Aphria Stock Forecast
Few stocks have been as disappointing in 2018 as Aphria Inc (OTCMKTS:APHQF, TSE:APH). When I first began covering the marijuana sector, Aphria was one of the best performers around, but this year, the Aphria stock forecast has been dismal.
However, rumors have begun to swirl around a potential Aphria-Molson Coors Brewing Co (NYSE:TAP) merger. If Molson Coors is indeed looking into a deal with Aphria, could that be just what the stock needs to recover?
In order to properly parse out the Aphria stock forecast, let’s take a look at the specifics of the deal that is potentially in the works.
First, the facts: Molson Coors is looking into how to best explore the marijuana market. That much, at least, is confirmed; back in June, the company said as much.
“We have assembled a team in Canada to actively explore the risks and opportunities of entering the cannabis space in that market, where it will be federally legal by this fall,” Chief Executive Officer Mark Hunter said at an investor presentation on June 6. (Source: “Molson Coors said to be in talks with marijuana companies about infused beverages,” Financial Post, June 25, 2018.)
What we don’t know is which companies, exactly, are linked to Molson Coors.
The Aphria-Molson Coors merger, however, has been rumored. Or at least, an Aphria partnership has been said to be among the most plausible deals for the alcohol juggernaut.
Considering how poorly Aphria stock has performed in 2018 (down over 40% year-to-date), it makes sense why marijuana bulls are excited about this deal. In fact, a partnership between these two companies may be just what the marijuana company needs. The Aphria stock forecast would certainly brighten should the two enter into a partnership.
Chart courtesy of StockCharts.com
But this isn’t a guaranteed home run, if it happens at all.
There are a number of companies looking to get into the cannabis-infused beverages game. Canopy Growth Corp (NYSE:CGC) has confirmed that it, too, is looking into how to capitalize on the intersection of marijuana and alcohol, a marriage of vices that could boost stock value. So the market is not exactly wide open.
Another issue is that Aphria has had plenty of opportunities to turn things around, and yet APH stock continues to trend down. Other than a few short weeks this year, the company has only disappointed.
I was convinced that eventually, the company would hit a nadir and investors would come back in with full force, but that has yet to happen. While that’s still very much a possibility, it is concerning how long it has taken for Aphria to recover.
While some marijuana stocks have thrived in 2018, like Canopy, and others have taken moderate hits, Aphria stock has been one of the few to be truly devastated, especially among peers of its size.
So while the company maintains a strong presence in the medical marijuana market and the Molson Coors partnership could help steer the Aphria stock forecast to sunnier shores, there are still a lot of question marks.
Why Aphria Stock Is Falling
So there is hope in the Aphria stock forecast, but we should also consider why the company has been rocked by 2018 in the first place.
There are a variety of factors that played into Aphria’s precipitous fall, but the most important one is that the company was repeatedly charged as being overvalued.
That’s a claim we hear bandied about often in the marijuana market, but Aphria in particular was slammed hard by analysts and investors believing the company to be trading above what it was worth.
As one would expect, overvaluation often leads to investors selling off when they think the company is at its zenith, abandoning ship before it begins to sink.
But here’s the thing: usually, after a big sell-off, we see investors begin to return to the stock with its value reduced. Now more in line with expectations, money often floods back in, and we see the company begin to recover. Aphria stock has enjoyed no such recovery.
It’s hard to say if the Molson Coors deal will be enough to resurrect Aphria. What’s for certain, however, is that the company is in desperate need of something to help it emerge from the dumps.
Aphria is surrounded by questions, but the most important one here is whether the Molson Coors deal will be enough to revive the stock value.
While I’m sure a deal announcement will see the stock rise somewhat, I’m concerned that the gains won’t be sustainable, and that Aphria will simply revert a few shorts weeks later back to its underperforming ways.
I’m not totally down on Aphria, but I do have my worries, seeing as how the company has failed to stage a consistent comeback in 2018 as of yet.
While there is potential within Aphria stock, and its value is at a bargain price, I’m not sure that a Molson Coors deal, if it were to happen, would be enough to justify getting back on board with the company until investors see demonstrably sustainable gains begin to emerge from the company once more.