Despite Q3 results that fell below his expectations, PI Financial analyst Jason Zandberg is maintaining his “Buy” rating on Aphria (Aphria Stock Quote, Chart TSX:APHA).
This morning, Aphria reported its Q3, 2019 results. The company lost $108.2-million on net revenue of $73.6-million, a topline that was up 617 per cent over the same period last year.
“I am proud of the efforts of our over 1,000 employees worldwide as we continue to position Aphria for future growth and success in the global medical and adult-use cannabis industry,” said interim CEO Irwin D. Simon. “Our organization has experienced significant change in a very short period of time which was necessary to propel the company forward. Our board of directors and executive team will remain focused on the advancement of Aphria’s leadership position in the global cannabis industry and we are pleased to have announced today the appointment of two new independent directors. Aphria will continue to drive sustainable long-term shareholder value by leveraging its strong brand positioning, superior distribution model, product innovation, industrial-scale cultivation and automation, medical-use leadership, and strategic global platform.”
Zandberg says Aphria’s medical and recreational cannabis sales were “materially” below his expectations, even as total net revenue exceeded his estimate. But he says there are some positive takeaways.
“The results were below expectations but the bigger events were the impairment of APHA’s LATAM assets, GGB’s takeover withdrawal, and a potential commercial arrangement between APHA and GGB that could provide APHA with exposure to the US markets again,” he said.
In a research update to clients today, Zandberg maintained his “Buy” rating and one-year price target of $14.00 on Aphria, implying a return of 19.7 per cent at the time of publication.
The analyst thinks APHA wll post EBITDA of negative $24.8-million on revenue of $189.3-million in fiscal 2019. He expects those numbers will improve to EBITDA of positive $51.3-million on a topline of $560.6-million the following year.
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