Aphria: Analysts’ Target Price and Ratings after Earnings


Oct. 17 2019, Updated 11:51 a.m. ET

On Tuesday, Aphria (APHA) reported impressive results for the first quarter of fiscal 2020 on Tuesday. The stock has risen 9.6% since its earnings. Analysts are a little pessimistic about the sector due to turmoil in the cannabis industry. We’ll discuss analysts’ target price and ratings for Aphria after its earnings.

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What are analysts saying about Aphria?

The cannabis sector’s negative outlook took a different turn when Aphria’s first-quarter results surprised investors. The company had a positive EBITDA of 1.0 million Canadian dollars for the second consecutive quarter. Aphria’s revenues of 126.1 Canadian dollars were lower than analysts’ estimates of 132.2 million Canadian dollars. Despite the positive results, the industry’s outlook made analysts cut the target price for the stock.

Notably, CIBC increased the target price to 6.5 Canadian dollars from 7 Canadian dollars. Meanwhile, Eight Capital cut the target price to 9 Canadian dollars from 11 Canadian dollars. Cormark Securities cut the target price to 8 Canadian dollars from 14 Canadian dollars.

Aphria’s latest price update 

The number of analysts covering Aphria’s stock didn’t change from previous results. The stock’s consensus target price fell to 12.9 Canadian dollars from 14.9 Canadian dollars before the earnings—a fall of 13.4%. The company’s current revised target price means a potential upside of 102% over the next 12 months.

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Peer’s earnings

Canopy Growth (CGC) (WEED) will report its earnings next month. Analysts expect the company to report 115.1 million Canadian dollars compared to 23.3 million Canadian dollars. Canopy Growth could report a negative EBITDA of 91 million Canadian dollars.

In contrast, Cronos Group (CRON) could report net revenues of 14 million Canadian dollars for the third quarter. Cronos Group could report a negative EBITDA of 19.2 million Canadian dollars.

Tracking the trend

Over the past 12-month period, Aphria stock has received increased coverage from analysts due to its strong fundaments.

However, Aphria has a positive outlook for fiscal 2020 despite turmoil in the cannabis industry. The company reaffirmed its guidance for fiscal 2020.

The number of analysts covering Aphria stock increased from seven to 12 during this period. Analysts’ “buy” recommendations also increased on the stock. However, the company’s target price fell gradually during this period. The industry faced many hurdles in the last few months, which might have made analysts reduce the target price.

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Analysts’ ratings for Aphria

Although Aphria’s consensus target price fell after its earnings, most analysts remained bullish on the stock. The overall “buy” rating remains unchanged from the period before the earnings release.

Among the 12 analysts covering Aphria stock, three recommended a “strong-buy,” six recommended a “buy,” two recommended a “hold,” and one recommended a “sell.” To learn more about Aphria’s valuation after its earnings, read Aphria: Valuation Update after Its Q1 Earnings.

Meanwhile, Hexo (HEXO) mainly has “buy” and “hold” ratings with a target price of 6.27 Canadian dollars. Aurora Cannabis (ACB) has a “hold” rating on its stock and a target price of 8.86 Canadian dollars. Canopy Groth mainly has a “hold” rating and a target price of 46.9 Canadian dollars.

Comparing Aphria with its peers

Aphria’s management announced during its earnings call that the company has expansion plans for Cannabis 2.0. Aphria plans to expand into the vapes and concentrate segment as well as edibles, peas, beverage, and topicals. The company talked about the market share its products will be consuming. According to the company’s models, around 60% of the market share is for dried cannabis, close to 20%–30% is for vapes, and the rest is for drinks, edibles, and other new product formats.

Canopy Growth, Aurora Cannabis, and Cronos Group are also preparing to expand. We’ll have to see how cannabis companies move ahead with their expansion plans.

Aphria’s results were good news for the cannabis industry. However, October hasn’t been good for the industry. Aphria stock rose after the results. The stock closed with a loss of 10.5% on Wednesday. Aurora Cannabis fell 3.9%, Cronos Group rose 0.96%, and Canopy Growth lost 1.8% on the same day. Aphria has lost 14.5% year-to-date.

The Horizons Marijuana Life Sciences ETF (HMMJ) tracks the North American cannabis industry. Notably, HMMJ fell 2.4% on Wednesday.

In other news, cannabis edibles legalization is here. Read Cannabis Edibles: October 17 Is Almost Here! to learn more. In the US, marijuana legalization is picking up in Pennsylvania. The state introduced a new bill. Meanwhile, corrupt cannabis licenses are creating problems in the industry.

For more marijuana-related news and updates, visit 420 Investor Daily


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