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Should You Invest in Aphria Stock or Not?


There are many reasons why you can invest in the Aphria stock for the longer term.

While there are many short-term triggers in the Marijuana space, this stock represents future value.

Now... before you read the rest of this article, make sure to check This System.

The expert circles are quite vociferous about Marijuana gains going up in smoke.

Most feel that the current spike is only temporary.

For most marijuana stocks, experts see considerable value erosion over long-term.

But there are some like the Aphria stock that is well poised for future.

Perhaps the consensus Buy call on the stock highlights this fact the best.

The broad-based expansion enhances the future scope in this space.

Global marijuana demand is seen rising over a point of time.

Demand, especially for medicinal marijuana is set to reach all-time highs by 2025.

Aphria is uniquely positioned in this regard to take on the anticipated rise in demand.

In this context, you have to understand that Aphria’s expansion model.

It is well set for a comprehensive global distribution network.

Reports suggest that legalizing marijuana can create over 1 million job opportunities.

The good news is Aphria is one of the most competent contenders to take advantage of this scope.

Aphria Stock

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Aphria Stock: Market Leaders in Making

The Aphria stock is one of the biggest producers of cannabis across Canada.

This is likely to boost the overall prospects of the company going forward.

Once marijuana use is legalized in Canada by mid-2025, demand is seen rising phenomenally.

A company, which already has production infrastructure in place, will benefit.

It can service demand immediately without losing an opportunity to gain from this.

Needless to mention that if you have invested in Aphria stock, you can gain over long-term.

It has recently entered into a joint venture with one of Canada’s top vegetable growers.

A 30-acre state of the art greenhouse is being refitted to enhance the overall cannabis production.

Moreover, this million dollars joint venture is set to prepare Aphria for the next level of growth.

This joint venture is called GrowCo and Aphria owns majority, 51% stake in it.

Canada is all set to legalize recreational use of marijuana along with medical purposes.

This will undeniably affect demand.

Right now the marijuana market in Canada is on fire anyway.

But it only services medicinal requirements.

The legalization of recreational pot is set to broaden the demand ambit.

This also helps the company prepare better to address international demand.

This expansion joint venture is not a one-off development.

Instead, it is part of the growth strategy that is powering valuations of Aphria stock forward.

It is supposed to boost output and make 100,000 kg annual production a reality.

Needless to mention that slowly Aphria is securing the market share.

In terms of market cap, it may be the number 2 marijuana player still but not for long.

Given the systematic expansion, the company is poised to take the leap to the next level.

That, no doubt, will help consolidate its position in the global market.

Inorganic Expansion

One reason why most experts see long-term value in Aphria stock is due to its inorganic growth.

The company is steadily taking over other smaller marijuana players in a bid to consolidate itself.

It has just recently concluded one of the biggest takeovers in the marijuana space globally.

It acquired Nuuvera, one of the top international marijuana retailers for over $800 million.

This acquisition is close on the heels of a few others.

It has already acquired $230 million worth broken Coast Cannabis Inc.

This is also a strategic takeover.

With this buy, the Aphria stock gets an opportunity to consolidate itself in the West coast.

It gets to tap the potential of the medicinal marijuana market in the Western coast.

These acquisitions appropriately complement the company’s fast growth rate.

Investment and funding in this sector are on the rise as market expect rapid growth in demand.

Aphria, in that context, is gearing well for this potential rise in demand.

These new acquisitions save Aphria the much needed time advantage.

The organic expansion is both resource heavy as well as time taking.

At the same time, lack of timely expansion can cost companies key market share.

However, with Aphria’s inorganic expansion, this growth becomes way faster.

In fact, it gives Aphria stock the much needed time advantage compared to peers.

So, as and when demands begin to rise, Aphria is much better geared to service it.

When you are investing for the longer term, it has to represent a solid future story.

The idea is to choose counters with strong business fundamentals.

That alone can help these counters sustain over the longer term.

After all, that is what represents a solid story with strong return potential.

Aphria stock, in this context, looks every bit the right entity.

Organic Expansion on Track

As a result of these aggressive measures, they have been able to project a positive outlook.

Along with the acquisition drives, their steps to expand capacity is on track too.

The company is in the process of undertaking Phase III level expansion at its Leamington unit.

This expansion is set to increase output by almost three times.

Once these expansion units become functional, their production capacity may rise to 30,000 kg.

This 1,000,000 square feet capacity will boost production in addition to the JVs and acquisitions.

So overall capacity may top 2,30,000 kg every year once all the units are functional.

But the company is not just concentrating on expanding capacity in its Canadian outlets.

Globally too, Aphria is leaving no stone unturned in maintaining its lead.

The Aphria stock undeniably reaped benefits of its Australian partner, Althea, getting the Medical Cannabis License.

This is a major step in helping Aphria seal its consolidation initiatives globally.

Aphria owns almost 25% in Althea.

They bought the stake for close to $2.5 million.

The Australian part of the business too is actively engaged in getting its facilities updated.

Till the time, it is ready Aphria will provide supplies to its Australian unit.

The Australian presence is crucial in helping Aphria better tackle the regional markets.

This also broadens its global reach to a large extent.

It gives the company a better leverage to tap on its strength globally.

Most importantly, the legalization of medical cannabis in Australia provides the next growth trigger for Aphria.

The Aphria stock already factors in the additional business from the 14 new licenses.

It goes on to establish Aphria’s position as one of the major medical marijuana suppliers globally.

It provides them with additional source of meaningful growth triggers for future.

Sensible Approach by Company

Another key distinguishing factor is the quality of corporate thinking.

A good and stable company knows the extent of risk that it should take.

Moreover, they also need to decide the point from where they have to return.

In this context, Aphria management has shown exceptional foresight.

This is exactly why their decision to divest itself from the US market makes sense.

Instead of getting delisted on regulatory ground, this is a far more honorable exit.

This also exhibits extreme restraint on the part of the company.

The TMX Group began its investigation against cannabis companies in late 2017.

By February, 2018, Aphria management announced its decision to sell its shares.

It sold off its entire 26.7 million share stake to Liberty Health Sciences.

This is a US-based establishment with no overt connection.

While some on the street found it a disappointing decision, most investors heaved a sigh of relief.

The company completely avoided the risk of potential delisting.

The move got a further stamp of approval from the improved earnings.

It removed the drag from the uncertain US business.

The company was able to free up funds and concentrate towards consolidating its global business.

This undeniably is a huge positive in terms of consolidating future gains.

It helps the company take up the next level of growth in a conclusive manner.

This makes the management better poised to take up future challenges.

Even in terms of resource allocation, it provides a positive precedence.

The management is mindful of restraining expenses that can lead to value depreciation.

This promises to extend long-term value to investors.

Therefore, it becomes a strong enough reason to invest in the stock over the longer term.

It promises to extend continuous value to the overall counter irrespective of sectoral developments.

Earnings Outlook

Though the overall earnings in the marijuana space is a concern, Aphria seems to buck the trend.

Its Q2 2018 earnings provide a very positive outlook for future.

The revenue is up close to 40% and is pointing northwards.

The gross profit too jumped over $2 million to $6.2 million.

But the dream run does not just end there.

The real juice is on the outlook going forward.

Most marijuana companies are tackling concerns of potential stagnation.

But the Aphria stock holds up like a beacon of hope amidst a big storm.

The earnings per share for 2020 is seen improving to 0.26 levels.

Though these are mere estimates, you have to understand that these are based on strong business fundamentals.

The current earnings per share for the company is on an upward trajectory.

What is particularly heartening is that on a 5-year period, this number is seen improving.

Moreover, the higher EPS estimate is backed by a marked increase in projected profit and gross income.

The 5-year trend for profitability is on the upmove, and net income may rise to over $4 million.

The gross profit margin estimates point to 55% levels and more.

This is only possible when the revenue increase and sales are on track.

Side by side the company’s initiatives are cutting down debt is also important.

Most importantly, the way the company is balancing its growth and expenses.

That is what can help bring about a sustainable growth trajectory.

A particularly positive development is the cashflow estimates for the company.

On a 5-year estimate, the cashflow is likely to turn positive.

A positive cashflow is one of the best indicators of a great business model.

It, no doubt, will give investors more confidence to buy the Aphria stock over long-term.

How Canadian Legalization of Recreational Marijuana Help?

Now if you have noticed, a good part of the discussion hinges upon Canadian legalization.

So the question is why exactly Canadian legalization is such a big deal?

The fact that the Aphria stock is undertaking this huge expansion in anticipation, will it bear fruit?

These are very important considerations.

Not just Aphria, almost the entire Marijuana space is on fire on the basis of this potential approval.

Let us analyze just how much will this approval help Aphria stock in growing in value?

This will help investors make some realistic assumptions about the ground realities.

Canada, in fact, will become the first developed country to grant this approval.

This extends the federal umbrella and coverage to a hitherto banned drug as an accepted legal product.

The recreational marijuana legalization further allows residents to use it for just about any purpose.

You do not have to just look at it as a forbidden product.

As citizens, you get to use it as you wish.

Now how will this impact sales?

Well, here is some basic maths for you to understand.

Close to 5 million Canadian between 15-64 years spent nearly $6 billion for marijuana in 2017.

This amount in itself is almost a quarter of the alcohol market there.

Now with the legalization of recreational marijuana, it is only likely to inch higher.

With potential clouds of further stern measures in US against marijuana, the prospects for Canada is huge.

It goes on to establish a definitive oasis of opportunities in the face of opposition from its immediate neighbors.

It is no doubt a very potent mix of opportunities and sale possibilities.

The question is how well the Aphria stock can capitalize on it.

That will determine the ultimate extent of gains for the stock.

Why Investing in Aphria Stock Makes Sense?

That brings me to the most important part of the discussion.

Well, there is no debating that marijuana represents pots of opportunities in long-term.

It is not just the projected demand for 2018 or 2019.

Over a 5-year period, the marijuana market is rife with potential sales opportunities.

So it makes perfect sense for investors to have a certain amount of exposure.

It no doubt represents considerable growth and value addition over the long-term.

Given the regulatory environment, it is also a good opportunity to enter the space.

This will set you up for higher gains going forward in future.

So if I am investing in marijuana, why not go for one of the best stocks.

This is exactly why I will vote for Aphria stock.

The company has anticipated potential demand in the right way.

It is able to prepare for the so-called spike in demand in the immediate future.

The company has beautifully combined organic growth and acquisitions to boost production.

A higher rate of production and sustained output is the key to future success.

If the assumption is that demand will rise phenomenally, supply should also complement.

Aphria stock is one of the few counters that is best poised for it.

It has just the right mix of growth and opportunity.

It also has the required infrastructure to support this expansion.

Moreover, the company has exhibited significant foresight in preparing for future demand.

They have not just looked at boosting output but gaining a comprehensive edge.

All their mergers are not just targeted at gaining additional output facilities.

It also helps them establish connect in the new market.

Needless to mention, this also gives them access to greater number of new customers.

Therefore, it is only obvious that business will grow.

Conclusion: Most Brokerages Have Put a Buy on the Aphria Stock

Most brokerages have put a Buy on the Aphria stock.

The price is not the only criterion to determine the stock’s worth.

In most cases, the Buy rating also highlights the long-term value that Aphria showcases.

The company is not just poised for strong growth in 2018 or 2019.

The 5-year outlook for Aphria stock offers considerable hope for sustained growth.

The production projections and growth trajectory makes investors hopeful.

If marijuana is seen as the next big boom areas in the market, the Aphria stock is a relatively better way to own it.

It does not just provide strategic growth or great output; it promises sustainable returns.

So as an investor if you want marijuana exposure, buy Aprhria stock for long-term.

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