Featured Cannabis Stock Pick for 2020: Aphria Inc. – Why is this stock a BUY Below $4/share?
Aphria Inc. (NYSE: APHA) is a cannabis company that has been through some of the most unfortunate circumstances of almost any cannabis company in the industry. In 2018, the company was covered in a report released by a short-seller wherein it accused the company of overpaying for assets it acquired in Latin America. The company lost significant value after the report was released, much to the benefit of the short-seller as they make a profit on the decrease of a company through options trades. But is this one of the best cannabis stock picks for 2020?
See our comprehensive analysis of Aphria here
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Why do we like Aphria as a top cannabis pick for 2020?
- Strong Cash Balance: The company has a cash balance of $600 million after it was determined to increase cash balance through liquidation of non-core assets, convertible debentures, term debt, and equity. The company only had a cash balance of $134 million before it started to increase the amount of cash it has on hand. Several cannabis companies on the market right now do not have a significant amount of cash on hand and are carrying sizeable credit loans instead.
- Strong Revenues: Aphria doubled its cannabis revenue and pulled in a total net income of $24 million. Thanks to its international ties in Europe, Aphria was able to generate a sizeable amount of cannabis revenue. Aphria was at a net loss $32 in less than a year prior and was able to change course towards profitability. The company also increased adjusted EBITDA from a dismal loss of $27 million to a positive adjusted EBITDA of $3 million.
Featured Cannabis Stock Pick for 2020: Aphria Inc. – Why is this stock a BUY Below $4/share?
We believe that the way Aphria was able to successfully navigate the claims made by in the short-seller report and its performance afterward indicates a cannabis stock investment with low risk. The company’s purchase of the Latin American assets was reviewed by a special committee and it determined that the price paid for the assets was within a reasonable range of its value. An indicator of how Aphria is a safe investment to make came through its fundamentals and its response to the short-seller report. Shortly after the short-seller did quite a number on the company’s share value, Aphria stock was able to increase 92% in value.
For these reasons, we believe that investing at or close to the current price of $3.33 per share of Aphria is a good cannabis stock investment opportunity for 2020. As the company continues to increase cannabis revenues, it will continue to provide investors with further opportunities.
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