Cannabis darling Aphria (NASDAQ:APHA) is stumbling Monday morning. A combination of factors, including a wider-than-expected loss in the third quarter, are causing the slump. What does this all mean? And is one catalyst on the horizon enough to turn the APHA stock story around?
Let’s start with the basics. This morning, the Canadian cannabis company reported results for its fiscal third quarter. Investors have been closely watching the cannabis space, hoping for federal action in the United States. Plus, the upcoming merger of Aphria with Tilray (NASDAQ:TLRY) has had both companies in the spotlight.
Aphria failed to deliver on Monday. The company reported a net loss of 366.8 million CAD, or 1.14 CAD per share. This missed consensus estimates, and was significantly worse than net income of 5 million CAD a year ago. Revenue rose 6.4% year-over-year to 153.6 million CAD, but still missed consensus estimates for 161.3 million CAD. Aphria also said the average retail price of its recreational cannabis fell 11% in the quarter, down to 3.82 CAD per gram.
Where did this earnings stumble come from? Importantly, Aphria is pushing much of the blame onto Covid-19. According to the company, lockdowns across Canada and other pandemic measures required Aphria to reduce its inventory and hurt consumer demand.
One Catalyst Could Help Turn APHA Stock Around
So what else do analysts need to know about APHA stock and other cannabis stocks now?
Aphria is already looking to the future, hoping to put this Q3 earnings stumble in the rear-view mirror. Its merger with Tilray is set to close some time this quarter, and once it does, it will become the largest cannabis company in the world by revenue. That has had many investors excited, especially with a Democrat-controlled Congress and growing support for cannabis legalization.
However, there is also another important cannabis catalyst to watch here. Ahead of the Aphria-Tilray merger, Aphria is getting serious about growth in Europe. Later this year, Tilray and Aphria will expand into Luxembourg and then Poland. From there, Aphria is eyeing the United Kingdom, Sweden, China and beyond.
What is the bottom line? Although the earnings disappointment will likely way on APHA stock today, investors should look to the future and explore the European potential.
On the date of publication, Sarah Smith did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Sarah Smith is a Web Content Producer with InvestorPlace.com.