The case for Aphria. A Fool Article.
The case for Aphria
There's no question that Aphria is on the cusp of phenomenal growth. Canada's recreational marijuana market opens in just a few weeks. Many expect exceptionally strong demand, which means that cannabis producers with solid production capacity and distribution channels should make a lot of money.
Aphria definitely appears to check off both boxes. The company can already produce 35,000 kilograms per year. In 2019, though, Aphria anticipates that its annual production capacity will increase to 255,000 kilograms. Aphria has supply agreements for the adult-use recreational marijuana market in place with all 10 Canadian provinces plus the Yukon territory. It also selected large wine and spirits distributor Southern Glazer's as its exclusive distribution partner in Canada.
One question mark for Aphria relates to the potential for partnering with a major beverage company to develop cannabis-infused drinks. Constellation Brands has partnered with Canopy Growth, while Molson Coors teamed up with HEXO. Guinness beer maker Diageo is also reportedly seeking a cannabis partner, with Aphria potentially one of the top candidates under consideration.
Aphria should have an even greater long-term opportunity for growth in international medical marijuana markets. The company is well positioned in Germany, the largest marijuana market outside of the U.S. and Canada. It also has operations in several other international markets, including Australia, Latin America, Lesotho, and Malta.
The company claims one of the best financial track records in the Canadian cannabis industry. Aphria has put together a string of 11 consecutive quarters of positive adjusted EBITDA. It also has a solid balance sheet with close to 350 million in Canadian dollars in cash, cash equivalents, and marketable securities thanks to a bought-deal financing that closed in June.