7.14%) $0.40
Aphria Stock Quote
Aphria
APHA

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