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Tuesday, November 24, 2020

How Recent Action in Aphria Inc (OTCMKTS:APHQF) Signals Market Leadership

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A few days ago, we stated that we felt Aphria Inc (OTCMKTS:APHQF) had moved back into a leadership position in the cannabis space. That was further evidenced by the stock’s aggressive new recent highs on Thursday despite weakness in many other cannabis names. Helping to drive this action, the company just announced that it has fully completed divesting its US assets (via a share purchase agreement with a group of buyers to complete the sale of all remaining shares in Liberty Health Sciences, Inc.).

According to the release, “As part of the transaction, Aphria retains an irrevocable option to repurchase the Shares or any replacement securities from the buyers for a period of up to five years, subject to the satisfaction of certain conditions as further described below. As a result of the transaction, Aphria has divested its remaining U.S. cannabis assets from its balance sheet in accordance with the staff notice and requirements of the Toronto Stock Exchange. As a result of this divestiture, the Company has significantly improved its liquidity position while it continues to focus on the many opportunities within Canada and in other legal cannabis markets around the world.”

Aphria Inc (OTCMKTS:APHQF) bills itself as a company that produces, supplies, and sells medical cannabis in Canada. Its cannabis products include dried flowers and cannabis oils. APHQF sells its products through its online store and telephone orders, as well as MMPR licensed producers.

The company offers sativa, indica, and hybrid medical marijuana products, as well as cannabis oils. It also provides support services in the form of medical consultations, group therapies, and rehabilitation to veteran and first responders.

The company sells its products through its online store or phones, as well as engages in the wholesale shipping of medical marijuana plant cuttings and dried buds to other licensed producers. Aphria Inc. is headquartered in Leamington, Canada.

According to press materials, “APHQF is one of Canada’s lowest cost producers, produces, supplies and sells medical cannabis. Located in Leamington, Ontario, the greenhouse capital of Canada. APHQF is truly powered by sunlight, allowing for the most natural growing conditions available. We are committed to providing pharma-grade medical cannabis, superior patient care while balancing patient economics and returns to shareholders. We are the first public licensed producer to report positive cash flow from operations and the first to report positive earnings in consecutive quarters.”

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The APHQF chart shows a bit more than 110% during the past month in terms of shareholder gains in the company, but this action is running counter to the larger trend in the name.

What’s more, the name has seen interest climb, with an increase in recent trading volume of a bit over 250% above its longer-run average levels.

“Given the current federal legal framework in the United States, we have made the strategic decision to divest our remaining U.S. holdings at this time in order to permit us to focus on other more immediate capital markets and strategic opportunities in Canada and in other legal markets around the world,” said Vic Neufeld, Chief Executive Officer of Aphria. “Not only does this transaction result in a significant gain to the Company it also enables Aphria to advance its existing global strategic plan unencumbered by U.S. exposure at this time.”

Now commanding a market cap of $3.82B, APHQF has a significant war chest ($59.7M) of cash on the books, which must be weighed relative to about $43.9M in total current liabilities. APHQF is pulling in trailing 12-month revenues of $36.9M. In addition, the company is seeing major top-line growth, with y/y quarterly revenues growing at 110.3%. As more color becomes clear on the name, we will review the situation and update our take. Sign-up for continuing coverage on shares of $APHQF stock, as well as other hot stock picks, get our free newsletter today and get our next breakout pick!

Disclosure: we hold no position in $APHQF, either long or short, and we have not been compensated for this article.

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