Aphria (APHA) stock took a huge blow in early December after a detailed short report came out with photographic and documentative evidence to support claims that the Canadian cannabis company was not appropriately utilizing its assets. The report suggests leadership was able to buy farms and office spaces in Latin American countries for low prices, but report spending more in order to allow insiders to pocket the difference.
GMP’s top analyst Martin Landry put the rating under review beginning December 4th and looked for changes in the company’s governance. Finally, APHA shook things up, appointing Irwin D. Simon as a new chairman.
Landry sees the move as reason to believe the company is moving on to better times. In response, the analyst updates his rating on APHA to Buy while reducing its price target to $14 from a previous $25.
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, 5-star analyst Martin Landry has a yearly average return of 33% and a 59% success rate. Landry is ranked #28 out of 5,120 analysts.
“We have reduced our target to $14.00 to reflect the recent decline in valuations in the cannabis sector. In addition, we have increased our discount rate by 100bps to reflect recurring governance issues at APHA which have reduced management’s credibility in front of investors. Despite applying a discount rate ~200bps higher than peers, we still find value in Aphria’s shares and recommend that investors accumulate at current levels,” the analyst explains. He moves on to comment on the new member of the APHA team. “Mr. Simon is a high profile and successful entrepreneur having founded The Hain Celestial Group (HAIN-NASDAQ). Mr. Simon has been one of the longest serving CEO in the packaged food industry and is now Non-Executive Chairman of HAIN. He is a strong addition to Aphria’s BOD and a great step in the right direction to improve governance,” Landry wrote.
Analysts who are following the stock are mostly bullish about its future. TipRanks analytics finds out of 11 analysts, 9 are bullish while 1 is sidelined and 1 is bearish. The consensus price target of $7.00, shows a potential upside of almost 16%. (See APHA’s price targets and analyst ratings on TipRanks)