Every time it appeared the pot market had bottomed out in 2019, something came along and sent share values falling even further. After a difficult year in terms of declining value, Aphria stock could be shaping up for some huge gains in 2020. Let's take a closer look at the factors possibly driving those gains.
Positive Financing
Last week, Aphria Inc (TSX:APHA) (NYSE:APHA) announced that it had secured a credit facility of $80 million CAD for its Aphria Diamond cultivation facility. This credit will be made available to the Canadian cannabis firm by a major bank at an interest rate of 5.5%, which is a very reasonable term given that so many pot producers are struggling to get financing at the minute and so smaller firms are being forced to raise capital by issuing new equity at rock bottom prices. Since that loan was announced last week, Aphria stock has gained over 7%.
Aphria Stock to Capitalize on Foreign Markets?
Aphria stock could potentially see some serious gains from overseas operations while the majority of its rival firms are focused on the North American market. Aphria has been awarded a contract in Germany, which will see the company produce one ton of cannabis there per annum, beginning in the second half of 2020. Aphria estimates German demand is already five times the total production capacity awarded to Aphria and other initial German producers, which means the selling price per gram could likely be higher.
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Election Season
2020 is an election year in the US, and with several other cannabis-related acts recently making their way through the US legislature, cannabis looks set to be a key policy point in the presidential race. The passage of the updated Farm Act in 2018 decriminalized hemp cultivation, and the SAFE Banking Act, which opens banking services for cannabis firms, has already passed the lower house, highlighting the shifting policy stance in the US. With federal legislation a real possibility in the coming years, access to a whole new market could be a major boost for Aphria stock.
Aphria shares are currently trading for $6.55 in Toronto.
Featured Image: Canva
