Shares of the Canadian manufacturer of medical cannabis Aphria Inc. (NYSE :), (TSX 🙂 rose late last week and received more than 14.5% news via MarketWatch on Friday that Newryse investment bank Jeffries initiated stock coverage with a strong buy rating.
The Ontario-based recognized manufacturer of medical pot and marijuana-based oils saw its share price go from US $ 6.79 to US $ 7.35 ($ 8.62 to CAD $ 9.87) at the close, when Jeffries analyst Owen Bennett set a price target of $ 11 (CAD $ 15), which would mean an almost 52% increase from the end of Friday.
"On our strategic scorecard, Aphria scores high, and third overall behind Canopy (NYSE :), (TSX :), and Aurora (NYSE :), (TSX :)," Bennett wrote in a statement to clients.
In the past year, Aphria, which with a current market capitalization of $ 1.93B has consistently been in the top 10 North American cannabis companies by valuation, was also considered to be one of the most undersized stocks in the sector. .
One of the reasons behind the poor performance of the shares can be attributed to governance issues, in particular negative headlines regarding the September acquisition of South American LATAM Holdings last year and claims from short sellers that the deal was over priced. used to be. The allegations shaken the price of the share and the company started an internal investigation.
The assessment concluded that the deal was within an acceptable range, but discount rates were applied. In January, it was announced that Aphria CEO Vic Neufeld and co-founder of the company, Cole Cacciavillani, will "make the transition from their executive roles" in the coming months. However, they remain on the board.
In the first five months of this year, the Aphria shares rose by 20%, but still fell by 17.2% compared to the same period last year, when it saw a price increase of US $ 16.50 in the fall (C $ 21.70) just before marijuana was legalized in Canada. It is the highest level in the post-legalization period this year was hit in February, when the shares reached US $ 10.84 (C $ 14.21).
Optimization of the momentum: last week there was positive news that Aphria had received its fifth cultivation permit in Germany. Germany is currently the largest cannabis market in the European Union. Last year the medical marijuana market was worth US $ 73 million. By 2023, it is estimated at US $ 2.7 billion, according to estimates
The German licenses for the production of medicinal cannabis were conditionally granted in April and confirmed on 21 May following an investigation by a German court. The move means that Aphria is the only recognized producer of all three legal strains of medicinal cannabis in Germany
These licenses mainly function as contracts for supplying at least 4000 kilos of domestically grown cannabis that will be sold to the German Institute for Drugs and Medical Devices and delivered to wholesalers for distribution to pharmacies. Aphria's contracts cover a four-year period starting in 2020.
Germany issued a total of 13 such licenses, with a maximum of five allowed to one producer, according to government guidelines. In addition to Aphria's licenses, five were granted to Edmonton Aurora Cannabis and three went to Denecan-based producer Denecan.
Although Aphria is ready to finish the month at a high level, May is generally not famous for the pot industry. To put it in perspective, the sector has seen more downs than ups, with trends that are largely flat and lower for most stocks in space.
Of the largest players, the Tilray (NASDAQ 🙂 shares have so far fallen by 14.4% this month, while Canopy has fallen by 12.6%. Cronos Group (NASDAQ :), (TSX 🙂 lost 12.6% and Aurora Cannabis fired 8%.
Among the smaller players, Quebec-based Hexo (NYSE :), (TSX 🙂 trimmed 16.8% so far this month, while CannTrust Holdings (NYSE :), (TSX 🙂 fell 14.6%.