Which stock wins in a one-on-one matchup between two marijuana businesses with very different business models?
Here’s a tale of two marijuana stocks. One is a top Canadian marijuana grower with a market cap approaching $2 billion that has expanded rapidly through acquisitions. Its stock is down 45% so far in 2018. The other focuses on providing financing to marijuana-related businesses. The company has a market cap of only $216 million, but its stock has jumped 23% year to date.
The first stock is Aphria (NASDAQOTH:APHQF), while the second stock is CannaRoyalty(NASDAQOTH:CNNRF). Does Aphria’s size and beaten-down valuation make it the better pick? Or does CannaRoyalty’s smaller size and momentum give it an advantage? Here are the arguments as to why investors should consider Aphria and CannaRoyalty — and which looks like the better choice right now…
The case for Aphria
Investors were disappointed by Aphria’s fiscal Q4 results, announced on Aug. 1. However, there were plenty of positives to be found that highlight the potential for the company.
Aphria’s year-over-year revenue growth of 110% stemmed primarily from its acquisition of Broken Coast earlier this year. But that same acquisition gives the company more capacity to meet the demand that’s on the way when Canada’s legal recreational marijuana market opens in October. With its other expansion efforts on top of the acquisitions that it’s made, Aphria anticipates an annual production capacity of 255,000 kilograms next year.
You can expect Aphria’s revenue to grow dramatically when Canada begins allowing the adult use of recreational marijuana. Eventually, however, supply will catch up with and exceed demand. Aphria CEO Vic Neufeld thinks the company will still be in a good position when this supply glut hits in Canada. He foresees Aphria as one of a few major players that will be able to deliver cannabis at low costs and potentially buy smaller marijuana growers at a steep discount from current valuations.
Another reason for Neufeld’s optimism is the global opportunity. Germany legalized medical marijuana last year. Neufeld expressed confidence that the company will achieve success in the German market. Aphria is also expanding into other international markets.
The company recently completed its largest international shipment of cannabis oil so far to Australia. In July, Aphria announced acquisitions of cannabis-related businesses in Argentina, Colombia, and Jamaica. It’s also keeping a close eye on the opportunity to sell medical marijuana in the U.K. as well as potentially step into the U.S. market should federal marijuana laws change.
The case for CannaRoyalty
Why consider buying CannaRoyalty stock? The company itself provides one great reason to investors…
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