Short Seller Report Is Just a Distraction from Aphria (APHA) National Success, Says Analyst
If buying marijuana legally doesn’t already seem a bit scandalous, then surely the cunning short report about Canadian cannabis company Aphria (APHA) will raise a brow. Or so you would think. Clarus analyst Noel Atkinson says the the recent short seller report, which alleges APHA benefited insiders by reporting inflated prices for Latin American assets it purchased, is a distraction from the real value drive – the Canadian Adult-Use Market.
Atkinson reiterates a Buy rating on APHA stock, but lowers the price target from $33 to $22.50 citing he “recognize[s] the moderation of valuations across much of the Canadian LP sector in recent weeks.” (To watch Atkinson’s track record, click here)
Atkinson expects Aphria’s Canadian operation will generate 95% of cannabis-related revenues through May of FY2021. Furthermore, the analyst touts the fact the company is one of just two LPs with products available in all eight provinces across Canada and has the third-most product placements of any LP.
“Using our estimates, Aphria is trading at 4.8x CY20e EV/Adj. EBITDA of 4.8x pf 33x (of which we expect almost all to come from the Canadian operations), which is a deep discount to the FactSet consensus valuations of the peer group (excluding outlier Tilray) of 18x. […] If Aphria can continue to make progress in the key Canadian adult-use market and calm investor concerns about its international initiatives, we believe patient investors will be rewarded,” Atkinson suggests.
The Street is still buzzing about Aphria even though the report was published more than two weeks ago. Many analysts changed their price targets following the release, similarly to Atkinson. Overall, TipRanks analytics shows out of 11 analysts, 9 are bullish, 1 sidelined and 1 is bearish. The Street consensus for this stock is considered a Moderate Buy with a price target of $14.50. The potential upside for APHA is still significant – at 167%. (See APHA’s price targets and analyst ratings on TipRanks)