Aphria Is a High Flyer with Tremendous Opportunities
If you think social media and Internet of Things (IoT) stocks are hot, a non-tech segment that has been flying high on the charts is the marijuana space. There are a handful of legitimate producers at this time, and an intriguing small-cap company is Canada-based Aphria Inc (OTCMKTS:APHQF, CVE:APH). Its stock is currently trading around $4.00, with a market cap of $579.3 million.
Aphria is situated in a farming community in Ontario, Canada, which kind of makes sense if you are growing plants.
What gives Aphria a head start in the rapidly-growing marijuana space is that the company is establishing itself as a grower of top-quality safe medical cannabis via its greenhouses. The product is different from the plants you may stumble upon in someone’s backyard or home.
Producing the plants via greenhouses results in a better-controlled product, which is ideal in meeting the strict requirements of the medical marijuana segment.
In the United States, Colorado is known for its legalization of marijuana, but there are many more states that are expected to follow suit. While a federal mandate to legalize marijuana is likely years away, if ever, the reality is that Canada has already approved the use of medical marijuana and is set to make the substance totally legal in 2018 via Bill C-45, the Cannabis Act.
Whether you believe the use of marijuana should be legalized, the reality is that there is a lot of (legal) money to be made in the area, and Aphria is in the right space at the right time.
My Bull Case for APHQF Stock
Under the Cannabis Act, Aphria will become a licensed producer of marijuana. We are only at the early stages of the marijuana sector, but the long-term upside looks rewarding.
The market for legal marijuana in North America was $6.9 billion in 2016, up 34% year-over-year, according to The Arcview Group. Legal sales could topple $50.0 billion by 2016, based on research by Cowen & Co. (Source: “Say What? A Republican Just Introduced a Bill to End the Federal Prohibition of Marijuana,” The Motley Fool, March 11, 2017.)
The outlook looks promising for the top marijuana producers, such as Aphria. The company raised CA$100.0 million in April to be earmarked for expansion and working capital. Upon the completion of the current expansion phase, Aphria expects to be producing around 5,500 kilograms of dried cannabis and 9,000 liters of cannabis oil.
Aphria also recently joined with Tetra Bio Pharma Inc (OTCMKTS:TBPMF, CVE:MZO) to co-distribute dried medical cannabis in Canada’s maritime provinces and Quebec. Aphria will produce the dried medical cannabis and Tetra will be responsible for the packaging. The venture could expand into other provinces if it proves successful in the initial stage.
APHQF stock has already made a massive move on the chart, rising from a 52-week low of $0.98 in June 2016 to a high of $6.60 in April 2017 prior to the recent relapse.
Chart courtesy of StockCharts.com
There is current weakness on the APHQF stock chart. Aphria’s stock price has broken below support at $5.25, to below its key 50-day moving average, and it could test support at its 200-day moving average at around $3.80.
At the current level, the chart risk is high but, for aggressive capital accounts, the future looks encouraging, which could inevitably drive APHQF stock back toward the $6.00 level and higher.
For the aggressive trader, Aphria is worth a closer look, especially as marijuana becomes legalized in Canada and spreads to more states.