Aphria’s Q2 results will be better than expected, says M Partners

Aphria’s (Aphria Stock Quote, Chart, News: TSXV:APH) second quarter results will be better than the street consensus expectations, says M Partners analyst Mason Brown.

On Wednesday, January 11, before market open, Aphria will report its Q2, 2017 results. The street is expecting the cannabis company will post Adjusted EBITDA of $1.3-million and gross profit of $3.7-million on revenue of $5.1-million.

Brown’s estimates for Aphria’s quarter are higher, across the board. The analyst thinks Aphria will post Adjusted EBITDA of $1.4-million and gross profit of $4.4-million on a topline of $5.3-million. He says there is still upside in the stock, despite the strong run that all cannabis stocks have enjoyed.

“We like APH as a longterm play on the medical + recreational cannabis market,” he says. “We expect APH to be one of the lowest cost producers in the space and that the company, run by owner-operators and management with considerable operational experience, will continue to diligently allocate capital to position itself ahead of the impending recreational market. We highlight management’s operational experience in the agriculture and greenhouse industries and believe APH’s management team will be extremely valuable as APH executes on its rapid expansion plans (6,000kg pa now built and growing to over 40,000kg pa by Jan/18) to produce on an industrial scale. APH currently trades at 7.2x our CY2020E adj. EBITDA est; our target price implies 10.1x.”

In a research update to clients today, Brown maintained his “Buy” rating and one-year price target of $7.10 on Aphria, implying a return of 37 per cent at the time of publication.

Brown thinks Aphria will generate Adjusted EBITDA of $6.1-million on revenue of $23.3-million inn fiscal 2017. He expects these numbers will improve to EBITDA of $11.9-million on a topline of $40.2-million the following year.

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