2019 has been a highly turbulent year for the cannabis sector, and many of the leading companies have seen their stock prices plummet from record highs. However, one company that has managed to beat the sector-wide slowdown is Aphria Inc (TSX:APHA) (NYSE:APHA), and Aphria stock has emerged as an outperformer in 2019. In fact, the stock recovered over 40% over the past month.
That being said, it is still in the red. Let's dig into Aphria stock.
Profitable Quarter
The majority of the cannabis companies in Canada are not yet profitable, and most of them were unable to beat analysts’ estimates in the latest quarter either.
However, Aphria proved to be an exception in this regard, and much of the credit for that strong performance is due to its German medical cannabis subsidiary CC Pharma. The company acquired CC Pharma in 2018, and over the past quarters, it has proven to be the most important driver of growth. In the fiscal first quarter of 2020, CC Pharma contributed as much as 75% of the company’s net revenue.
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Experts believe CC Pharma is going to continue to be the Aphria’s crown jewel in the future as well. Projected overall revenue for 2020 stands in the $650 million to $700 million CAD range, and CC Pharma is expected to generate half of that.
Aphria stock is down 1.52% at $7.15 CAD.
The opening up of new stores in Ontario and other provinces in Canada is also going to be a major boost for Aphria. Additionally, the emergence of the cannabis derivatives market is also expected to be an opportunity for the company, and it is all set to start shipping those products soon.
Last but not least, Aphria is making headway into the American and Caribbean markets after having become a major player in Germany.
Aphria stock trades at only seven times its forward sales, which is cheaper than many of its rivals and has a lower market cap as well. While there are inherent risks associated with a cannabis stock, is Aphria stock in it for the long game?
What do you think?
Featured image: Canva
