Aphria Inc (TSX:APHA)(NYSE:APHA) and OrganiGram Holdings Inc (CVE:OGI) were down in trading on Monday as both cannabis stocks reported their quarterly results which underwhelmed investors. Despite showing good sales growth from a year ago, both companies posted losses overall.
In Aphria’s case, sales of $73.6 million were up more than 600% from the $10.3 million that it recorded a year ago. However, it was moot given that the company incurred a $50 million impairment charge that set the stage of a mammoth loss of more than $108 million. So it’s no surprise that the stock fell as much as 16% during the day.
OrganiGram also saw incredible growth in its quarterly results as sales of $26.9 million showed even more improvement than Aphria, rising nearly 700% year over year. And while it didn’t have a significant loss like Aphria, OrganiGram also failed to stay out of the red with losses totaling $6.4 million. The stock’s losses were a bit more timid, dropping as much as 8% during the day.
Both companies highlight the ongoing problem the marijuana industry is facing, and that’s a lack of profitability. When companies achieve such significant sales growth and still can’t turn a profit, that’s a big cause for concern for investors. Even if Aphria didn’t have the big write down, it still would have landed well into the red.
At some point investors will start demanding more substance behind these stocks. Growth alone will only get a company so far, but if the results aren’t there, it won’t matter a great deal. I wouldn’t be surprised to see both Aphria and OrganiGram continue to fall further down in price in the weeks to come as investors look for better options to put their money into.
