Although publicly traded cannabis firms have caught flack from investors for a general lack of fiscal discipline, Aphria (NYSE:APHA) may present a beacon of hope. Once one of the most controversial and pressured weed investments, Aphria stock this year has been relatively stable. On a year-to-date basis, shares are down “only” 9%.
Of course, that’s never something to be proud about. But at this juncture, you got to take your victories in any form, even if only comparatively. For instance, Cronos Group (NASDAQ:CRON) has shed over 57% year-to-date, while Canopy Growth (NYSE:CGC) is down 59%. And these laggards look good compared to Tilray (NASDAQ:TLRY), which has hemorrhaged 72% year-to-date.
So no, APHA stock isn’t a standout investment by most measures. But with the underlying sector doing so poorly, I chalk that up as a win.
Furthermore, Aphria stock may offer another reason for investors to get excited. On Monday, management announced that it received a cultivation license from Health Canada, the country’s health-related governing agency. The license affects the company’s Aphria Diamond cannabis greenhouse facility, which is located in Leamington, Ontario.
With the addition of this new greenhouse, APHA tacks on 1.3 million square feet of production space and 140,000 kilograms of annual growing capacity. In total, Aphria now has 2.4 million square feet of production space and 255,000 kilograms of capacity.
This news is a far cry from events from roughly a year ago. At that time, short-selling specialist Hindenburg Research accused Aphria of being a “shell game” with a cannabis business on the side. Such harsh criticism immediately took down APHA stock.
So, is it time to buy Aphria stock? Perhaps, but not for the capacity ramp.
High Times Are Coming for Aphria Stock
Please don’t misread the above statement: I believe the capacity ramp is a significant detail for Aphria. However, I also can’t help but notice that APHA stock closed down on the announcement.
Why? Most likely, investors are tired of cannabis firms stretching themselves to accommodate their growth strategies. Additionally, Canada is having trouble rolling out its green infrastructure with licensing backlogs. Coupled with overenthusiastic companies, the supply chain dynamic of pot is a mess.
Thus, what folks want to see is sustainability, not dart-throwing contests in the dark. In this respect, I’m not necessarily surprised that Aphria stock couldn’t sustain momentum earlier in the day.
Nevertheless, APHA stock intrigues me because of its eclectic marijuana offerings. Particularly, Aphria’s Broken Coast brand of medicinal marijuana may help APHA rise above the competition.
Unlike the popular cannabidiol (CBD) that’s now legal in the United States, Aphria’s marijuana products contain tetrahydrocannabinol (THC). This of course is the controversial psychoactive compound that gives users a “high.”
Logically, then, THC is associated with recreational cannabis. However, that might not be its only practical purpose. According to a University of New Mexico study published earlier this year, researchers analyzed users of either CBD or THC to determine which compound produced the most effective therapeutic benefits.
Surprisingly, THC users experienced the most symptom relief, while also suffering from the most side effects. True, the study was somewhat flawed because it lacked a control group. Moreover, test subjects self-reported their data, therefore not eliminating the possibility of a placebo effect.
Still, this analysis demonstrated that medicinal CBD may be a mixture of substance and hype. And if that’s the case, I can envision frustrated CBD users making the trip north for the real deal. Ultimately, that bodes favorably for Aphria stock.
International Catalyst for APHA
Tucked underneath the investment thesis for APHA stock is its international catalyst. That’s understandable considering that Aurora Cannabis (NYSE:ACB) dominates this discourse. However, Aphria has a respectable presence globally, including South America, Oceania and Europe.
Out of these, the European market arguably holds the greatest potential. According to Health Europa, public opinion for medical cannabis has shifted favorably throughout the region. As such, the collective will put more pressure on local and federal governments to open access to these therapies.
This is where Aphria has a chance to shine with its THC-based therapies. While CBD certainly has a place in the broader cannabis story, Aphria offers unmitigated marijuana solutions. In other words, if CBD therapies don’t work for certain individuals, they have the option to use THC-infused products in legal jurisdictions.
Admittedly, though, this is a longer-term consideration. Thus, the decision to buy Aphria stock rests largely on one’s tolerance for risk.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.
