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Aphria is still a buy, Haywood Securities says


aphriaHaywood Capital Markets analyst Neal Gilmer is keeping his “Buy” rating on Aphria (Aphria Stock Quote, Chart, News TSX:APHA) after the cannabis company’s latest quarterly earnings.

In an update to clients on Thursday, Gilmer said he continues to see Aphria as the leader in the Canadian
cannabis space.

Leamington, Ontario-based Aphria announced on Wednesday its fiscal fourth quarter 2020 results for the period ended May 31, including net revenue of $152.2 million, representing an 18-per-cent year-over-year increase and a five-per-cent increase sequentially. Adjusted EBITDA was $8.6 million, a 49-per-cent increase over the previous quarter.


Aphria ended the fiscal year with $497.2 million in cash and equivalents, while the company recorded a non-cash impairment of $64.0 million for the Q4, said to be related to Aphria’s international business in response to COVID-19.

On the quarter, CEO Irwin D. Simon said the quarterly results show how Aphria is setting itself apart from the rest of the cannabis industry in terms of sales growth, balance sheet and cash position, consumer brands and global business.

“Our strong finish to fiscal year 2020 demonstrates that this was a transformative year for Aphria, as our net revenue increased 129 per cent from fiscal year 2019. We continue to focus on capturing strong market share in Canada by executing upon our strategic plan and positioning Aphria as a leader in category innovation,” Simon said.


Calling the quarter broadly in line with expectations, Gilmer said Aphria’s top line of $152.2 million was above his and the Street’s estimates at $148.3 million and $146.6 million, respectively. Adjusted EBITDA of $8.6 million was in line with the analyst’s forecast.

Gilmer said the quarter featured some positive underlying trends for Aphria, most notably in adult-use cannabis revenues which increased by 27 per cent sequentially.

Aphria’s share price rose and dropped abruptly this week, with Gilmer saying, “The 19 per cent sell-off yesterday was more the result of a strong outperformance (up 38 per cent MTD to Tuesday’s close) to peers heading into the results as well as the $100-million ATM announced. We view yesterday’s sell off as a near-term correction despite solid fundamental results.”

Gilmer said that so far Aphria has been successful at scaling up its production capabilities, capturing market share and generating positive EBITDA, all of which sets it apart from the crowd.

“We continue to view Aphria as the leader in the Canadian LP landscape. The Company continues to demonstrate strong sales growth in the adult-use market in Canada while at the same time reporting positive EBITDA. We expect the Company will continue to demonstrate its leading position, supported by expanding EBITDA margins in F2021,” Gilmer said.

For APHA’s fiscal 2021, Gilmer is now calling for revenue and adjusted EBITDA of $715.5 million and $94.5 million, respectively, and for fiscal 2022 revenue and adjusted EBITDA of $846.4 million and $142.7 million, respectively.

With Gilmer’s retained “Buy” rating, the analyst is also keeping his $8.25 per share target, which at press time represented a projected return of 27 per cent.

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About The Author /

Cantech Letter founder and editor Nick Waddell has lived in five Canadian provinces and is proud of his country's often overlooked contributions to the world of science and technology. Waddell takes a regular shift on the Canadian media circuit, making appearances on CTV, CBC and BNN, and contributing to publications such as Canadian Business and Business Insider.
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