Talk about a role reversal. It wasn’t long ago that Canopy Growth (NYSE:CGC) was the star of the cannabis world, while Aphria (NYSE:APHA) reeled from a controversy. Now it’s a much different story.
Canopy Growth has caught a lot of flak for two consecutive quarters of disappointing results. The company fired its former CEO. Meanwhile, Aphria is coming off an unexpectedly strong quarter where it posted a tidy profit.
Which of these two cannabis stocks is the better pick for investors now? Here’s how Canopy Growth and Aphria compare…
The case for Canopy Growth
Let’s first address the elephant in the room for Canopy Growth. The company isn’t anywhere close to profitability. Canopy’s apparent channel stuffing of cannabis oil and softgel products caused it to take a big write-off in the fiscal 2020 first quarter because of anticipated product returns. This issue makes Canopy’s path to profitability even more uphill.
Having gotten that out of the way, though, the fact remains that Canopy sits in an enviable position in the cannabis industry. Canopy is arguably poised for greater success than any of its rivals in the “Cannabis 2.0” cannabis derivatives market scheduled to launch soon. The company is ready to release a wide lineup of products, including cannabis beverages, edibles, and vapes.
Over the long run, Canopy’s opportunities in international medical cannabis markets look even brighter than those in the Canadian adult-use recreational market. Canopy ranks among the leaders in European and Latin American medical cannabis markets.
The biggest market of all is the U.S. And that’s where Canopy Growth could be the most dominant of the top Canadian cannabis producers. Canopy plans to launch hemp cannabidiol (CBD) products produced from its large-scale hemp facility in New York state later this year. The company also stands ready to enter the U.S. recreational marijuana market as soon as federal laws permit, thanks to its deal to acquire U.S. cannabis operator Acreage Holdings.
Investors shouldn’t worry too much about Canopy Growth running out of money despite its sluggish pace in becoming profitable. The company still had over 3.1 billion Canadian dollars (around $2.4 billion) in cash, cash equivalents, and marketable securities as of June 30, 2019. With its partner and largest shareholder, Constellation Brands, having deep pockets and a burning desire to ensure that its huge investment in Canopy Growth pays off, Canopy will be able to raise more cash if necessary.
The case for Aphria
Aphria’s stock price still hasn’t fully recovered from allegations made late last year that it drastically overpaid for Latin American acquisitions in a deal that lined the pockets of key insiders. However…
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