Medical marijuana producer Aphria gets price target raise at PI

A better than expected quarter has PI analyst Jason Zandberg revisiting his price target on Aphria (Aphria Stock Quote, Chart, News: TSX:APH).

On Friday, Aphria reported its Q1, 2017 results. The licensed medical marijuana producer earned $895,269 on revenue of $4.37-million. The numbers were a solid beat over the same period a year earlier when it lost $476,825 on a topline of $950,740.

“Aphria continues to deliver on all operating metrics,” said CEO Vic Neufeld of the quarter. “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.”

Zandberg notes that the results from Aphria bested his expectations of $0.01 a share in earnings and EBITDA of $1.0-million on revenue of $3.3-million. The analyst says the beat was likely due to the fact that Aphria has become the seller of choice for other licensed producers.

“Grams of MMJ sold during the quarter were 585,200 –we had modelled 408,480 grams,” notes the analyst. “The average selling price per gram was $7.48, slightlv lower than the price of $8.16 reported in Q4 FY16 (ending Mav 31). The reason for the lower average selling price per gram reported this quarter is likelv due to strong wholesale business. Aphria sells to other licensed producers at a wholesale price of $3.75 – $4.25. The wholesale business was particularlv strong during Q1 as several LPs had demand that exceeded internal production.”

In a research update to clients Friday, Zandberg maintained his “Buy” rating on Aphria but raised his one-year price target on the stock from $3.75 to $4.25. He pegs the risk level at “Speculative”.)

Zandberg believes Aphria will post net income of $4.24-million on revenue of $23.48-million in fiscal 2017, numbers he expects will climb to net income of $7.8-million on a topline of $43.41-million the following year.

Shares of APH closed Friday up 7.8 per cent to $3.58.

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