IT’S been a jam-packed week for the global cannabis industry as a host of companies including Aurora, Halo Collective, Dancann Pharma, Yooma Wellness and Intercure, among others, reported quarterly results.
While this saw cannabis stocks have a more stable, if not positive week, companies were still forced to contend with continually turbulent global markets.
After a number dramatic swings last week, the FTSE 100 looked to be stabilising seeing a consecutive three-day recovery, but this calm was broken mid-week amid a ‘global stock sell-off’, seeing £50bn wiped off UK stock values.
The Canadian cannabis giant released its Q3 results at the end of last week, reporting a total net revenues of $50.4m CAD, down 17% compared to the previous period and 9% year-on-year.
This drop was considerably less severe than analyst predictions of around $41m CAD in total sales.
Meanwhile the company’s EBITDA losses grew from $9m CAD in Q2 to $12.3m CAD during the period, while net losses for the quarter were just over $1bn CAD, $160m CAD more than its current market value.
Despite the largely expected declines figures Aurora saw its stock rally earlier this week by around 25%, seeing its North American peers Canopy Growth and Sundial also make gains.
It is thought that the boon was down to a reported 8% growth in Aurora’s medical cannabis operations, which accounted for nearly 80% of its consolidated revenue and 92% of its adjusted gross profit.
This growth was largely driven by its expansion into international medical cannabis markets, particularly in European countries including Germany, Poland and the UK, with revenues in these territories and Australia growing 55% year-on-year.
Amid much needed efforts to cut costs Aurora announced the imminent closure of its flagship Aurora Sky facility in Edmonton, Alberta, alongside a second outdoor farm in British Columbia.
It also announced plans to sell its Alberta-based Sun facility for just $47m CAD, a fraction of the $250m CAD it purchased it for.
While Aurora scrambled to offload assets in North America, it announced a number of developments across its European markets, including the receipt of an EU-GMP certification for its production facility in Germany, with the first shipments due later this month.
A week earlier it announced the launch of three new cannabis extracts for patients in the United Kingdom, produced in its Danish facility, suggesting that as its consumer business continues to decline it may further shift its focus to the EU medical cannabis market.
The Danish cannabis company was another to release its latest quarterly results this week, reporting growing sales and falling losses.
During the three months to March 31 2022, DanCann saw revenues rise steadily month-on-month to 1.2m DKK (£136k), up from 874,000 DKK in the previous quarter, and no revenues in the same period a year earlier.
Meanwhile EBITDA also fell from 4.7m DKK to 3.5m DKK (£398k), as the young company said it was ‘undergoing a change from being an ambitious project to a growth company in operation.’
While the company’s share price remained stable throughout the week, the company has seen its share price drop by around two thirds since January.
Since the start of the year, Dancann has made significant changes to its board, including a new COO, CFO and CEO of its subsidiary CannGros.
While the company says it has ‘significantly equipped’ itself with key people, adding that this was what its ‘investors expect’, the rapid turnover means the new team remains unproven to shareholders as the company enters the next stage of its lifecycle.
Alongside its Israeli stablemate Intercure, Seach Medical was one of the best performing stocks this week.
However unlike Intercure, which posted its second consecutive quarter of record breaking results, Seach’s 10% climb this week appeared to be based on less solid foundations.
One report published this week suggested that the company’s share price could be overvalued, focusing specifically on its price-to-earnings ratio (P/E).
The P/E ratio takes a company’s market share price and divides it by its earnings per share, a measure of the company’s profits. This is a common method of determining whether a company is under or overvalued.
According to the report, Seach’s P/E ratio currently sits above the Israeli industry average, despite the company’s earnings having declined over the past year.
It suggested that in order to justify the company’s current 13.5x ratio it would need to produce growth similar to that of the wider market, however its earnings per share dropped 44% last year.
Unless the company’s earnings per share performance improves, the company’s current share price is reportedly ‘unsustainable’.
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