Aphria Inc. shares soared about 9% Friday to lead the cannabis sector, after Jefferies started coverage of the stock with a buy rating.
Analyst Owen Bennett assigned Aphria APHA, +15.29% APHA, +13.92% a C$15 ($11) price target that is 115% above its current trading level, highlighting the disconnect between the valuation and the company’s strategic positioning.
“On our strategic scorecard Aphria scores highly, and third overall behind only Canopy and Aurora,” Bennett wrote in a note to clients. “Despite its strong global outlook, its valuation is the cheapest across our space, with allegations around inflated assets/insider deals weighing.”
Aphria has…
weathered a scandal surrounding its acquisition last year of Latam Holdings Inc., after short sellers said the deal was overpriced and that insiders were undisclosed beneficiaries. The company formed a special committee to investigate those allegations and concluded that there were conflicts of interest for some board members.
The company pledged to improve corporate governance and add independent directors to its board. It also transitioned former Chief Executive Vic Neufeld and co-Founder Cole Cacciavillani out of the board roles while keeping them as advisers.
“With these issues now seemingly cleared up, as the company continues to execute, and with likely positive developments on US optionality/Canadian derivatives, we see significant re-rating,” Bennett wrote. The analyst is expecting the company to take a similar action in the U.S. to one taken in Germany, where it has acquired non-cannabis assets that can be leveraged at a later date.
“In Canadian derivatives we think there’s a good possibility of a vapor partnership with Pax,” he wrote.
Canopy Growth Corp. shares CGC, -0.07% WEED, -0.42% were flat Friday, ahead of a June vote on its proposal to acquire Acreage Holdings Inc. once cannabis is legalized in the U.S. The deal has its roots amid bunk beds inside a small…
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