Aphria Inc (NYSE: APHA) Has Massive Growth Potential

The cannabis industry came blazing out of the gates this year, and many investors are looking for exposure to the fast-growing marijuana space including companies directly or indirectly involved with cannabis, Cannabidiol (CBD) and hemp.

However, it can be challenging making a decision on the company to invest given that most Canadian growers are in early differentiating stages.

Aphria Inc (NYSE: APHA) is now on the recovery path amid a disappointing earnings report. The company grows and sells medical as well as recreational marijuana products in Canada. Moreover, it has notable foreign medical marijuana operations.

Aphria Inc Price Check

The company has been through a lot of drama lately with allegations regarding an asset purchase as well as conflict of interest in the C suite. As a result, the stock was sent from more than $16 per share to below $4 a share in a short period.

However, the company has restored confidence as it’s observed with an increase in the price. Currently, the stock’s price stands at $.6.95 and is set for an upward trajectory.

Although the recent earnings numbers may have stopped the upward move for a bit, still, APHA is well-positioned to recover nicely.

A Closer Look at Aphria

Founded in 2014, Aphria is one of the largest cannabis companies in the world listed both on the NYSE and the Toronto Stock Exchanges. Aphria is the third-largest grower in Canada with over 250,000 kgs of peak annual output at full capacity.

There have been several negative happenings in the company which might have led to the poor third-quarter earnings results despite recording CA$73.6 million in revenue.

Perhaps, the revenue recognized was as a result of the acquisition Aphria made of distributor CC Pharma during the quarter.

The Management Scenario

Over the past few months, Aphria board has seen several changes with the latest one being the resigning of its president Jakob Ripshtein from June 7, 2019. Furthermore, CEO and co-founder had earlier left the company and Irwin Simon resumed duties as interim CEO.

Why it’s Important

Confidence in management is essential, and with marijuana companies now going all out wooing the lucrative market opportunity via inorganic growth, operational excellence, as well as management expertise, are of utmost importance.

And critical decisions have to be made for that. Looking at his record, Simon has the capable hands of managing the company to recover from reputational blows that it had suffered recently.

Nevertheless, performance wise in the year to date, APHA has gained about 36.7% against 15.9% of the S&P 500, but it has lost 35% compared to a 6.7% gain for S&P 500.

The Expansion Mode

Aphria is simply in an expansion mode. The company has made several deals; for instance, the deal with Southern Glazer’s wine & spirits for distribution of Aphria’s recreational marijuana products in Canada.

Also, it acquired several South American cannabis companies for almost $200 million last year in a deal with Scythian Biosciences.

Furthermore, earlier this year the company signed supply collaborations with each province in Canada as well as the Yukon Territory to ensure access to its products for almost 100% of the population in Canada.

The deal that Aphria referred to as “opportunistic” and “inadequate” from Green Growth is another highlight. Aphria management stated that Green Growth’s offer simply undervalues it by 23%, and hence it urged shareholders to reject the buyout.

It’s, therefore, a move that suggests as much as the company has not realized full potential; it’s right on the track to make even tougher decisions. Besides, it leaves the doors open to the fact that Aphria may finally have a potential acquisition candidate. Perhaps, it won’t surprise anyone if another big firm off-the-cannabis industry invested in Aphria.

Is Aphria a Smart Pick?

The bottom line is that Aphria, for now, has many skeptics. However, with a top-tier production capacity as well as a solid strategy for Canada’s recreational pot market, Aphria is set for the highs.

Subsequently, the company’s acquisition of Nuuvera giving it a supply deal with CC Pharma opened for the company to enjoy a robust international presence.

Nevertheless, Aphria is well ‘moving past’ its past, and it’s arguably in the best shape ever to keep an upward trajectory that will continue rolling for an extended period.

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Disclosure: We have no position in APHA and have not been compensated for this article.

Photo by Gerd Altmann from Pexels