The COVID-19 pandemic has to a degree benefited the cannabis industry. Cannabis sales hit a new high earlier this year, as lockdown measures pushed people to replenish their stockpiles. According to an article published in The Guardian, “34 states and two territories now approve marijuana for use as a medicine. Fifteen states, two territories plus Washington DC accept its use for recreation.” With the majority accepting the use of cannabis legally, the industry is expected to thrive.

Moreover, a Biden administration is expected to be a boon for the US cannabis industry. Though it’s unlikely that he’ll legalize marijuana federally, allowing states to set their own cannabis policies could significantly help cannabis companies get more access to capital and other benefits.

Given this background, Aphria Inc. (APHA), Cronos Group Inc. (CRON) and Canopy Growth Corporation (CGC) could witness significant upside in the near term.

Aphria Inc. (APHA)

APHA is an international producer, processor and distributor of medicinal and recreational cannabis. The company produces cannabis-derived extracts and derivative cannabis products under the brand names Solei, RIFF, Good Supply and Aphria.

On November 30th, APHA announced the strategic acquisition of SW Brewing Company. This will further diversify APHA’s product offering, expand its addressable market and broaden its consumer reach.

On November 26th, the company announced the expansion of its 510 Vape offering across its award-winning adult-use brand portfolio. This will help APHA meet the increasing demands to generate higher revenue in the upcoming quarters.

APHA’s revenue increased 15.5% year-over-year to $112.60 million in its fiscal third quarter ended August 2020. Gross profit rose 65.7% from the year-ago value to $58.17 million over this period.

The consensus EPS estimate for the fiscal period ending May 2021 indicates a 75.9% increase year-over-year. The consensus revenue of $524.04 million for the next year indicates a 28.7% increase from the same period last year. The stock has gained 46.6% year-to-date.

How does APHA stack up for the POWR Ratings?

A for Trade Grade

B for Buy & Hold Grade

A for Peer Grade

A for Industry Rank

B for Overall POWR Rating.

The stock is ranked #35 out of 240 stocks in the Medical – Pharmaceuticals industry.

Cronos Group Inc. (CRON)

CRON is a cannabinoid company offering hemp-derived supplements and cosmetic products through ecommerce, retail, and hospitality partner channels. The company is engaged in cultivation, distribution and marketing of cannabis-derived products for medical and adult-use markets.

The company recently launched Happy Dance, a new skincare CBD brand in partnership with Kristen Bell. CRON has also launched a leading medical brand, Peace Naturals, in Israel. This expansion will allow it to diversify its product portfolio by offering high-quality, affordable products to a larger consumer base.

CRON’s revenue increased 96.3% year-over-year to $11.36 million for the third quarter ended September 2020. Gross profit from the US segment increased 50.3% from the year-ago value to $0.70 million.

CRON has an impressive earnings surprise history, as it beat the street EPS estimates in three out of the trailing four quarters. The consensus revenue estimate of $41.60 million for the current quarter ending December 2020 indicates a 75.2% increase year-over-year. The stock has gained 8.5% year-to-date.

It’s no surprise that CRON is rated “Buy” in our POWR Ratings system. It has an “A” for Trade Grade and a “B” for Buy & Hold Grade, Peer Grade and Industry Rank. Among the 27 stocks in the Agriculture industry, it is ranked #10.

Canopy Growth Corporation (CGC)

CGC is involved in the production, distribution and marketing of cannabis for medical and recreational purposes internationally. The company also pursues investment opportunities in the global cannabis industry.

The company recently announced the launch of Quatreau, a new line of premium CBD-infused beverages. CGC is well positioned to win market share in the CBD beverage space as this product was launched on the heels of incredible growth in sales from the company’s THC-infused beverages, released earlier this year.

CGC’s revenue increased 76.5% year-over-year to $104.60 million in the third quarter ended September 2020. The consensus EPS estimate for the next year indicates a 37.1% improvement from the year-ago value. Moreover, CGC beat the street EPS estimates in three out of trailing four quarters, which is impressive. The consensus revenue of $433 million for the next year indicates a 35.6% increase year-over-year. The stock has gained 26.4% year-to-date.

CGC’s strong fundamentals are reflected in its POWR Ratings. It has a “Buy” rating with an “A” for Trade Grade, Peer Grade and Industry Rank, and a “B” for Buy & Hold Grade. It is ranked #29 out of 240 stocks in the Medical – Pharmaceuticals industry.

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APHA shares were trading at $8.32 per share on Wednesday afternoon, up $0.67 (+8.76%). Year-to-date, APHA has gained 59.39%, versus a 15.55% rise in the benchmark S&P 500 index during the same period.

About the Author: Imon Ghosh

Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization. More...

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