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Why Village Farms Stock Fell 16% in March | The Motley Fool

Village Farms International (NASDAQ:VFF) stock declined 16.2% in March, according to data from S&P Global Market Intelligence. For context, the S&P 500 index returned 4.4% last month. 

Shares of the Canada-based greenhouse produce grower, which entered the cannabis space in 2017, are up 439% over the one-year period through April 1. The broader market has returned 65.5% over this period.

So what

We can attribute Village Farms stock’s pullback last month largely to the company’s fourth-quarter 2020 revenue falling short of Wall Street’s expectations. Shares fell 10.9% on March 16 following the company’s release of its Q4 and full-year results. And they dropped 16.2% in the three days following the release.

That said, many stocks in the cannabis sector pulled back last month following robust performances in the prior couple of months. It’s natural for some investors — or at least short-term traders — to take some profits off the table.

In Q4 (as I just wrote in an article on the two best cannabis stocks to buy now):

Village Farms’ revenue jumped 43% year over year to $47.4 million. (Only about two months of Pure Sunfarms’ sales are included in Village Farms’ consolidated results, as Village Farms only wholly owned the cannabis subsidiary beginning on Nov. 2. Pure Sunfarms’ October results, prorated for the portion owned by Village Farms at that time, are accounted for in a line item called “Equity earnings from unconsolidated entities.”)

In Q4, Village Farms’ net income landed at $7 million, or $0.12 per share, up from a net loss of $7.2 million, or $0.15 per share, in the year-ago period. 

Wall Street was looking for Q4 revenue of $52.5 million, or growth of about 59% year over year. Investors shouldn’t be concerned with the so-called “revenue miss.” Village Farms turned in a solid performance. 

VFF Chart

Data by YCharts

Now what

For first-quarter 2021, Wall Street is modeling for a loss per share of $0.02 on revenue of $51.2 million.

Village Farms’ financial results will be easier for investors to digest starting in Q1 of 2021 since it’s the first full quarter in which the company is the sole owner of the Pure Sunfarms cannabis subsidiary. 

 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.



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