MENU

Should You Buy the Dip in Aphria Inc. or BlackBerry Ltd.?

The S&P/TSX Composite Index managed to rebound to finish the trading week on Friday, February 9. The TSX dropped 31 points, but was down over 250 points earlier in the day. Stocks have taken a hit across segments, with the TSX now declining 7.25% thus far in 2018.

But investors should not be quick to throw in the towel. There are still a number of great companies available at a bargain in the midst of this rapid dip. Today we will look at two that have surged in recent months and should continue to spark interest in 2018 and beyond. Which one should you stash?

Aphria Inc.

Aphria Inc. (TSX:APH) is one of the largest cannabis producers in Canada. Like other cannabis stocks, Aphria saw its shares spike in late December and early January, reaching an all-time high of $24.75 earlier last month. The latter part of January and the month of February has been a different story, however. Aphria stock is down 29.7% month over month. With a target of July 2018 set for recreational cannabis legalization, is Aphria a buy-low candidate or still overvalued?

Aphria leadership has elected to divest itself of its U.S. investment rather than fall victim to a possible delisting. The investigation by TMX Group Limited into cannabis companies began late last year. On February 5, Aphria announced that it would sell all 26.7 million of its shares in the U.S.-based Liberty Health Sciences Inc. The divestment is a disappointment for Aphria, but should come as a relief for some investors, as the risk of delisting is no longer a factor.

In its fiscal 2018 second-quarter results, Aphria saw its revenue climb 39% over the prior year. Gross profit rose to $6.2 million from $4.1 million. On January 29, Aphria also announced that it had reached a deal to purchase Nuuvera Inc., which gives it access to key international markets, for $826 million. The move represents another step in the scramble of some of the largest cannabis producers to gobble up assets and consolidate before legalization.

BlackBerry Ltd.

BlackBerry Ltd. (TSX:BB)(NYSE:BB) stock rose 1.46% on February 9. Shares have dropped 18.5% month over month. BlackBerry had been powered by impressive third quarter results it released in late December. Its business software and licensing revenue made up 85% of total revenue and rose to $199 million. Investors were also excited after BlackBerry announced a partnership to develop software for autonomous vehicles with China-based Baidu Inc.

The promise of big growth in the autonomous vehicle industry has resulted in improved investor sentiment for the former hardware company. BlackBerry has also established itself as a leader in encryption software, offering its services to a number of governments worldwide. The company melded these two with the launch of a cybersecurity for driverless cars called Jarvis.

Which is the better buy right now?

The release of a Statistics Canada study that estimated the cannabis industry was worth $5.7 billion in 2017 invoked some worry among investors in the sector. The top cannabis producers, including Aphria, have accrued market caps in the billions over the past few months. There are also questions over how efficiently producers will be able to meet demand as the provinces prepare for the gigantic rollout. It is more likely that Aphria and other cannabis stocks will consolidate in the run up to legalization.

That leaves BlackBerry as the more attractive addition, especially after its recent dip. The autonomous vehicle industry is expected to experience compound annual growth of over 30% into the 2020s, and BlackBerry has established itself as a leader for its contribution in Canada.

The Richest Man Alive Invests in This

The richest man in the world has just launched a $100 million investment fund and investors who don't take note could miss out on a massive opportunity.

And it isn't by sheer luck. He did it by looking to the future and investing in the big ideas of tomorrow.

This could be your chance to get in on the ground floor!

Click here to discover more!

Fool contributor Ambrose O'Callaghan has no position in any of the stocks mentioned. David Gardner owns shares of Baidu. Tom Gardner owns shares of Baidu. The Motley Fool owns shares of Baidu and BlackBerry. BlackBerry and Baidu are recommendations of Stock Advisor Canada.

I consent to receiving information from The Motley Fool via email, direct mail, and occasional special offer phone calls. I understand I can unsubscribe from these updates at any time. Please read the Privacy Statement and Terms of Service for more information.