Aphria soars 38% after defying Wall Street estimates and turning a profit

• Aphria, a Canadian cannabis producer, reported fourth-quarter earnings Thursday that beat analyst expectations.
• Consensus estimates called for negative net income, but the company ended up turning a profit.
• Shares surged as much as 38% on the news.
• The strong report comes after a year of losses for the company when short sellers questioned its acquisitions.
• Watch Aphria trade live on Markets Insider.

Aphria just got a break from strong fiscal fourth-quarter earnings.

Shares of the Canadian cannabis producer rose as much as 38% after it reported on Thursday evening, putting the stock's performance into positive territory this year. The report beat analyst expectations, led by strong distribution sales.

Perhaps the brighest spot was the Aphria's surprise profit. The company reported net income of 15.8 million Canadian dollars, which bucked Wall Street forecasts for a net loss of 13.9 million.

"It's a new day at Aphria," interim CEO Irwin Simon said in a press release. "Our team's solid execution across key areas of our business resulted in strong adult-use revenue growth and a profitable fourth quarter."

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Sales brought in $128.6 million Canadian dollars, beating expectations and growing 75% from the previous quarter. Revenue for adult-use cannabis was up 158% from the previous quarter, bringing in $18.5 million in the fourth quarter, the company said. Sales were also boosted by the introduction of a CBD-based nutraceutical product line in the German market, the company said.

The company also said that it signed on as a brand partner to Pax Era, a vaporizer pen that works with THC cartridges. The company now expects that its year end results for fiscal 2020 will be net revenue of $650 million to $700 million Canadian dollars, and adjusted EBITDA of $88 million to $95 million Canadian dollars.

The solid report comes after the company's disappointing third-quarter earnings when shortages negatively impacted the company's ability to sell weed and an increase in costs ate into the bottom line. Aphria stock tumbled on the news.

The gains counterbalance just some of the sharp selloff Aphria has seen over the last year. In December, short sellers argued that its business was full of overvalued buyouts and fraudulent financial reporting.

"Aphria is part of a scheme orchestrated by a network of insiders to divert funds away from shareholders into their own pockets," short seller Quintessential Capital Management's Hindenburg Research said Monday morning in a report titled "Aphria: a shell game with a cannabis business on the side."

Other short sellers also argued that the company's acquisitions were "largely worthless" to shareholders and benefitted insiders only. Shares fell even further when the company said it brought in a committee to review the purchase of the company in question.

Shares of Aphria are up 13.5% year-to-date