Tilray, Aurora report earnings as Cronos, Medipharm enter supply deal
TILRAY REPORTS REVENUE BEAT: Tilray (TLRY) reported Tuesday first quarter earnings per share of (27c) on revenue of $23M, which compared to analyst estimates of (27c) and $20.16M respectively. The company also reported Q1 total kilogram equivalents sold of 3,021 kilograms compared to 1,299 kilograms in the prior year period and Q1 average net selling price $5.60 compared to $5.94 last year. Piper Jaffray analyst Michael Lavery lowered his price target for Tilray to $72 from $84 in a Wednesday research note and maintained an Overweight rating on the name. The company's momentum is building, but its "trajectory can be lumpy," Lavery said. The analyst noted revenue rose 49% from Q4 as better than expected cannabis revenues more than offset lower than expected hemp foods sales, however, he believes the company's negative earnings reflect the investment stage of the business and the dynamic is likely to persist. Additionally, BMO Capital analyst Tamy Chen upgraded Tilray to Market Perform on valuation but lowered his price target to $50 from $60 in a Wednesday note after the company's "in line" results and his revised forecast of a "more gradual" industry production ramp.
AURORA SALES SURGE: Aurora Cannabis (ACB) posted on Tuesday a Q3 net loss of (C$158.4M) vs. a loss of (C$19.2M) last year and net revenue up 305% at C$65.1M versus C$16.1M last year. The company also reported Q3 gross margin 55% versus 59% last year and active registered patients 77.1K compared to 45.8K last year. The company also sold 9.2K kilograms of cannabis compared to 1.4K kilograms last year with the active net selling price at C$6.40 versus C$7.99 last year. The company said,” With production ramping up, the company continues to scale up manufacturing capacity, with innovation and technologies aimed at reducing time from harvest to market. The company anticipates that increased processing, packaging and delivery efficiencies in Q4 and beyond will accelerate availability of product. Supply to Europe and other international markets is expected to increase as more of Aurora's production facilities receive EU GMP certification. The Bradford facility has recently undergone an audit to obtain EU GMP certification. In Q3, the company began exports of full spectrum cannabis extracts in Germany. Management anticipates these sales will contribute to growth given the higher margins in extracts.
CRONOS, MEDIPHARM ENTER SUPPLY DEAL: Cronos Group (CRON) announced Tuesday that it entered a multi-year supply agreement with MediPharm Labs (MLCPF). MediPharm Labs will supply Cronos Group with approximately $30M of private label cannabis concentrate over 18 months and potentially up to $60M over 24 months. In addition, Cronos Group and MediPharm Labs have entered into a multi-year tolling agreement, where Cronos Group will supply bulk cannabis to MediPharm Labs' extraction facility in Barrie, Ontario, to fulfill certain additional processing needs of the company. Under the terms of the bulk resin supply agreement, Cronos subsidiary Peace Naturals will purchase a minimum of approximately $30M of cannabis concentrate from MediPharm Labs over the course of 18 months. Peace Naturals will also have a right of first offer to purchase an additional approximately $18M of cannabis concentrate over the same period. The agreement includes an option for a mutual extension where Peace Naturals would additionally purchase a minimum of approximately $6M over 6 months and would have a right of first offer to purchase an additional approximately $6M over the same period, bringing the total potential aggregate value of the agreement to over $60M to the end of April 2021. Under the terms of the cannabis concentrate program agreement, Peace Naturals will supply bulk quantities of dried cannabis to MediPharm for processing on a fee for service basis into bulk resin or other premium cannabis oil derivative products. The tolling agreement has a two-year term.
CVSI INITIATED WITH BUY: Roth Capital analyst Scott Fortune started coverage of CV Sciences (CVSI) on Thursday with a Buy rating and $9 price target. The analyst believes the 2018 Farm Bill provides greater consumer acceptance and the beginning of large retail adoption of its products. The analyst also notes that the company is also developing a CBD drug for smokeless tobacco cessation.
CANOPY GROWTH, KUSHCO INITIATED WITH BUY: Alliance Global Partners analyst Aaron Grey initiated Canopy Growth (CGC) on Monday with a Buy rating and C$75 price target, citing his view that the company can become the "global leader in cannabis" following its game-changing acquisition agreement with Acreage Holdings (ACRGF) to give it access to the world's largest cannabis market in the U.S. Though he does not foresee Canopy being profitable until FY21, Grey noted that he does expect the company to be profitable in the Canadian cannabis market as it continues with its international expansion. The analyst also initiated KushCo Holdings (KSHB) with a Buy rating and $9 price target, calling the company "the go-to in cannabis supplies" and viewing it as one of the more underappreciated stocks in the space. He expects the company's strong top-line momentum to continue, driven by growth within existing states and new cannabis legal states coming online.
OTHER CANNABIS STOCKS: Publicly-traded companies in the space include Aphria (APHA), CannTrust Holdings (CNTTF), General Cannabis (CANN), Innovative Industrial Properties (IIPR), India Globalization Capital (IGC), ICC International Cannabis (KNHBF), Biome Grow (ORTFD), MediPharm Labs (MLCPF), Indiva (NDVAF), OrganiGram (OGRMF), MedMen Enterprises (MMNFF), Elixinol Global (ELLXF), Planet 13 Holdings (PLNHF), Wayland Group (MRRCF), Khiron Life Sciences (KHRNF), Liberty Health Sciences (LHSIF), Origin House (ORHOF), Sunniva (SNNVF), Sproutly (SRUTF) and DionyMed Brands (HMDEF) and GrowGeneration (GRWG).
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