3 Reasons Aphria Might Be the Best Pot Stock to Buy Now

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Canada's third largest marijuana cultivator,&nbsp;Aphria&nbsp;(NYSE: APHA), shocked Wall Street last Friday by posting a huge sales boost during its fiscal fourth quarter. In fact, the company generated a modest profit of CA$15.8 million, or CA$0.05 per share, for the three-month period, thanks to its newly acquired German medical cannabis unit CC Pharma. That’s a big improvement over the company’s staggering quarterly loss of CA$108.2 million, or $0.43 per share, in the prior quarter.” data-reactid=”11″>Canada’s third largest marijuana cultivator, Aphria (NYSE: APHA), shocked Wall Street last Friday by posting a huge sales boost during its fiscal fourth quarter. In fact, the company generated a modest profit of CA$15.8 million, or CA$0.05 per share, for the three-month period, thanks to its newly acquired German medical cannabis unit CC Pharma. That’s a big improvement over the company’s staggering quarterly loss of CA$108.2 million, or $0.43 per share, in the prior quarter.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="The big deal is that Aphria's shares have been sliding ever since the company's disappointing fiscal third-quarter results hit the wires last April. The company’s hefty write-offs, managerial turnover, and mounting losses all acted as an anchor on the pot titan’s shares over the past few months. As a result, Wall Street clearly wasn’t expecting Aphria to get its house in order so quickly.&nbsp;” data-reactid=”12″>The big deal is that Aphria’s shares have been sliding ever since the company’s disappointing fiscal third-quarter results hit the wires last April. The company’s hefty write-offs, managerial turnover, and mounting losses all acted as an anchor on the pot titan’s shares over the past few months. As a result, Wall Street clearly wasn’t expecting Aphria to get its house in order so quickly. 

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With Aphria firmly on the comeback trail under the watchful eye of interim CEO Irwin Simon, there’s arguably a lot to like about this beaten-down stock. Here are three reasons Aphria might, in fact, be the best pot stock to buy right now. 

1. Aphria has an attractive valuation 

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Compared to fellow top-tier cultivators&nbsp;Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC), Aphria’s shares are a downright bargain. Despite Aphria’s sizable move&nbsp;during Friday’s session, its stock is still trading at only around 2.3 times calendar year 2020’s projected sales. Aurora, on the other hand, is trading at an astronomical 12-times 2020’s estimated revenue haul, and Canopy’s stock isn’t doing much better from a valuation standpoint, at 11.1 times next year’s projected sales.” data-reactid=”27″>Compared to fellow top-tier cultivators Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC), Aphria’s shares are a downright bargain. Despite Aphria’s sizable move during Friday’s session, its stock is still trading at only around 2.3 times calendar year 2020’s projected sales. Aurora, on the other hand, is trading at an astronomical 12-times 2020’s estimated revenue haul, and Canopy’s stock isn’t doing much better from a valuation standpoint, at 11.1 times next year’s projected sales.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="The long and short of it is that Aphria's Latin American asset scandal and subsequent managerial turnover seriously damaged its long-term value proposition in the eyes of many investors. With a new management team in place and a rapidly growing footprint in Germany through CC Pharma, though, Aphria might be poised to finally claw its way back to respectability. This undervalued pot stock, in turn, could perhaps double or even triple in value within the next few months, depending on how the marijuana space performs as a whole over this period.&nbsp;” data-reactid=”28″>The long and short of it is that Aphria’s Latin American asset scandal and subsequent managerial turnover seriously damaged its long-term value proposition in the eyes of many investors. With a new management team in place and a rapidly growing footprint in Germany through CC Pharma, though, Aphria might be poised to finally claw its way back to respectability. This undervalued pot stock, in turn, could perhaps double or even triple in value within the next few months, depending on how the marijuana space performs as a whole over this period. 

2. International expansion is moving quickly

With the Canadian adult-use recreational marijuana market headed for a serious supply glut next year, the top pot cultivators and distributors in the country will need to start to ramp up their export volumes in a big way to soak up all this weed. After all, marijuana does have a limited shelf life, especially dried flowers. 

To meet this key challenge facing the industry, Aphria has built one of the widest commercial footprints outside Canada. For example, the company was recently granted the maximum number of lots during the German tender process, five in total, and permitted to grow all three strains of medical cannabis approved by the German Federal Institute for Drugs and Medical Devices. During the most recent quarter, Aphria launched a CBD-based nutraceutical product line designed specifically for the German market as well.

Aphria has also started to gain traction from a commercial standpoint in both Latin America and the Caribbean. Keeping with this theme, the company’s 49%-owned subsidiary Marigold Projects Jamaica Limited received a retail Herb House license from Jamaica’s Cannabis Licensing Authority earlier this year. Aphria and Marigold are thus set to open their first store, Sensi Medical Cannabis House, in Jamaica later this month.  

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