It’s quite the exciting time for marijuana investors as the U.S. inches closer toward mainstream acceptance of cannabis. Aphria (NASDAQ:APHA) stock is particularly interesting right now as the company finalizes its merger with Tilray (NASDAQ:TLRY).
There’s lots of movement among top marijuana stocks these days. Investors are hopeful for big action from President Joe Biden and the newly Democrat-controlled Congress.
Unfortunately, it may be better to remain patient when it comes to names like APHA stock. I’m not saying this stock is a bad investment. But it may be premature to believe that the federal government will act on cannabis this calendar year.
Let’s take a closer look at Aphria. The company has a “B” grade and a buy recommendation in my Portfolio Grader these days.
The Landscape on Marijuana
Marijuana stocks began moving higher last year as investors began making bets that Biden would be able to topple President Donald Trump.
Biden’s running mate, Vice President Kamala Harris, has been a proponent of legalization. She sponsored a Senate bill in 2019 that would have ended federal cannabis prohibitions.
That bill died as the Senate was controlled by Republicans. But with the upper chamber now split 50-50 and Harris able to cast tiebreaking votes, there seemed to be real momentum that the government could take swift action.
So far, that hasn’t happened. And in any case, Biden has a more moderate stance than Harris. He supports the decriminalization of marijuana, and supports a law that would expunge the records of anyone who has been convicted of marijuana-related offenses.
But that’s not nearly the same thing as legalization, which has already taken place in Canada and several U.S. states.
It’s unclear if Democrats will be able to push through a more liberal bill. And even if they were so inclined, Congress and the White House are too involved with pushing out Covid-19 vaccines, selling the $1.9 trillion stimulus package recently passed by Congress and getting the economy back on track.
Legalization is on the back burner for now, and may stay there a while.
Efforts Outside of Washington
The federal government may not be moving as quickly as investors would like. But the promise of marijuana legalization continues to grow in North America.
Canada, of course, has already legalized cannabis. In the U.S., New Jersey became the latest state to legalize marijuana, while more than 30 states have legalized medical marijuana.
Mexico is also getting closer to legalization. A bill to make recreational use of the drug legal has already been passed by one legislative chamber.
Marijuana stocks are quick to move on any news regarding legalization. Investors know that making recreational pot available in the U.S. will be the quickest way to open the floodgates to more profit.
APHA Stock at a Glance
In December Aphria and Tilray announced a merger that, once completed, would create the world’s largest global cannabis company in terms of revenue.
When the merger is final, Aphria shareholders will receive 0.8381 shares of TLRY stock for each share of Aphria that they own. Aphria will then become a wholly owned subsidiary of Tilray, which would continue to be a publicly traded company.
Aphria shareholders, however, will end up owning about 62% of the combined company. That’s why the arrangement is called a reverse merger.
In the end, the combined company will have the advantage of being the biggest dog on the block. It will also be able to save costs by consolidating business operations and eliminating redundancies.
In January, Aphria reported revenue of $160.5 million, which beat out analysts’ estimates of $153.75 million. Losses were 42 cents per share, much worse than the expected loss of 3 cents per share. Revenue for the quarter was up however, by more than 33% on a year-over-year basis.
The Bottom Line
APHA stock isn’t a slam-dunk marijuana stock pick. But it has the advantage of being the biggest cannabis company in the world once the Tilray merger settles.
Investors looking for a quick win will probably be disappointed if they’re hoping that federal marijuana legalization will happen this year.
But even with the perceived delays in Washington, public sentiment for marijuana legalization continues to grow in the U.S. and more states will pass legislation that is pro-cannabis.
If you are willing to buy APHA stock and hold onto it until after the Tilray merger, you have a better-than-decent chance of being rewarded down the line.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation.