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Tilray Stock Jumps On Sales Beat, Even As It Warns On Shortages; Aurora Sales Miss Late

Canadian cannabis producer Aurora Cannabis (ACB) late Tuesday reported fiscal third-quarter sales that missed some expectations, after rival Tilray (TLRY) earlier in the day said it could take another year-and-a-half to two years before Canada's strained pot supply evens out with demand.

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Still, Tilray stock continued its after-hours ascent, after the company reported first-quarter sales that beat expectations. The company's loss was deeper than expected. Other marijuana stocks mostly rose late in the day.

Aurora's conference call is set for Wednesday. Aurora cannabis stock fell 2.2% after hours.

Earlier Tuesday, rival CannTrust Holdings (CTST) reported a surprise profit.

Aurora Cannabis Earnings

Aurora reported net sales of 65.1 million Canadian dollars, a 20% jump from the prior quarter. Analysts expected net sales of 68.7 million Canadian dollars.

The company reported a net loss of 160.2 million Canadian, narrower than the loss reported in the prior quarter.

Net cannabis sales came in at 58.7 million Canadian dollars, with recreational sales accounting for a majority. Extra production at the company's massive Aurora Sky facility helped broaden product availability and lower production costs, the company said. Non-production costs "stabilized," the company said, rising 1%.

Average selling price per gram dipped due in part due to excise taxes on medical weed and "extraction capacity constraints." Cannabis extracts, like oils, tend to command more of a premium. A greater quantity of cheaper wholesale product also brought prices lower.

Aurora sold 9,160 kilograms of cannabis during the quarter, 31% more than in the prior period. The kilograms of weed it produced nearly doubled over that time, to 15,590.

The pot producer's results follow its purchase of Hempco Food and Fiber, a move the company said would "strengthen our CBD-from-hemp supply chain as well as our hemp business of hemp-based superfoods, nutraceuticals and fibers." Aurora also has brought aboard activist investor Nelson Peltz as a strategic advisor.

"He has been incredibly engaged, collaborative, and strategically focused on assisting our pursuit of growth in global markets and with mature companies in adjacent industries," CEO Terry Booth said in a statement on Tuesday.

Tilray: 'We Believed The Hype'

Tilray's management said its forecast for when supply and demand might balance out was longer than one it gave eight weeks ago. The remarks, made during the Tilray's conference call to discuss first-quarter results, underscore struggles by the company and others in Canada to find, grow and process more quality weed while adhering to regulations.

Canada's marijuana stocks have been grappling with shortages, licensing backlogs, regulatory constraints and money-losing operations. Both Cronos Group (CRON) and Aphria (APHA), which have reported earnings in recent weeks, cited struggles with packaging and distribution bottlenecks as they try to activate more production capacity and stay compliant.

Echoing past remarks, Tilray CEO Brendan Kennedy, during Tuesday's call, attributed some of the supply problems to speculation, from analysts and the media, about a possible glut of cannabis once legal recreational sales took hold. An emphasis on a metric known as "funded capacity" led some executives to grossly overstate how much they could produce, he said. He said he wished he would have invested more in cultivation.

"That was a mistake," Kennedy said on the call. "But we believed all the hype 18 months ago."

The illegal market, he said, had also taken its toll. But Kennedy said that as more legal shops open and derivative products, like vapes and edibles, become available online, the tide could turn.

"You can go into an illicit retailer in Canada today and buy all the same products you can buy in a U.S. state," he said, adding that customers in Canada couldn't yet buy what they wanted.

Tilray Earnings

Tilray's revenue jumped 195% from a year ago to $23 million. That figure was also up from the sales it posted in the fourth quarter. Wall Street expected Tilray to report first-quarter sales of $21 million.

The company lost 32 cents per share. That was deeper than expectations for a per-share loss of 23 cents.

Tilray stock jumped 7.3% to 52.30 after hours the stock market today. The stock has trended lower for much of this year.

Sales got a lift from recreational legalization in Canada. Hemp-food sales from the company's acquisition of Manitoba Harvest — a large hemp-food supplier Tilray acquired in February — and gains in the international medical marijuana markets, also helped. Tilray acquired Natural Naturals, a cultivation center in Ontario, in February as well.

Tilray's gross margins increased from the prior quarter to 23%. The company said gross margins would continue to take the hit from rising costs related to bringing cultivation facilities online in Canada and Portugal. Buying cannabis from third-party suppliers will also cut into margins, Tilray said.

Tilray wants to buy cannabis from third-party suppliers to use it as an ingredient. But some analysts have also raised concerns that the quality of that product has left something to be desired. On Tuesday, the company said its quest for product that met its standards had still proven frustrating.

The pot producer sold 3,012 kilograms of weed during the quarter, up from the prior quarter and a year ago. But the average price per gram slipped to $5.60, as extracts made up a smaller portion of Tilray's sales.

Other Marijuana Stocks

Among other marijuana stocks, Cronos rose 0.9% after hours. Aphria stock added 1.2%. Canopy Growth (CGC) gained 0.9%.

Canopy Growth, which is based in Canada, recently secured the rights to buy Acreage Holdings, a cannabis company in the U.S. Tilray CEO Brendan Kennedy, when asked by an analyst Tuesday for his thoughts on that deal, said it wasn't the best fit for his company.

"I think we looked at that deal, as we have with most of the deals our competitors announced," he said. "And we decided it wasn't the right deal for us. We expect to see copycat deals between Canadian LPs and U.S. (multi-state operators)."

Analysts Weigh In On Tilray's Prospects

Jefferies analysts have worried that Tilray lags its rivals in the medical marijuana business, and that investors are placing too much value on the company's the cannabis-beverage research partnership it has Anheuser Busch InBev (BUD) and deals it has struck to put more CBD ointments and sprays on mainstream retail shelves.

However, Piper Jaffray analyst Michael Lavery, in April, said he liked Tilray's odds based on the AB-InBev deal and its distribution deal with drugmaker Novartis (NVS).

Kennedy, during Tilray's conference call, said the company had been in contact with Fortune 500 companies from a "broad variety of industries." He expects Tilray's hemp-derived CBD products to roll out in the second half of the year in the U.S. He added the interest in CBD among retailers, and their willingness to move into the space, was ahead of consumer packaged goods companies.

"We're having lots of conversations with lots of different retailers," he said. "They all want everything."

CannTrust Earnings

CannTrust earnings came in at 12 cents Canadian as revenue shot up 115% to $16.85 million Canadian. That was a modest gain from $16.2 million Canadian in the prior quarter.

No Zacks Investment Research estimates were available for CannTrust earnings. But Factset forecast a loss of 3-cents a shares on sales of $24.5 million Canadian.

Shares, which began trading in the U.S. in February, rose 0.8%.

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