Why This Underdog Pot Stock Could Soar Past Canopy (TSX:WEED)

Aphria Inc. (TSX:APHA)(NYSE:APHA) is back in the thick of the action. The third-largest cannabis producer has good chances of snatching the leadership position from the industry giant.

Cannabis stocks have fallen.

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.

New direction

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.

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.

More on Cannabis Stocks

A cannabis plant grows.
Cannabis Stocks

Can Aurora Cannabis Stock Recover in 2024?

Aurora Cannabis stock is down 99% from all-time highs but remains a high-risk bet, despite its cheap valuation.

Read more »

A person holds a small glass jar of marijuana.
Cannabis Stocks

The Best Cannabis Stock to Buy Right Now

This cannabis stock has jumped 30% in the last few months, with even more growth on the way – all…

Read more »

Cannabis grows at a commercial farm.
Cannabis Stocks

Down 99% From All-Time Highs, Is Canopy Growth Stock a Good Buy Right Now?

Canopy Growth stock is a high-risk investment due to its negative profit margins and challenging liquidity position.

Read more »

Marijuana plant and cannabis oil bottles isolated
Stocks for Beginners

Aurora Cannabis’ Reverse Stock Split: Is the Stock a Buy Today?

Cannabis stock Aurora (TSX:ACB) is consolidating shares once again, but what does this mean for investors?

Read more »

Medicinal research is conducted on cannabis.
Cannabis Stocks

Where Will Cannabis Stocks Be in 10 Years?

Cannabis stocks could see a huge shift upwards should marijuana be rescheduled in the U.S., but you can still buy…

Read more »

Cannabis grows at a commercial farm.
Cannabis Stocks

Forget Canopy Growth: 1 Cannabis Stock With Far Less Risk

Cannabis stocks like Canopy Growth (TSX:WEED) haven't done well for quite some time, yet this one deserves a major boost!

Read more »

Medicinal research is conducted on cannabis.
Cannabis Stocks

Is Canopy Growth Stock Worth Buying?

Canopy Growth stock (TSX:WEED) made a big move to consolidate its shares, but will this help the company move forward?

Read more »

Pot stocks are a riskier investment
Cannabis Stocks

Canopy Growth Corp: Will it Ever Be a Buy?

Canopy Growth Corp (TSX:WEED) keeps going lower. Will it ever find a bottom?

Read more »