Aphria is Rapidly Expanding Production, But is There a Mold Problem?

Aphria

For years, Aphria Inc. (TSX:APHA) (NYSE:APHA) has been one of the top five cannabis companies in Canada. Its stock is currently at a healthy $6.61, and it’s turned a profit over the last two quarters. Last month alone, it posted earnings of $16.4 million CAD, or 7 cents per share.

Now there’s even more news to celebrate, as the company has made exciting developments towards reaching its production capacity. While normally this would be cause to flock towards APHA stock, Rich has some news that might get pot stock watchers to reconsider.

“One of our members just got a product from Aphria that has mold in it,” he says. “He paid a lot of money for it, and it has mold.”

Aphria’s Newest Cultivation License

This would be a particularly bad time for Aphria to contend with product quality issues, as it would seriously distract from the company’s good news.

On Monday, it announced that Health Canada granted a cultivation licence to its second cannabis greenhouse facility in Leamington, Ontario. The facility, called Aphria Diamond, offers 1,300,000 square feet of production space and has an annual growing capacity of 140,000 kilograms.

Aphria now has over 2,400,000 square feet of cultivation space and a total annualized production capacity of 255,000kg. This makes it one of the cannabis industry’s top licensed producers.

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Even with concerns of oversupply issues dogging the industry, Aphria has no reason to sweat. It has an incredible market reach and is ready to capitalize on demand as it grows.

Essentially, Aphria seems like it should be the one pot stock investors know they can trust. But can they?

The Company’s History with Mold Issues

In December last year, APHA stock took a dive to its lowest point in years. This was a result of a short-sellers’ report about poor-quality cannabis production at its first Leamington facility. The report went so far as to say that the company is “setting the standard for low-quality production.”

Addressing the report, then-CEO Vic Neufeld said:

“Did we have some small mould issues? Sure, but those were only a few plants. Nothing that any other [licensed producer] hasn’t experienced before.”

Prior to that, the only time Aphria recalled its cannabis was in January 2018. This was due to a labeling error, as some 10-gram bottles of dried cannabis were sold without a percent sign next to the numerical values for cannabinoid content.

Neufeld is right to point out that Aphria isn’t alone in dealing with mold. Aurora Cannabis Inc. (TSX:ACB) (NYSE:ACB), Sundial Growers Inc. (NASDAQ:SNDL), and, most famously, CannTrust Holdings Inc. (TSX:TRST) (NYSE:CTST) have all had issues with mold in the past.

Still, as one of the most reputable LPs in Canada, this is a bad look for the company.

Where Aphria Goes from Here

Last month, Rich touted the company as “the hero” of the cannabis sector. Today, things aren’t looking so good.

“These LPs need to be put on blast,” says an exasperated Rich. “Aphria, if you’ve got mold in your weed, throw that s*** out!”

While this news is bad, it’s no reason to flea from APHA. The company still has a great production capacity and is reporting rare profits. As long as it can ensure its products are high-quality, it will likely be able to keep its head above water.

But if you keep hearing “Aphria” and “mold” in the same sentence, you might want to reconsider this company.

What do you think? Is this going to be an issue for the company, or is APHA still the best pot stock to buy? Have you had any problems with Aphria’s product?

Featured image: Canva

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