Canada Markets open in 22 mins

Marijuana Stock Collapse: Why Aphria (TSX:APHA) Stock Has the Best Chance of Survival

Christopher Liew, CFA
falling red arrow and lifting

Marijuana stocks have been out of the limelight for months now following the beating of the once praised cannabis companies. It was shock and disbelief for investors who lost huge sums of money from the sector-wide collapse.

Regaining investors’ interest, if ever, might take time. But if you were to assess the current situation, there’s one marijuana stock that bears watching. Among all, it seems that Aphria (TSX:APHA)(NYSE:APHA) has the best chance of surviving the carnage and delivering incredible gains.

Coloured reputation

Aphria was one of the cannabis producers that market analysts thought would make a big splash in 2019. From $8.15 at the start of the year, the stock rose by 74.35% to $14.21 in early February. The momentum was not sustained as price movements became erratic.

If you will recall, the company almost lost shareholder trust and confidence following claims it overpaid for assets acquired in Latin America. Aphria was able to prevent what could have been a massive stock sell-off.

A botched hostile takeover bid by Green Growth Brands and the resignation of a senior executive this year also affected the stock price. Fortunately, some good news was able to replace Aphria’s misfortunes.

After sinking further to $6.90 on August 1, Aphria was able to redeem its tainted image by reporting an industry-best 417% trailing-12-month revenue growth and a 158% quarter-over-quarter sales growth in Q4 fiscal 2019. The stock instantly jumped to $40.14% to $9.67 during the next trading session.

Finally, a major cannabis company was presenting a profitable quarter! The elation, however, did not last long. All the pot stocks were under pressure as the cannabis sector was becoming super volatile.

Back-to-back quarterly profits

The Leamington, Ontario-based pot producer reported an 849% increase in net revenue and $16.2 net income in the first quarter of fiscal 2020 compared with the same period in 2018. It was a second consecutive quarter of profitable growth.

Irwin Simon, Aphria’s interim CEO, partly attributes the company’s success to international business and the strength and growth of its brands, particularly Broken Coast. Simon believes the solid start in 2020 is a good sign that the company is on track to achieve its fiscal year financial outlook.

Fearless forecast

Aphria is not letting up as it continues to widen its production footprint. It is waiting for Health Canada to expedite the issuance of a licence for Aphria Diamond, its second cannabis greenhouse facility in Leamington.

Aphria One, Broken Coast, and Aphria Diamond can combine to produce an annualized production capacity of 255,000 kilograms. With such production capacity, the company can put up $650 million to $700 million of sales in the fiscal 2020.

As of this writing, the market cap has shrunk to $1.51 billion from $2.28 billion in August while the stock is down 23.7% year to date. But you can say the stock is selling at a bargain vis-à-vis the revenue targets in fiscal year 2020.

Market analysts are even forecasting a high of $26 in the next 12 months or a potential increase of 334% from $5.99. Aphria looks like the best cannabis play but sadly, not a strong buy. The cannabis sector is no longer the most exciting, but it is the riskiest.

More reading

Fool contributor Christopher Liew has no position in any of the stocks mentioned.

The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool Canada’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Motley Fool Canada 2019

  • Stock market news live: Stocks futures flat, China works to contain coronavirus
    Finance
    Yahoo Finance

    Stock market news live: Stocks futures flat, China works to contain coronavirus

    Headlines moving the stock market in real time.

  • Wells Fargo’s Main Regulator Aims to Punish Former Managers
    Finance
    Bloomberg

    Wells Fargo’s Main Regulator Aims to Punish Former Managers

    (Bloomberg) -- Wells Fargo & Co.’s main regulator is preparing civil charges against former managers related to their roles in its retail banking scandals, people familiar with the matter said.The Office of the Comptroller of the Currency has been readying so-called notices of charges against as many

  • Finance
    The Canadian Press

    Portugal police: Banker in Angola scandal hangs himself

    LISBON, Portugal — A Portuguese banker named in a major Angolan money-laundering and corruption scandal has died in apparent suicide at home, police said Thursday.Nuno Ribeiro da Cunha, named as a suspect by Angolan authorities in an investigation targeting the billionaire daughter of Angola’s former

  • From Communist-era roots to cash cows: Poland's gaming industry takes on the world
    Finance
    Reuters

    From Communist-era roots to cash cows: Poland's gaming industry takes on the world

    WARSAW/PRAGUE (Reuters) - The drab exteriors of a pair of 1970s buildings in an industrial Warsaw neighborhood belie the hive of high-tech activity inside where developers, screenplay writers and others at leading video game maker CD Projekt hustle to create the next global hit. Poland -- Eastern Europe

  • Merkel Says Climate Fight a ‘Matter of Survival’: Davos Update
    Finance
    Bloomberg

    Merkel Says Climate Fight a ‘Matter of Survival’: Davos Update

    (Bloomberg) -- Sign up here to receive the Davos Diary, a special daily newsletter that will run from Jan. 20-24.The rich and powerful are in Davos, Switzerland, for the World Economic Forum’s 50th annual meeting, and the gathering is being closely watched to see how the global elite aims to tackle problems

  • European Central Bank holds rates, launches policy review
    Finance
    The Canadian Press

    European Central Bank holds rates, launches policy review

    FRANKFURT — The European Central Bank has decided to launch a top-to-bottom review of how it steers the economy for 342 million people in the 19 countries that use the euro currency.The bank’s 25-member governing council on Thursday gave the green light for the review proposed by new ECB head Christine

  • City of London Wants Regulators’ Help Competing After Brexit
    Finance
    Bloomberg

    City of London Wants Regulators’ Help Competing After Brexit

    (Bloomberg) -- Terms of Trade is a daily newsletter that untangles a world embroiled in trade wars. Sign up here. With Britain on the verge of quitting the European Union, the country’s financiers are asking the U.K. government to revamp regulations to attract global business.Watchdogs should have the

  • Oil Falls to Seven-Week Low as Asia Virus Eclipses Supply Loss
    Finance
    Bloomberg

    Oil Falls to Seven-Week Low as Asia Virus Eclipses Supply Loss

    (Bloomberg) -- Oil fell further after hitting a seven-week low on speculation that China’s coronavirus outbreak may dent demand, just as the market already contends with plentiful supplies.Futures lost 1.9% in New York to trade below $56 a barrel as the world’s biggest oil importer effectively quarantined

  • Stocks Slip, Bonds Climb on Virus Fears; Oil Drops: Markets Wrap
    Finance
    Bloomberg

    Stocks Slip, Bonds Climb on Virus Fears; Oil Drops: Markets Wrap

    (Bloomberg) -- For a fresh perspective on the stories that matter in Australian business and politics, sign up for our new weekly newsletter.U.S. equity futures edged lower while European stocks fell and Asian shares slumped on Thursday amid lingering concerns that a virus spreading from China to other

  • 'Companies that stay private too long may not have the best exit strategy': IPO expert
    Finance
    Yahoo Finance

    'Companies that stay private too long may not have the best exit strategy': IPO expert

    Companies that stay private too long may not have a good exit strategy, says Renaissance Capital's chairman.

  • U.S. Applications for Jobless Benefits Rise Less Than Forecast
    Finance
    Bloomberg

    U.S. Applications for Jobless Benefits Rise Less Than Forecast

    (Bloomberg) -- The number of Americans applying for unemployment benefits rose less than forecast, marking the first increase in six weeks and adding to signs of a labor market strong enough to sustain consumers and drive the expansion.Jobless claims climbed by 6,000 to 211,000 in the week ended Jan.

  • Bank of America CEO: Bank regulators need to get 'calibrations right'
    Finance
    Yahoo Finance

    Bank of America CEO: Bank regulators need to get 'calibrations right'

    Bank of America CEO Brian Moynihan sat down with Yahoo Finance in Davos and said U.S. regulators have room to loosen rules on the banking industry.

  • Fairway Returns to Bankruptcy With Plans to Sell Five Stores
    Finance
    Bloomberg

    Fairway Returns to Bankruptcy With Plans to Sell Five Stores

    (Bloomberg) -- Fairway Group Holdings Corp. has gone bankrupt for the second time since 2016, overwhelmed by its lingering debt load and cutthroat price competition in the grocery business.The iconic New York grocer filed for Chapter 11 bankruptcy early Thursday morning with an agreement to sell five

  • Boeing-Embraer Deal Faces Delays as EU Pauses Its Probe Again
    Finance
    Bloomberg

    Boeing-Embraer Deal Faces Delays as EU Pauses Its Probe Again

    (Bloomberg) -- European Union merger watchdogs said they stopped the clock on their review of Boeing Co.’s tie-up with Brazilian rival Embraer SA for a second time as they demanded yet more details from the jet makers.The move is a re-run of a similar request late last year for data about the deal, which

  • Lebanon’s New-Government, Old-Debt Combo Has Risk-Reward Aplenty
    Finance
    Bloomberg

    Lebanon’s New-Government, Old-Debt Combo Has Risk-Reward Aplenty

    (Bloomberg) -- Lebanon’s sky-high bond yields and credit default swaps may start to dip if a new government unveiled this week can ease concerns about a sovereign default.Investors are watching a $1.2 billion Eurobond, payment for which is due on March 9. Its price has risen this week due to the formation

  • China Expands Travel Curbs as Singapore Reports Virus Case
    Finance
    Bloomberg

    China Expands Travel Curbs as Singapore Reports Virus Case

    (Bloomberg) -- Chinese health officials expanded travel restrictions beyond the epicenter of a SARS-like outbreak that’s killed at least 17 people as the virus appeared in the Asian financial hub of Singapore.Channel News Asia reported the Singapore case Thursday. Travel was halted in Wuhan, China, where

  • American Airlines profit rises 27% on strong travel demand
    Finance
    The Canadian Press

    American Airlines profit rises 27% on strong travel demand

    DALLAS — American Airlines' fourth-quarter profit rose 27% to $414 million on strong travel demand that resulted in record occupancy levels on its planes.However, American continues to be weighed down by the grounding of Boeing 737 Max jets. American said Thursday that it had cancelled about 10,000

  • Markets Upset From China Virus Is Only Getting Larger
    Finance
    Bloomberg

    Markets Upset From China Virus Is Only Getting Larger

    (Bloomberg) -- You might not know it to glance at the slightly muddled, muted trading across U.S. equity futures and European assets on Thursday, but concern over the virus that roiled global markets at the start of the week is only growing.China has expanded travel restrictions a day after halting transit

  • Deadly Viruses Aren't Pharma's Top Priority. Why Not?: Max Nisen
    Finance
    Bloomberg

    Deadly Viruses Aren't Pharma's Top Priority. Why Not?: Max Nisen

    (Bloomberg Opinion) -- Drugmakers have made significant scientific advances in recent years. Unfortunately, their ability to combat potential pandemics isn't included.Driven in part by high prices and an easier path to profit, pharmaceutical companies have increasingly focused on medicines targeting

  • ECB Kicks Off Major Review After Years of Missing Inflation Goal
    Finance
    Bloomberg

    ECB Kicks Off Major Review After Years of Missing Inflation Goal

    (Bloomberg) -- Explore what’s moving the global economy in the new season of the Stephanomics podcast. Subscribe via Apple Podcast, Spotify or Pocket Cast.The European Central Bank agreed to review its strategy for the first time since 2003 after years of radical monetary stimulus struggled to revive

  • First phase of Huawei CFO Meng's U.S. extradition hearing set to wrap up in Canada
    News
    Reuters

    First phase of Huawei CFO Meng's U.S. extradition hearing set to wrap up in Canada

    Lawyers for Huawei Chief Financial Officer Meng Wanzhou will respond Thursday to the Canadian prosecutor's arguments calling for Meng to be extradited to the United States on bank fraud charges. Thursday's proceedings will wrap up the first phase of the extradition process and legal experts

  • Amateur Investors Are Making Risky Bets That Could Wipe Them Out
    Finance
    Bloomberg

    Amateur Investors Are Making Risky Bets That Could Wipe Them Out

    (Bloomberg) -- Follow Bloomberg on Telegram for all the investment news and analysis you need.After years of falling debt yields and new technologies enabling one-click purchases of complex financial products, mom and pop investors around the world are making bets that put them at danger of getting burned.In

  • Facebook Says Bezos Hack May Highlight Vulnerabilities in Phones
    Finance
    Bloomberg

    Facebook Says Bezos Hack May Highlight Vulnerabilities in Phones

    Jan.23 -- The hack of Amazon.com Inc. billionaire Jeff Bezos’s phone, allegedly via a WhatsApp message, brings to light potential security weaknesses in smartphone operating systems, Facebook Inc. vice president Nicola Mendelsohn says. She made the comments in an interview with Bloomberg’s Francine Lacqua

  • The Latest: Turkey aims to soothe NATO over Russian missiles
    Finance
    The Canadian Press

    The Latest: Turkey aims to soothe NATO over Russian missiles

    DAVOS, Switzerland — Turkey's foreign minister has reiterated a proposal to establish a NATO-lead committee to review possible threats to the alliance from Turkey's purchase of a Russian-made missile defence system. Speaking at a panel discussion at the World Economic Forum in Davos, Switzerland

  • Finance
    Bloomberg

    Lebanon’s New Government Is Set Up to Fail

    (Bloomberg Opinion) -- After more than three months of political wrangling amid the backdrop of massive street protests, Lebanon finally has a new government. But the cabinet assembled by Prime Minister Hassan Diab, almost entirely composed of Hezbollah’s allies, is unlikely to succeed.Indeed, it may