Aphria (TSX:APHA)(NYSE:APHA) had a tumultuous end of the week. In an unexpected move, the company decided to part ways with CEO Vic Neufeld and co-founder Cole Cacciavillani. The news was first announced on Thursday, January 10, on the evening before Aphria was supposed to release its second-quarter earnings results.
A change in management over allegations made in a now infamous short-seller report may have been what Aphria needed. These allegations had already had a negative impact on the company’s stock performance. In early December, Aphria’s share price dropped significantly when the report was released, and it hasn’t fully recovered since.
Given Canada’s newly enacted laws regarding the recreational use of marijuana, Aphria’s performance on the stock market has been underwhelming; these allegations are partly responsible for that. Aphria’s share value has decreased by 27% since last May.
This figure compares very unfavourably to those of Aphria’s two main competitors, Aurora Cannabis and especially Canopy Growth. Since May, Canopy’s share price has increased by 31%. Aurora has had its ups and downs, but the company’s share price is exactly what it was in May (at the time of writing).
Considering the potential for growth in the industry and the performance of Aphria’s competitors, the Ontario-based medical cannabis company could not afford to be held back by allegations of wrongdoing. Thus, parting ways with CEO Vic Neufeld may have been the right move.
Of course, there is still no definitive evidence of guilt. The well was sufficiently poisoned after the short-seller report received widespread attention, however. To make matters worse in the minds of many analysts, Aphria took too long to take action and issue a rebuttal. Stewardship is an important consideration for investors.
Aphria’s earnings report
Aphria’s earnings report, which was released on Friday morning, almost took a back seat to the news surrounding the company’s change in management. The company’s financial results were encouraging. Although sales fell short of analyst estimates by a wide margin, revenues were up by 139% year over year.
Aphria’s net income soared by more than 250%, while its earnings per share increased by 113% compared to the corresponding period of the previous fiscal year. Aphria’s financial performance will likely continue to increase as the company taps into the growing domestic cannabis market.
Is now a good time to buy?
Aphria’s stock was up by as much as 10% on Friday, January 11, when its earnings report was released. The company finished the day up by 5%. Investors seemed to have received all the news surrounding Aphria very well. Aphria finally addressed a nagging issue with which it had been dealing since late last year, and the company’s financial results were a testament to how much its earnings can grow in the future.
Aphria will likely see much better days ahead. Now may be as good a time as any to jump on the bandwagon.
