Are Aphria Shares Available at a Discount Now after Tilray Merger?

It has been over two years since recreational marijuana has been legalized in Canada and investors are still hovering around this industry looking to build long-lasting wealth. Canada-based Aphria Inc which operates in the medical cannabis space is one of the best names in the industry. Cannin.com first recommended buying this cannabis stock back in March 2020 when APHA was trading at $2.36/share. It’s on a tear and now trading at [stock_market_widget type=”inline” symbol=”APHA” template=”basic” color=”default”]. With a market capitalization of about $2.934 billion, the stock has more than tripled since March 2020, making it one of the most preferred stocks in the cannabis industry. But are Aphria shares available at a discount now after Tilray merger?

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APHA | TLRY Merger

In December, Aphria and Tilray announced their merger. This will create the largest cannabis producer by sales globally. In essence, the combined entity will be valued at $3.9 billion and will have a pro forma annual revenue of $685 million. The transaction has been termed a “reverse acquisition of Tilray” and Aphria shareholders will own 62% of Tilray’s stock in the new company.

This merger will propel the new company to the number one slot beating out other large MSO players like Curaleaf, Trulieve, and GreenThumb.

The merger presentation highlights some key points for the new company:

It brings cultivation cost below C$1 per gram.
Complete processing and manufacturing capabilities for 2.0 products
Pro forma retail market share of 17.3%.

Growth Potential in the Adult Beverage Market

Estimates suggest the cannabis adult-use beverage market was valued at about $367.4 million in 2019 and is expected to reach $8521.6 million by 2027 which is about 25 times the 2019s size. Also, statistics show the US beer market is currently valued at $119.3 Billion and is growing annually by about 5.8% indicating huge growth opportunities for companies.

This November Aphria announced about entering the US market with the acquisition of Georgia-based SweetWater, the 10th largest independent brewing company in the US, for $300 million. SweetWater has been distributing craft beer to 27 states and with this Aphria would get instant access to the US market.

Meanwhile, Tilray has a joint venture with alcohol giant Anheuser-Busch InBev Fluent Beverage will tap the booming cannabis drinks market segment.

High Growth Opportunity for Cannabis Stocks like APHA

The global marijuana market is expected to rise by 18% by 2027. Post this US election five more states have legalized pot and it was found 1 out of 3 Americans now live in a state where cannabis is legal. It can be said in the coming years some companies in the cannabis industry may hold positions comparable to big players in the alcohol and tobacco industry.

Aphria is all set to grab the upcoming opportunities. It has a solid liquidity position with a cash balance of $400 million that can aid further growth by various means such as mergers and acquisitions. And its domestic market experience due to Canada being one of the first to legalize recreational marijuana can help it capture global markets also as they start opening up. In its AGM, Aphria stated it had obtained EU certification for entering the German Medical Marijuana Market and its subsidiary CC Pharma will likely distribute to 13,000 drugstores in Germany.

However, the market hasn’t been kind to Aphria stock and the stock price was on a downward trend since the merger was announced. This doesn’t really make sense when you consider the fact that Aphria’s revenue has grown at a CAGR of 296.8% over the past three years indicating a solid past performance.

The merger with Tilray will enable Aphria to accelerate its global expansion plans while strengthening its hold in North America. It’s a good growth stock for your portfolio if you are looking for solid, long-term cannabis stock investment options.

Are Aphria Shares Available at a Discount Now after Tilray Merger?

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Are Aphria Shares Available at a Discount Now after Tilray Merger?