Aphria Stock Forecast: Q1 Earnings, Altria Stake, and the 70% Stock Surge

Aphria stock forecast 2019
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APH Stock Forecast

What was once one of the worst underperformers in the marijuana stock market, Aphria Inc (OTCMKTS:APHQF, TSE:APH) is now making a strong case that it will, in fact, end up being one of the best marijuana stocks of 2018.

But just how reliable are those projected gains? In other words, does the current APH stock forecast make reinvesting in the stock worth it?

Aphria stock recently received a shot in the arm following the company’s Q1 2019 earnings report, and one massive event on the horizon could be a huge boon for the company: a Big Tobacco partnership.

Investors have been invigorated by reports that Aphria is in talks with Altria Group Inc (NYSE:MO), a major tobacco producer. It looks like Altria is interested in acquiring an equity stake in Aphria, although no deal has materialized yet.

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Landing this deal would likely improve the APH stock forecast. Depending on how valuable it would be, you could expect to see Aphria stock soar if Altria pulls the trigger on the purchase.

This could be the next big frontier for marijuana stocks. After all, Big Alcohol partnerships already sent the entire cannabis stock market on a run in August.

Consider the craze surrounding the possibility of cannabis-infused beverages, which keep cropping up in the news and spurring on massive growth for the marijuana stocks involved.

Chart courtesy of StockCharts.com

In the case of Canopy Growth Corp (NYSE:CGC) and Constellation Brands, Inc. (NYSE:STZ), their deal sent pretty much every major marijuana stock on a surge, due to the vast amount of money involved.

Basically, when these billion-dollar investments take place, it opens the eyes of many investors to just how much interest there is in the cannabis sector at the moment, sending them on a buying spree that benefits all marijuana stocks.

In the case of Altria, we have the possibility of marijuana/cigarette collaborations that would cause another mass wave of investor interest.

After all, everyone is on the lookout for new and exciting ways to exploit the consumer thirst for marijuana products. The creation of a marijuana/cigarette hybrid could be just the ticket to appeal to a wider audience.

Not to mention that tobacco companies may be looking to go all-in on pot as cigarette sales decline (we see that situation exacerbate wherever marijuana is legalized).

It’s the same playbook that alcohol producers are employing, so it makes sense that the APH stock forecast would benefit greatly from a deal being finalized with a tobacco company.

Aphria Financials: Q1 2019 Earnings

3 months ended August 31, 2018

3 months ended August 31, 2017

$13,292

Revenue

$6,120

$13,764 Gross profit

$7,903

$8,458

Adjusted gross profit $4,774
63.6% Adjusted gross margin

78%

$21,176

Net income $15,041
-$3,964 Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA)

$2,227

Q1 2019

Q4 2018
1,778.2 Kilograms (or kilogram equivalents) sold

1,312.6

$13,292

Revenue $12,026
-$828.00 Adjusted EBITDA from Access to Cannabis for Medical Purposes Regulations (ACMPR) operation

$2,227

$1.30

Cash cost to produce dried cannabis/gram $0.95
$1.83 “All-in” cost of goods sold/gram

$1.60

$313,982

Cash and cash equivalents & marketable securities $104,799
$363,245 Working capital

$150,758

$28,036

Investment in capital and intangible assets—wholly-owned subs

$39,042

(Source: “Aphria Records Solid Revenue Growth in First Quarter of 2019,” Cision, October 12, 2018.)

The Q1 2019 report was especially strong for the company, with Aphria’s revenue nearly doubling from the previous year. The company also saw a significant increase in grams sold as wholesale orders came in for clinical drug trials.

Furthermore, the company boasts 35,000 kilograms of annual production capacity, with plans to spur Canadian-based production to 255,000 kilograms per year.

“Aphria started fiscal 2019 by taking significant steps to solidify our position as a premier global cannabis company,” said Vic Neufeld, CEO of Aphria. “Going forward, we are well positioned not only for the recreational market in Canada, but also the continued growth and leadership of the medical cannabis market globally.” (Source: Ibid.)

Analyst Take

Admittedly, the Aphria year-to-date stock price isn’t impressing anyone. The gains made in recent months have yet to balance out what was a dismal start to this year.

Nevertheless, the end of 2018 may make up for it. The APH stock forecast is looking strong, following a 70% climb in share value in the past three months.

The future of Aphria stock will be decided by several major factors, but chief among them is a potential deal with Altria. If that Big Tobacco partnership goes through, the forecast for APH stock will immediately become one of the strongest in the marijuana industry.

Without the deal, Aphria is still in a very strong position, with the company’s earlier troubles making way for substantial gains as the stock now appears to be appropriately valued.

Therefore, Aphria stock is currently much more appealing to investors who believed it to be overvalued at the beginning of the year.