Whether you realize it or not, the cannabis industry had an incredible year in 2018. You might not think this was the case, as pot stocks were somewhat of a mixed bag, with many delivering huge declines, but the industry itself gained validation in a big way after Canada ended nine decades of recreational marijuana prohibition in October.
Today we’re going to examine Aphria (APHA) — which is committed to bringing breakthrough innovation to the global cannabis market — to see whether its stock is a buy.
Aphria recently reported solid second-quarter sales growth with net revenues of $21.7 million, which represents 63% QoQ growth and 155% YoY. The Company sold 3,408.9kg equivalent of product in the quarter compared to 1,778.2kg in the prior quarter with an average retail price of medical cannabis before excise tax of $7.51 per gram, versus $8.99 in the prior quarter. However, corporate Adjusted EBITDA loss was $9.530 million versus estimates of $4.2 million.
Furthermore, CEO Vic Neufeld and Co-Founder and VP of Growing Operations Cole Cacciavillani will be transitioning out of their executive roles while replacements are identified over the next few months. Newly appointed Independent Chair Irwin D. Simon and current President Jakob Ripshtein will work with Mr. Neufeld and Mr. Cacciavillani on developing a succession plan.
So, should you buy APHA stock? Haywood analyst Neal Gilmer says ‘yes,’ but with caution: “Overall, we view it as a solid quarter of revenue growth, but somewhat disappointing in the continued delay of approval from Health Canada that will drive higher costs longer than we had expected. We believe that product cost per gram has reached its peak and the pace of decline will be determined by the timing of Health Canada and subsequently operational execution.”
The analyst reiterates a Buy rating on Aphria shares, with a price target of $13, which implies an upside of 88% from current levels. However, the analyst has revised his estimates lower as the continued delay in the Part IV approval has impacted the timing of revenue ramp up and improvement in cost-structure. (To watch Gilmer’s track record, click here)
When looking at Wall Street’s stance, Gilmer is not the only bull, as TipRanks analytics showcase APHA as a Buy. Out of 7 analysts polled in the last 3 months, 4 rate Buy on Aphria stock, 2 maintain Hold, while only 1 issues Sell. The 12-month average price target stands at $10.00 marking an 44.50% upside from where the stock is currently trading. (See APHA’s price targets and analyst ratings on TipRanks)