Aphria Stock Breakout Ahead of Earnings: What Should You do Now?
The situation has not been particularly great for the cannabis industry over the course of the past year or so and many companies have seen their stocks recording significant declines. However, there are some stocks which have been the exception and on Monday, it was Aphria Inc (NASDAQ:APHA) which emerged as a major gainer from among cannabis stocks.
The Aphria stock rallied by as much as 12.3% on Monday after an analyst made bullish statements with regards to the Canadian cannabis company. Considering the sort of gains that have been made by the Aphria stock, it could be worthwhile for investors to take a closer look at it.
The rally was primarily due to the latest report from Pablo Zuanic, an analyst at the firm Cantor Fitzgerald. Zuanic revealed that Aphria is his top pick from among cannabis stocks and on top of that, he raised the target price as well. The new price target has also been boosted to $8.23 a share from $7.86 a share.
The new price target represents an upside of as much as 40% for investors at this point in time. The stock closed on Monday at $5.74 a share. He stated that he expects Aphria to generate sequential growth of as much as 25% in the fourth fiscal quarter and that is going to come about primarily due to gains in market share.
In addition to that, Zuanic also expects the company to deliver better margins since it may have reined it is expenses and reduced cash burn as well. He went on to add that Aphria is poised to be one of the major winners in the North American market. The cannabis industry in Canada is expected to be valued at $6.2 billion by 2024 and the one in the United States could be worth $31 billion by the same time. The analyst reports have come as a shot in the arm for Aphria and it remains to be seen if the stock can further add to its gains over the course of the week.
In recent times, analysts have become far more bullish with regard to their expectations about the federal legalization of marijuana in the United States. If Joe Biden does become the next President, then marijuana could be legalized by 2021 according to some analysts. If that happens, then it could prove to be a major boost for companies like Aphria.
The company is going to report its fourth-quarter results on July 29 and investors could do well to keep an eye on it. Over the course of the past four quarters, the company has generated positive EBITDA and also boosted the balance sheet by buying back convertible debentures worth CA$127.5 million.
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