Aphria Stock Rose More than 8% after Stifel’s Upgrade


Jul. 14 2020, Published 10:50 a.m. ET

Aphria (NYSE:APHA), which reported a positive EBITDA in its past four quarters, received a bullish call from Stifel. On Monday, Stifel upgraded the stock from a “hold” to a “buy” rating. Stifel also raised its 12-month target price from 5.40 Canadian dollars to 8 Canadian dollars. The new target price represents a 12-month return potential of 26% from its closing price on July 13.

Last month, Pablo Zuanic of Cantor Fitzgerald also reiterated his confidence in the stock. As reported by MarketWatch, he said that Aphria and Aurora Cannabis (NYSE:ACB) reported impressive B2B recreational sales in the quarter that ended in March. He said that the companies look attractive at those levels. In April, Eight Capital upgraded the stock from a “neutral” to a “buy” rating. Eight Capital raised its target price to 9 Canadian dollars from 8 Canadian dollars. However, not all of the analysts are bullish on the stock. In April, Jefferies and CIBC lowered their target price.

Overall, analysts favor a “buy” rating for Aphria. Among the 12 analysts, 83.3% recommend a “buy,” while 16.7% recommend a “hold.” As of July 14, analysts have given an average target price of 8.40 Canadian dollars. The target price represents a 12-month return potential of 32.3%.

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Aphria’s stock rises over 8%

Stifel’s upgrade appears to have increased investors’ confidence in Aphria. On Monday, the stock rose to a high of 6.75 Canadian dollars before closing at 6.35 Canadian dollars, which represents a rise of 8.9% from the previous day’s closing price. Despite the surge, Aphria still traded 6.3% lower for this year. However, the company has outperformed its peers and cannabis ETFs. Canopy Growth (TSE:WEED), Aurora Cannabis, and OrganiGram Holdings (NASDAQ:OGI) have fallen by 13.4%, 50.9%, and 36.1% YTD, respectively. The ETFMG Alternative Harvest ETF (NYSE:MJ) has fallen by 23.5% during the same period. The impressive third-quarter performance and the new EU GMP certification for the Malta-subsidiary limited Aphria’s downside.

My take

Overall, I’m bullish on Aphria. While most marijuana companies fight to attain profitability, Aphria has reported positive EBITDA in its past four quarters. In the latest quarter, the company’s cash cost per gram declined to below 1 Canadian dollar. I expect the cash cost per gram to decline more. Aphria One and Aphria Diamond have started to operate at their full capacity. Also, the company hasn’t introduced its Cannabis 2.0 products yet, which could improve its numbers. So, I think that Aphria is a good bet in the cannabis space.


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