Is Aphria Stock a Buy Right Now?
With a market capitalization of about $2.94 billion, Canada-based Aphria, Inc. (APHA) is one of the biggest names in the cannabis industry. Like most other cannabis stocks, Aphria has yet to demonstrate consistent profits and is a relatively risky investment.
However, we all know that fortune favors the bold. So, is Aphria stock a buy right now?
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Aphria Misses Revenues Estimates
Aphria had published its Q1 Financials for the FY 2020-21 on the 15th of October and its stock price immediately crashed 18%. Although Aphria has reported positive EBITDA for six consecutive periods along with a 16% surge in revenue compared to last year, its quarterly revenue fell short by about 4% compared to the previous quarter.
The board claimed such revenue reduction was on account of a drop in cannabis sales in the US markets due to COVID lockdown impositions. The net loss of C$5.1 million, with an EPS as low as –C$0.02 did upset many cannabis investors which subsequently led to its recent price decline.
Keeping aside the current revenue dip, Aphria’s balance sheet remains impressive. It ended Q1 with a cash balance of $400 million giving it enough room to reinvest in capital expenditures as well mergers and acquisitions.
More company highlights can be found in the pdf below.
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Aphria: A Solid Long-Term Bet?
After this most recent US Presidential Election, and the legalization of cannabis in five more states, 1 out of 3 Americans live in a state where cannabis is legal. As more and more markets start emerging in the coming years, a few companies in the cannabis industry may hold market shares comparable to big players in the alcohol and tobacco industry. Aphria’s domestic market experience due to Canada being one of the first countries to legalize recreational marijuana can help it to capture global markets post growing legalization and demand.
Aphria: Outperforming its Peers
Aphria says it has outperformed its peers in the quarter. It’s cost of production stood at between $0.30-$0.80 with a selling price between $1.50-$6.50 per gram of cannabis. It seems Aphria is committed to reducing its production cost consistently over the years.
Currently, Aphria cannabis stock is trading at ( ). Its revenue grew at a CAGR of 296.8% over the past three years. In its AGM Aphria stated it had obtained EU certification for entering the German Medical Marijuana Market. Its subsidiary CC Pharma will likely distribute products to 13,000 drugstores in Germany. It also announced its expansion plans in the U.S. – where, again, 1 in 3 citizens now have legal access to cannabis.
Aphria just acquired SweetWater Brewing Company, the 10th largest independent brewing company in the US, for $300 million. Huge synergies may be obtained from this acquisition when more cannabis-infused beverages will be rolled into the $119.3 Billion U.S. beer market that is growing annually by about 5.8%. Both the companies will be able to generate consolidated revenue of $675 million as well.
APHA has an impressive track record and the cannabis company has abundant growth opportunities ahead. Given its cost of production, ample production volume and efficient management, Aphria may soon enter its profitable phase. So, keeping in mind all the above-discussed points if you are already holding shares of this cannabis stock then continue to hold on – or if you are looking for long-term investment opportunities – then Aphria may be the cannabis stock for you.
Is Aphria Stock a Buy Right Now?
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