3 Things to Watch for When Aphria Inc (TSX:APH) Releases Earnings This Week

Can Aphria Inc (TSX:APH) bounce back after a poor Q4?

Aphria (TSX:APH) is set to release its quarterly earnings later this week, and with the stock showing signs of momentum, investors may be wondering if now is the time to buy the stock.

In its Q4 earnings back in August, Aphria had a disappointing quarter where the low-cost producer recorded a net loss of $5 million after finishing in the black for three consecutive reporting periods. For its upcoming earnings release, there are three things investors should watch out for.

Will there be any news with respect to beverage deals?

Although Aphria’s results did not inspire much bullish activity last quarter, pot stocks as a whole have been doing well since it was reported that popular beer maker Diageo plc was looking for a partner in the cannabis industry. We’ve seen a few deals come together between the two industries, and it may only be a matter of time before Aphria announces one as well.

There haven’t even been any rumours involving Aphria, and you’d have to believe that the company is exploring the possibility given that some of its rivals have already gone down that path. If the company comes out with news about it seeking a partner or announcing a deal, expect its stock to shoot up in price.

Will operating expenses continue to skyrocket?

Although Aphria saw its sales double in its last quarter, its operating expenses more than offset that as the company continues to accumulate more and more costs, especially as it looks to continue to pursue expansion opportunities. The ability for Aphria to get more control of these costs, the better odds it has of pulling out a profitable quarter.

The company is likely going to continue to see strong sales growth in Q1, but how much of that will flow through to the bottom line is the big question. If it simply gets absorbed by higher expenses, then it’s a net negative for the company and its investors.

Can Aphria produce a positive operating income?

In three of the past four quarters, Aphria has been able to post a profit, and each time it has had posted an operating loss. It’s been other income that has lifted the company into the black. A low-cost operator, Aphria shouldn’t need to rely on anything but its operations to keep its business profitable, but up until now, that’s been the case.

I’m not optimistic that the company will be able to stay out of the red this far up the income statement, but a good result here would certainly bode well for the stock.

Should you buy Aphria ahead of earnings?

In the past three months, Aphria’s stock has risen 40% amid the beverage craze, although in the past month it has declined 20%, as the effect has started to subside.

Investors have been bearish about Aphria for much of this year, and without a strong performance or a big deal to announce, I wouldn’t expect the stock to get a boost on earnings day, especially after the ascent it has been on lately.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor David Jagielski has no position in any of the stocks mentioned.

More on Investing

growing plant shoots on stacked coins
Dividend Stocks

4 Ways to Grow $100,000 Into $1 Million in Retirement Savings

Anyone can build a million-dollar retirement portfolio. Here are four ways you could practically grow $100,000 to $1 million.

Read more »

Pot stocks are a riskier investment
Cannabis Stocks

Steer Clear: This Stock Spells Trouble

A newly listed cannabis stock is outperforming in 2024 but investors should stay clear to avoid trouble and losses.

Read more »

Red siren flashing
Energy Stocks

Buy Alert: 4 Reasons Why TC Energy Stock Is a Must-Own Now

A large-cap energy stock is a strong buy today for four compelling reasons.

Read more »

Shopping and e-commerce
Tech Stocks

Is Lightspeed Commerce Stock a Buy Now?

Despite the near-term weakness, I am bullish on Lightspeed due to its solid fundamentals, healthy growth prospects, and attractive valuation.

Read more »

A shopper makes purchases from an online store.
Dividend Stocks

3 Reasons to Buy TFI Stock Like There’s No Tomorrow

TFI stock (TSX:TFII) had a hard 2023, but now it's set up for a solid 2024, with an acquisition that…

Read more »

Dividend Stocks

5 Secrets of TFSA Millionaires

These lesser-known secrets can help you set up the perfect long-term portfolio and achieve a million-dollar TFSA!

Read more »

Canadian stocks are rising
Dividend Stocks

iShares S&P/TSX Capped REIT Index ETF (TSX:XRE): Why I Like this ETF Better Than a Rental Property

XRE is a great ETF for gaining exposure to the Canadian real estate sector.

Read more »

analyze data
Dividend Stocks

How to Build a Powerful Passive-Income Portfolio With Just $20,000

These fundamentally strong TSX stocks have paid and increased their dividend in all market conditions. Add these stocks to build…

Read more »