Aphria Stock Forecast
One of the most impressive companies when I first began reporting on the marijuana industry was Aphria Inc (OTCMKTS:APHQF, TSE:APH). The company was nimble enough to see huge gains without being so small as to be at risk of disappearing. And yet, 2018 has not been kind to APHQF stock, dropping it by almost 50% in the past three months. But does that mean that Aphria stock is beyond redemption?
For now, I believe a cautious hand is best when dealing with APHQF stock. What we have is an Icarus problem. The company flew too close to the sun (massive gains in a short period of time) and is suffering the label of “overvalued” as a result. Many people are still asking whether Aphria stock is overvalued, and for good reason.
When companies across the industry shoot up by exponential factors in value, it only makes sense that investors—and the market, in general—will be wary. That’s what a bubble looks like. But the thing about the marijuana industry is that you’re not trading tulips, you’re buying into a very real sector with the very real potential to be worth billions upon billions in the near future.
Aphria stock is going to need some time to recover, surely. I believe that the massive drop it experienced may drive investors away in the near term, but the company is still very appealing.
The problem is that its near-term prospects look bleak.
Consider its recent announcement of its completed acquisition of Nuuvera Inc., now a subsidiary called Aphria International Inc.
Chart courtesy of StockCharts.com
On the surface, this looks like a great deal. But dig into the details and you can see why APHQF stock has fared worse than others so far this year.
The first problem is the price: CA$826.0 million. That’s a hefty sum for Nuuvera, with many in the industry believing that Aphria overpaid for the relatively unknown company.
The issues only continued to mount as it was later revealed by The Globe and Mail that Aphria executives had invested in Nuuvera stock without publicly disclosing that information. While not illegal, it did put a damper on the deal and make it seem a little shadier than the company would have liked.
While those are certainly roadblocks to APHQF regaining value via the deal, the move does position the company to take better advantage of the burgeoning international pot market.
The new subsidiary will focus on overseas markets like Italy, Australia, and Germany, where Nuuvera had been making headway before its acquisition. (Source: “Cannabis company Nuuvera rebranded as Aphria International following takeover,” Financial Post, March 27, 2018.)
Aphria CEO Vic Neufeld was particularly high on the potential of the German market.
“It’s probably the most lucrative medical cannabis country in the world,” he said, according to the Financial Post. “Given the socialized medicine coverage for cannabis. It is huge. That country alone pays for the entire acquisition.”
The overall effect was that the company was unable to generate value out of what should have been good news, at least on the face of it. The price and the undisclosed investments dampened excitement and, therefore, APHQF stock was again unable to produce stock gains in 2018.
But those issues aside, the Aphria stock forecast is not all doom and gloom. There is still potential contained in APHQF stock. The question is whether the company will be able to avoid these missteps and get back on track, or if it will continue to falter for the remainder of the year until the bounce back that I’m predicting in the summer.
Another question of equal import is whether APHQF stock’s rebound will be enough to climb back from the pit it’s currently stuck in.
I believe that, ultimately, APHQF is likely to see strong growth by the end of 2018, perhaps even as high as 40% or so (and potentially much higher should another bull rush take place).
But—and this is a big “but”—I rate APHQF stock as one of the riskier plays on the market right now, with a chance that it could go either way.