If you’re an investor who’s been waiting to make your marijuana move, the end of Aphria (NASDAQ:APHA) stock and emergence of a now-stronger, bigger Tilray (NASDAQ:TLRY) offers up a choice opportunity.
End of APHA stock, you say? Well, it is being delisted. But shareholders, who voted an astonishing 99.38% in favor of the merger, got 0.8381 of a share of TLRY stock for each of their Aphria shares. That’s 0.8381 of a share of stock in what is now the largest cannabis company by revenue.
I’ve been anticipating this game-changing event for a while. And while Tilray shares are down over the longer term, the window of opportunity to own the stock at a reduced price point probably won’t last much longer.
A Closer Look at TLRY Stock
Back when TLRY stock was peaking at around $150 in late 2018, I was wary. It just seemed too good to be true.
And indeed, it was. The hype surrounding Tilray, and pot stocks in general, waned in 2019. Unfortunately, vast amounts of wealth were destroyed in the process as panicky investors dumped their shares.
There’s an old saying that investors should focus on “time in the market,” not “timing the market.” In other words, if you believe that a company and an industry are poised for growth, just take a position early on and leave it there.
This simple strategy can be applied to TLRY stock. The share price settled at $18 and change at the end of last month, and that’s as good an entry point as any… and even better after yesterday’s 5.4% decline.
Within the past 12 months, Tilray shares have been as high as $67. The next bull run could be right around the corner.
And instead of trying to time your entry, consider just putting some “time in the market” and hoarding a few shares of TLRY stock for the long term.
Bullishness Abounds
There’s a multitude of reasons to feel bullish about the business combination. It’s hard to decide where to begin.
We could start with this: the Tilray-Aphria combination is projected to deliver around $100 million worth of annual pre-tax cost savings within two years of the transaction’s completion.
Or how about this: Aphria recently acquired a craft beer company called Sweetwater Brewing. The new company plans to introduce Sweetwater’s brands through CBD-infused beverages in the U.S.
The company is really ahead of the curve with this. Potential federal cannabis law reform could open the door to vast revenue streams in CBD-enhanced beverages.
Aphria’s shareholders should be excited about all of this. After all, as InvestorPlace contributor Mark R. Hake reports, they’ll end up owning 62.1% of the combined company.
Focus on Europe
Investors should understand that the legalized cannabis market isn’t limited to North America. There’s a whole world out there to conquer.
Europe offers particularly notable potential for revenue growth. And in that region, both Tilray and Aphria bring something to the table.
What Aphria offers is a robust German medical cannabis business, known as CC Pharma, as well as its European operations.
For its part, Tilray has cultivation and production facility assets in Portugal.
More precisely, the combined business’s investor presentation refers to a “2.7m sq. ft. EU-GMP low-cost Cannabis cultivation and production facility with export capabilities, providing tariff-free access to the EU.”
Aphria CEO Irwin Simon commented that “From a free trade standpoint, we can ship anywhere in Europe.” Tilray CEO Brendan Kennedy also provided a dose of optimism regarding the new company’s European business.
“Our combined company will be well positioned to pursue growth opportunities with our end-to-end, EU GMP supply and distribution chain,” Kennedy declared.
The Bottom Line
As you can see, there are plenty of reasons to be excited about the business combination between Tilray and Aphria.
With that in mind, it’s surprising that TLRY stock isn’t much higher. Perhaps it’s just a delayed reaction — and an opportunity to take a position before the share price moves up.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.
