For the first time since the global coronavirus pandemic began, Aphria (APHA) traded above $5 last week. 

However, this bullish move was short lived.  By last Thursday, when the markets plummeted, shares of APHA fell and it is currently trading at about $4.50.

Is this recent down move a buying opportunity?

In a sector where investors are laser-focused on profitability, or should we say lack of profitability, APHA has been a standout performer.  The company released its most recent earnings results in April and reported a profit.  This was the third quarter out of the past four quarters, that the company posted a profit.  That’s extremely impressive, especially when you look at APHA’s peers, most of whom report losses quarter after quarter.

APHA reported net sales of CA$144.4 million which were 19.7% higher compared to the previous quarter.

When it comes to operating expenses the company did burn through $124.4 million in operating expenses in the previous nine months.  However, APHA has a sizable cash position of roughly $515 million in cash. This cash position should prevent APHA from having to dilute their shares by selling stock to raise capital.  And it should give the company a buffer to weather the storm that the COVID-19 pandemic has created.

Therefore, in our opinion, this 10% sell-off that has occurred in the past week is a buying opportunity.  

Next month, when APHA releases their next earnings report, investors should focus on Canadian recreational sales figures along with international revenues from Germany. The German cannabis market was one of the main drivers in revenues for APHA when they initially achieved profitability and investors will want to see that this revenue stream remains strong. 

(Disclosure: The author is long APHA)

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APHA shares were unchanged in after-hours trading Tuesday. Year-to-date, APHA has declined -14.18%, versus a -2.19% rise in the benchmark S&P 500 index during the same period.

About the Author: Aaron Missere

Aaron is an experienced investor who is also the CEO of Departures Capital. His primary focus is on the cannabis industry. He also hosts a weekly show on YouTube about marijuana stocks. Learn more about Aaron’s background, along with links to his most recent articles. More...

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