Since reporting its fiscal third-quarter earnings results, Aphria stock has tumbled 16% despite this being the first full quarter that Aphria Inc (TSX:APHA) (NYSE:APHA) has managed to sell recreational marijuana in Canada.
Healthy Outlook
However, investors have been keen about Aphria stock in the past, and some may wonder whether the current bear market on APHA has created a potential trading opportunity.
One of the main reasons why several analysts believe Aphria stock has a healthy outlook is that the company has made more additions to its cultivation space. Once Health Canada approves the additional space, Aphria Inc will have over 2.4 million square feet of space that will increase cannabis production capacity to 255,000 kg. Equally, the company is adding an "Extraction Centre of Excellence" to its processing facility, which will increase production to approximately 200,000 kg of cannabis concentrates and edibles per year.
In the third quarter ended February 28, 2019, Aphria’s net revenue increased 617% to CA$73.6 million compared to the same quarter last year. At the end of this year, the company expects beverages and edibles, as well as vaporizer cartilages, to push its domestic revenue even higher. Revenue from Aphria’s distribution operations grew to CA$57.6 million in Q32018 from nearly nothing. In January the company acquired CC Pharma, increasing its reach with the addition of over 13,000 dispensaries in Germany.
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Key Challenges
Despite a healthy outlook, Aphria has been dealing with corporate governance challenges, such as the CEO stepping down, and has seen several deletions and additions to its board. Following the acquisition of Scythian Biosciences, the company reported CA$50 million impairment, and as a result, Aphria stock tanked because of allegations of double-dealing.
Aphria Inc is expected to raise $345 million from the offering of convertible notes of around 44 million outstanding shares. Once the deal matures, the company is expected to earn more to give returns projected when Aphria stock was purchased.
Shares of Aphria are still up over 25% so far in 2019. However, the stock has corrected almost 30% from its February peak price.
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