The last time I wrote about Aphria (NYSE:APHA) was in early December. At the time, Aphria stock was on a big-time roll after hitting an all-time low of $3.76 in mid-November.
I debated whether its latest move was the Real McCoy or merely a dead cat bounce.
I concluded that if Aphria doesn’t deliver a third consecutive profitable quarter on Jan. 14, APHA stock could retrace some of its November gains, falling into the low $4 range.
That said, I didn’t think it would test its all-time low. And I still don’t. CEO Irwin Simon is building a great business that should allow it to maintain its position as one of Canada’s best cannabis companies.
So, with earnings just days away, you’re probably wondering if you should buy Aphria stock before or after earnings. Here are my thoughts on the subject.
APHA Looks Great Long Term
Jefferies’ analysts have selected Aphria as one of its top picks for 2020.
They believe that the company’s strong Canadian medical marijuana business, combined with strong branding for its recreational product, along with the potential of an ever-expanding U.S. business, puts Aphria in a prime position to benefit from Cannabis in 2020.
For these reasons, Jefferies has a 12-month price target of $8.40, 75% higher than where it’s currently trading.
Jefferies isn’t the only one who thinks highly of Aphria stock in 2020.
InvestorPlace contributor Luke Lango recently explained why he thinks Aphria could jump by 75% in 2020.
Lango believes that while many of the Canadian cannabis companies saw “flattish or even negative sales and volume growth in 2019, Aprhia’s revenue and volume growth rates were consistently positive.”
Furthermore, Aphria is one of the few profitable cannabis companies, and that’s got to be worth something to shareholders.
I couldn’t agree more.
Even when former Aphria CEO Vic Neufeld was running the company, it always seemed to have a focus on profitability when almost no one else gave it a second thought. Fast forward to today, and Simon’s kept the same focus while growing Aphria’s stable of brands.
In fiscal 2020, analysts expect Aphria to generate sales of CAD$591 million and an adjusted EBITDA of CAD$42 million. In Q2 2020, the consensus estimate for sales is CAD$130 million with a one-cent loss.
As the company’s German pharmaceutical distributor starts to make inroads into selling cannabis in Europe, I expect Aphria to deliver positive earnings and sales surprises for several quarters.
Is it going to happen with the second-quarter results? I don’t see why not.
I’d be shocked if Aphria delivered a stinker on January 14.
A Miss Could Cost Aphria Big
Aphria’s two consecutive quarters of positive EBITDA may have gotten investors overly confident about a third straight quarterly profit. As we’ve seen with Tesla’s (NASDAQ:TSLA) history of earnings reports, it didn’t always deliver the goods.
If there’s a big miss on the top or bottom line when Aphria reports, I could see APHA losing 20% of its value in no time.
InvestorPlace contributor Jonathan Berr recently stated that Irwin Simon might be a breath of fresh air from Vic Neufeld, but he still comes with his own set of problems. Last May, I, too, wondered about the long-term viability of Simon’s management.
The second-quarter results should get investors closer to the answer.
The Bottom Line on Aphria Stock
On very few occasions do I recommend investors buy a stock before earnings. That’s because it’s better to have more information when making a buying decision.
Despite the gains since mid-November, I would wait until after earnings to buy APHA stock. Long-term, I still like it amongst Canada’s most prominent cannabis players.
At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.
