Shares of Canada’s cannabis giant Aphria Inc. (TSX:APHA)(NASDAQ:APHA) rose 12% on Monday to close trading at $7.68. The marijuana stock gained momentum after Cantor Fitzgerald analyst Pablo Zuanic named Aphria as his top cannabis pick among peers.
Zuanic also raised Aphria’s target price to US$8.23 from US$7.86 indicating a 43% upside from its current price. Zuanic expects Aphria’s fiscal fourth-quarter sales to rise by 25% on a sequential basis on the back of an increase in market share.
The analyst is also optimistic that the pot stock will be able to lower expenses and reduce cash burn in Q4. Aphria will be reporting its fiscal fourth quarter of 2020 results on July 29
Zuanic is excited about Aphria’s long-term prospects and its potential to gain traction in the rapidly expanding cannabis market in North America. According to Zuanic, the cannabis market in the U.S. would reach US$31 billion while Canada’s pot market might grow to $6.2 billion by 2024.
Industry analysts believe that cannabis can be legalized south of the border at the federal level by 2021 if Democrat Joe Biden wins the presidential race this year. If these expectations come true, pot stocks including Aphria can soar to touch record highs, as the U.S. will be the largest cannabis market in the world.
Aphria has a huge international presence
Aphria is a well-diversified cannabis company with operations in Canada, Germany, Italy, Malta, Lesotho, Jamaica, Columbia, and Argentina. It has production facilities totaling 2.4 million square feet with an annual production capacity of up to 255,000 kilograms.
Aphria has managed to establish a footprint in the global cannabis market and aims to create operational hubs in regions where it expects growth opportunities. In Europe, its primary hub is in Germany where Aphria’s acquisition of CC Pharma has helped it establish a distribution network throughout the continent.
In Europe, CC Pharma is primarily involved in the distribution of non-cannabis medical products, which means Aphria will continue to develop and incorporate medical marijuana products into its product portfolio.
Aphria acquired LATAM Holdings in September 2018, a company that holds key cannabis licenses in Columbia, Jamaica, and Argentina. The pot heavyweight identified Columbia as a hub for South America and is constructing a cultivation and production facility there to meet demand in the region.
Further, Aphria holds a distribution network in Argentina and obtained an option to purchase a majority interest in a Brazilian entity as well.
What makes APHA stock a solid long-term bet?
We have seen why Cantor Fitzgerald is bullish on APHA stock. It was one of the first licensed producers in Canada that leveraged greenhouse cultivation and industrial-scale cultivation to deliver an operating profit among cannabis stocks.
Aphria’s focus on expanding international operations and the rapidly growing cannabis 2.0 market will be key revenue drivers in the upcoming decade. Aphria has supply agreements with all Canadian provinces, giving it access to 99.8% of the country’s population.
Aphria is well poised to lead the recovery among cannabis stocks and can create significant wealth for investors in 2020 and beyond.
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Fool contributor Aditya Raghunath has no position in any of the stocks mentioned.