Aphria gets price target raised at Mackie Research

After a better than expected first quarter, Mackie Research Capital analyst Neil Gilmer is raising his price target on medical marijuana player Aphria (Aphria Stock Quote, Chart, News: TSX:APH).

On October 7, Aphria reported its Q1, 2017 results. The company earned $895,269 on revenue of $4.37-million. It was a quarter that easily bested last year’s Q1, when the company lost $476,825 on a topline of $950,740.

“Aphria continues to deliver on all operating metrics,” said CEO Vic Neufeld. “Patient onboarding, harvest yields, delivering in-demand strains, kilograms sold and low production costs have again generated stellar top-line and bottom-line results. Completion of the part II expansion remains on schedule. Part III expansion just kicked off in the last two weeks. With expected annualized yields increasing to 18,000 kg upon completion of the expansions, Aphria is strategically positioned for continued sustainable growth.”

“We view Aphria’s Q1 results quite positively,” says Gilmer. “The company was able to generate significant growth in the quarter following the more modest growth in its May quarter end. While we don’t expect Aphria to post 58% Q/Q growth each quarter, we believe the company is well positioned to generate meaningful growth in sales and earnings. Aprhia continues to be one of the cost leaders in the industry and that has resulted in strong EBITDA margins.”

In a research update to clients today, Gilmer maintained his “Speculative Buy” rating but raised his one-year price target price on the stock from $3.75 to $4.35, implying a return of 12 per cent at the time of publication.

Gilmer thinks Aphria will generate EBITDA of $6.4-million on sales of $21.2-million in fiscal 2017, numbers he expects will climb to EBITDA of $17.8-million on a topline of $56-million the following year.

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