The Only Cannabis Stock I’d Buy Today

If you were to say that Aphria Inc. (TSX:APHA)(NYSE:APHA) was going to be my top cannabis stock a year ago, I would have laughed. A year ago, the situation was very different for this top pot stock. The company was mired in controversy, with the word “acquisition” even being thrown around now and again.

Today, however, with the COVID-19 pandemic striking all pot stocks, and the company making more than a few changes, it couldn’t be a better time for Aphria. Well, maybe not the best time. However, this company now has a bright future ahead.

Earnings on earnings

Let’s rewind back to before the pandemic. While other companies continued to announce losses, Aphria announced in January its third consecutive quarter of positive adjusted EBITDA. It also continued to be the only top cannabis stock to turn a profit.

Fast forward about half a year later and things are very different. All pot companies had to shut down at least partially during the pandemic. Distribution, already slowed down, came to a near standstill. Companies that were working on expanding came to a crashing halt, especially in the goldmine that is the potential U.S. market.

But Aphria remained stable. As of its latest earnings report, the cannabis stock reported the fifth straight quarter of growth, with gross revenue increasing 27%. Adjusted EBITDA increased 49% for the quarter, with almost half a billion in cash reserved for expansion in Canada and internationally after the pandemic.

Investor takeaway

Year to date, the share price of Aphria is about where it was at the beginning of the year. This has to be at least from the controversy surrounding the stock from last year, when short sellers accused Aphria of taking profit from its Latin America acquisitions. The accusations were unfounded in a report.

Another reason shares remain low is the company had to sell its Liberty Health Sciences interest in the United States, for fear of losing its listing on the TSX. That means it doesn’t have the expansion into the U.S. for cannabis that other companies have. However, this could all change soon.

The company acquired CC Pharma back in January 2019, and are now looking to launch more product. The company is completely outside of cannabis, so it can set up throughout the United States. The hope is that after the federal election, if a new president is elected there could be legalization of marijuana. That would mean this cannabis stock could then expand CC Pharma back into cannabis.

“We bought an asset that wasn’t cannabis, didn’t pay a cannabis premium, and have built it now to leverage it for cannabis,” Chief Financial Officer Carl Merton said. “That’s where our focus has been, and it’s still there.”

Bottom line

When it comes to cannabis stocks, there are a million and one options out there. Aphria definitely has a back story that you need to know about. And it’s still cannabis, which is definitely a risky investment. But if you’re going to invest in any cannabis stock right now,

Aphria has by far the highest growth potential in the shortest amount of time. If the company continues to make a profit and expand its business, it could easily reach pre-crash, pre-cannabis bubble, pre-controversy share prices of $22 per share. That’s a potential upside of 250% as of writing.

If cannabis isn’t for you, there are other ways to get rich.

Looking for the Next Potential Netflix? We’ve Got You Covered with These 3 Free Stock Picks

Motley Fool Canada’s market-beating team has just released a new FREE report that gives our three recommendations for the Next Gen Revolution.
Click on the link below for our stock recommendations that we believe could battle Netflix for entertainment dominance.

Click Here to Get Your Free Report Today!

More reading

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned.

The post The Only Cannabis Stock I’d Buy Today appeared first on The Motley Fool Canada.

Source: The Fool
The Only Cannabis Stock I’d Buy Today
The Fool

The Motley Fool
Contributor for
The Motley Fool is dedicated to helping the world invest — better. Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, mutual funds, and premium investing services.

In all we do, we take a different approach.

We believe – and have proven over decades – that the individual investor can beat the market.

We believe that anyone can do it, even if they don’t have a lot of time or money to devote to investing.

We believe in a long-term outlook, helping people build wealth over time.

We believe that the person best positioned to take care of your financial future is you.

And we work tirelessly on behalf of our hundreds of thousands of members who are enjoying the opportunities that come with having enough money to do the things that matter to them.

While we are headquartered in Alexandria, Va., The Motley Fool advocates for the individual investor around the globe with offices in the UK, Australia, Canada, Singapore, and Germany.

Related posts