It’s been a tough year for cannabis stocks, with supply concerns, industry hiccups, warnings, and poor earnings. Major companies like Canopy Growth (NYSE:CGC), Aurora Cannabis (NYSE:ACB), Charlotte’s Web Holdings (OTCMKTS:CWBHF), and OrganiGram (NASDAQ:OGI) are all well off their highs as a result.
However, such pullbacks are creating sizable opportunities for patient investors.
According to a Gallup survey, 66% of Americans are in favor of legalizing cannabis, compared to just 60% three years ago. A Pew survey found that 62% of Americans are in favor, as compared to 57% approval four years ago.
Plus, if you can look past the near-term negative headlines, you’ll see there’s plenty of long-term growth in store for marijuana stocks. After all, the cannabis industry could be worth well over $57 billion in 2027, according to Arcview Market Research and BDS Analytics.
There’s plenty of growth ahead for the cannabis sector.
Aphria Stock Is Emerging as a Long-Term Winner
One of the companies that will benefit the most is Aphria (NYSE:APHA), Canada’s third-largest cannabis company. It’s one of the only cannabis companies to report two consecutive profitable quarters. In the second quarter, APHA earned C$16.4 million on revenue of $126.1 million.
While its revenue did decline versus Q1, it reiterated its outlook for 2020, calling for revenue of C$650 million to C$700 million, and adjusted EBITDA of C$88 million to C$95 million.
“We are pleased to report a second consecutive quarter of profitable growth with strong contribution from our Canadian cannabis operations. Our success was also driven by our international business and the strength and growth of our brands…despite a small fire at our British Columbia facility at the end of the quarter,” the company’s CEO, Irwin Simon, was quoted as saying in its press release.
APHA is a sizable player in the market, on track for annual production of 255,000 kilograms after all of its facilities have been licensed and become fully operational.
It’s also one of the fastest growing cannabis companies after reporting “strong sales volume growth (and) high revenue growth” for two consecutive quarters, as noted by InvestorPlace contributor Luke Lango.
Aphria Stock Will Benefit From Cannabis 2.0
In December, new forms of cannabis will become legal in Canada. That change is known as Cannabis 2,0. Cannabis edibles, beverages, and topicals will all be legalized under Cannabis 2.0, creating sizable opportunities for growth.
Interestingly, according to Deloitte, up to 60% of Canadians would use edible cannabis products. Aurora Cannabis has been so enthralled with the opportunity that it has expanded into edibles, vapes, and concentrates. Canopy Growth is launching edibles, beverages, and vape products. Even HEXO (NYSE:HEXO) may benefit from the cannabis-infused drinks it’s developing with Molson Coors (NYSE:TAP).
Aphria stock is also poised to benefit from the legalization of additional products in Canada. APHA plans to enter the vape and concentrates business. In fact, the company believes that vapes and concentrates will generate up to 30% of the overall revenue of the Canadian adult-use market by 2021.
Also positive for Aphria stock will be the expansion of the company’s global footprint. The company recently acquired German medical cannabis company CC Pharma, which contributes up to three-quarters of APHA’s total revenue, as noted by Motley Fool contributor Keith Speights.
The Bottom Line on Aphria Stock
The short-term pain plaguing the cannabis industry may stick around for a while. However, investors who can ignore the short-term noise for the long-term opportunity can find plenty of value. Given Aphria’s sizable production and profitability, Aphria stock will likely benefit from positive, long-term cannabis trends.
As of this writing, Ian Cooper did not hold a position in any of the aforementioned securities.
