Strange things have been happening lately to a weed stock that was considered the most inferior in the cannabis industry. Aphria (TSX:APHA)(NYSE:APHA) sunk into the bottom rung recently. Investors nearly lost confidence in the company. However, the embattled cannabis producer is returning to the limelight.
The way things are developing at present, Canopy Growth might be an erstwhile leader. Aphria seems headed for the big stage and take over the top spot. I have to admit, I was almost ready to scratch the stock off my list.
The ship is sinking
Aphria sailed through rough seas in recent months. Last December, the issue of poor corporate governance emerged. The company was involved in a short-selling controversy. The misdeed allegations were grave, and no one thought Aphria could ever recover. A weaker company could have gone down already.
A hostile takeover bid by Green Growth ensued but was unanimously rejected. The shareholders knew the deal would only destroy the company value. Soon after, Aphria released the third-quarter fiscal 2019 financial results. Just like industry peers, the earnings were disappointing.
In less than a month from reporting the quarterly earnings, President Jakob Ripshtein tendered his resignation effective June 7. He was formerly the CFO of a global alcohol giant. He was supposed to spearhead Aphria’s international expansion, particularly in the cannabis-infused beverage market.
The waves were so strong, but Aphria managed to sail past all of the challenges. What was needed after the short-seller reports, unsolicited offer, and the exit of atop executive was a major management overhaul. Irwin Simon, the interim CEO, formed a new set of officers and board members. Most of them are from the organic food industry.
Aphria pushed the reset button. The ghosts of the past are gone and, hopefully, will not come back to haunt the company. APHA is trending upward again. The price rose 4.52% to $9.67 on June 3 to end the week higher. Analysts aren’t seeing any downside from here on. They project the stock to climb 168% in the next 12 months.
Normalcy has returned. Aphria is back to ramping up production. With three growing sites capable of producing 255,000 kilos at full capacity, Aphria has a fighting chance to beat the industry giants. By next year, quarterly sales would be 10 times more than what the company sold in the recent quarter.
In another development, Aphria was selected as one of the partners of PAX Labs. The company is the maker of the PAX Era, which is a pod-based marijuana vaporizer. This partnership is timely since the Canadian government is set to make beverages, edibles, and marijuana vapes legal by the end of 2019.
Should the Canadian market reach saturation point, the international markets would be the catch basins. Aphria was granted the cultivation licence in Germany, and the German market is seen to be the largest medical cannabis market in Europe. Aphria is out of the turbulent seas. The ship is cruising to success.
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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Christopher Liew has no position in any of the stocks mentioned.