I recently received a request from a reader asking if Aphria Inc stock was a good buy. He was considering several weed stocks, and a friend told him about Aphria (NYSE: APHA).
Circling back to Aphria, there are a few factors on why or why not I would consider it a good buy. It would be similar to most stocks I evaluate. Those factors are business model and management, sector, business fundamentals, and technical indicators.
Given those indicators, I would give Aphria stock an overall grade of C and would choose to watch the stock more before investing it. It could be a great opportunity if the May numbers are positive. However, it could sink further if the numbers fail to impress Wall Street analysts. Readers may remember Aphria is one of our “Top 3 Marijuana Stocks to Watch For 2020.”
Below is the breakdown of the complete “Report Card” for Aphria.
Aphria Business Model & Management – Grade C
Aphria, headquartered in Canada, sells, and produces medical cannabis. It also has pharmaceutical-grade cannabis and has several brands.
Looking at Aphria a little closer, there is some cause for concern. According to news reports, Aphria’s profits were because it shifted its ownership in another company.
It appears that the stock is being held up by paper and not selling pot.
Carl Merton, the CFO, said on the conference call that Aphria expects “annualized” Canadian marijuana revenue of $1 billion by the end of the calendar year 2020. (May)
The grade for Aphria’s Business Model & Management: C
I would upgrade if they turned profitable, but give an F if they fail to deliver the greens.
Cannabis Stocks Sector – Grade B
Weed stocks are currently the wild west of investments right now, and the risks are very high. Many people are hoping to get rich overnight on cannabis stocks, but recently it the sector has gone up in smoke.
Investors need to consider this sector very risky right now. It is highly regulated and still illegal in many states. There is a grave legislative risk to all businesses in this sector. For the right investor, the cannabis sector could be a great opportunity. However, they will need to “kiss a lot of toads” before they find their prince.
Business Fundamentals – Grade B
Aphria basic numbers are reasonable considering the sector. May financials will give a better idea of the health of the company.
The total revenue has consistently grown with a significant jump in 2019 from 36,917 to 237,110. Unfortunately, the profit did not increase at the same rate. Specifically, the Aphria had 40,887 gross profit in 2018 and 75,421 gross profit in 2019 despite six times the revenue. Aphria needs work, but it’s May numbers will make or break it. Investors need to see real profit.
Aphria Technical Chart Numbers – Grade D
Aphria stock and the cannabis sector are experiencing a strong bear trend. Most all the indicators are negative. I see some movement on the oscillators, but still very early to say.
The stock has been bouncing off the $4 support level since October. There is some price consolidation around the $5 level.
Support – $4 Resistance – $6
Aphria Stock Wall Street Recommendation
Jan-21-20 Initiated Alliance Global Partners Buy
Jan-15-20 Upgrade CIBC Sector Underperform → Neutral
Jan-13-20 Initiated BofA/Merrill Neutral
Nov-05-19 Initiated Cantor Fitzgerald Overweight
Jul-26-19 Downgrade CIBC Neutral → Sector Underperform
May-24-19 Initiated Jefferies Buy
Feb-21-19 Initiated Seaport Global Securities Buy $18
Jan-18-19 Initiated CIBC Neutral
Aphria Stock 1 Day Oscillators
Name Value Action
Relative Strength Index (14) 41.64 Neutral
Stochastic %K (14, 3, 3) 13.14 Neutral
Commodity Channel Index (20) −71.53 Neutral
Average Directional Index (14) 17.16 Neutral
Awesome Oscillator −0.64 Neutral
Momentum (10) −0.35 Sell
MACD Level (12, 26) −0.23 Sell
Stochastic RSI Fast (3, 3, 14, 14) 28.29 Neutral
Williams Percent Range (14) −73.27 Neutral
Bull Bear Power −0.13 Neutral
Ultimate Oscillator (7, 14, 28) 34.63 Neutral
Aphria Stock 1 Day Stock Moving Averages
Name Value Action
Exponential Moving Average (5) 4.25 Buy
Simple Moving Average (5) 4.18 Buy
Exponential Moving Average (10) 4.37 Sell
Simple Moving Average (10) 4.35 Sell
Exponential Moving Average (20) 4.58 Sell
Simple Moving Average (20) 4.75 Sell
Exponential Moving Average (30) 4.69 Sell
Simple Moving Average (30) 4.83 Sell
Exponential Moving Average (50) 4.81 Sell
Simple Moving Average (50) 4.89 Sell
Exponential Moving Average (100) 5.12 Sell
Simple Moving Average (100) 4.92 Sell
Exponential Moving Average (200) 5.86 Sell
Simple Moving Average (200) 5.77 Sell
Ichimoku Cloud Base Line (9, 26, 52, 26) 5.02 Neutral
Volume Weighted Moving Average (20) 4.87 Sell
Hull Moving Average (9) 4.12 Buy