APHQF

Here’s the Story Behind the Breakout in APHRIA INC COM NPV (OTCMKTS:APHQF)

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APHRIA INC COM NPV (OTCMKTS:APHQF) shares have broken out once again this week. This is one of our most loved stocks over the past 6 months. The company generates a ton of cash from operations and has taken significant steps to diversify income streams and buffer its longer-term outlook as the cannabis market inevitably matures into a cyclical commodity market. Debt isn’t a factor, and top-line growth is humming along at nearly 40% on a quarterly year-over-year basis. The latest breakout appears to be directly related to a recent development. Here are the details.

Specifically, the company just announced that it has entered into an agreement to become a medical cannabis supplier to Shoppers Drug Mart. According to the release, “subject to Health Canada’s approval of Shoppers Drug Mart’s application to be a licensed producer, under the terms of the agreement the Company will supply Shoppers Drug Mart with Aphria-branded medical cannabis products. It is expected the products will be sold online, as Canadian regulations currently restrict the sale of medical cannabis in retail pharmacies.”

APHRIA INC COM NPV (OTCMKTS:APHQF) bills itself as a company that produces, supplies, and sells medical cannabis in Canada. Its cannabis products include dried flowers and cannabis oils. APHQF sells its products through its online store and telephone orders, as well as MMPR licensed producers.

According to press materials, “APHQF is one of Canada’s lowest cost producers, produces, supplies and sells medical cannabis. Located in Leamington, Ontario, the greenhouse capital of Canada. APHQF is truly powered by sunlight, allowing for the most natural growing conditions available. We are committed to providing pharma-grade medical cannabis, superior patient care while balancing patient economics and returns to shareholders. We are the first public licensed producer to report positive cash flow from operations and the first to report positive earnings in consecutive quarters.”

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As noted above, the company just announced that it has entered into an agreement to become a medical cannabis supplier to Shoppers Drug Mart. We believe this development was directly responsible for the stock’s powerful breakout this week, which saw shares rise as much as 30% on Tuesday. It was likely not the initial press release about this deal that spawned the powerful reaction, but the company’s conference call that took place Monday afternoon at 5:30 PM EST. That explains why the bulk of the breakout came into play on Tuesday morning.

“We have an impeccable record cultivating and producing high-quality, medical-grade cannabis,” said Vic Neufeld, CEO of Aphria. “These traits make us a strong partner for an organization looking to serve and support Canadian patients.”

The Canadian cannabis patch has continued to roar higher during this quarter, with many stocks in the space still powering in primary degree breakouts. These same companies were doing the same operational success dance during Q3, but mainstream and institutional investors refused to come in and play in the space. That all changed when we saw a Fortune 500 company come in and take a major minority stake in one of the main producers in the space in early November. Now, the space is seemingly more legitimate and we are seeing a clear example of multiple expansion.

We’ve witnessed 61% tacked on to share pricing for the listing in the past month. Market participants may want to pay attention to this stock. APHQF is a stock whose past is littered with sudden rips. In addition, the name has benefitted from a jump in recent trading volume to the tune of just under 170% beyond its prior sustained average level.

Currently trading at a market capitalization of $1480.6M, APHQF has a significant war chest ($38.2M) of cash on the books, which is balanced by about $1.6M in total current liabilities. APHQF is pulling in trailing 12-month revenues of $22.2M. In addition, the company is seeing major top-line growth, with y/y quarterly revenues growing at 39.9%. You can bet we will update this one again as new information comes into view. Sign-up for continuing coverage on shares of $APHQF stock, as well as other hot stock picks, get our free newsletter today and get our next breakout pick!

Disclosure: we hold no position in $APHQF, either long or short, and we have not been compensated for this article.