Is Aphria (APHA) a Buy on the Dip?

Shares of Aphria (NYSE:APHA) have tumbled about 16% since the company reported earnings results for its fiscal third quarter. This was the first full quarter since the company and its peers began selling adult-use recreational marijuana in Canada, and investors enthusiastic about the future are wondering if the market has overreacted and created a bargain opportunity.

Let’s take a closer look at the road ahead of Aphria to see if this troubled marijuana stock is a buy right now…

Reasons to buy

Once Health Canada gives a regulatory green light to some recent additions, Aphria will have more than 2.4 million square feet of cultivation space capable of producing at least 255,000 kilograms of cannabis. The company’s also adding an “Extraction Center of Excellence” to the Aphria One facility that will be able to process around 200,000 kg of cannabis annually into edibles and concentrates. Health Canada expects it will allow these popular options to go on sale later this year.

Aphria has also developed a shelf-stable, water-soluble, and flavorless cannabinoid nano-emulsion formulation that provides an initial onset within 10 to 15 minutes if used in a beverage.

During Aphria’s fiscal third quarter, which ended on Feb. 28, 2019, net revenue soared 617% compared to the previous-year period to 73.6 million Canadian dollars. Edibles, beverages, and cartridges ready for vaporizers could begin pushing domestic revenue much higher before the end of the year.

Revenue from the company’s distribution operation surged from nearly nothing to CA$57.6 million during the fiscal third quarter. This new reporting segment involves purchasing cannabis from other producers then reselling it to pharmacies. The acquisition of CC Pharma in January gives Aphria access to more than 13,000 pharmacies in Germany.

The company doesn’t break down revenue by geographic region, but we do know that 79% of net revenue came from outside Canada during the fiscal third quarter…

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