After releasing a somewhat disappointing Q2 2020 report on January 14, Aphria Inc. (TSX:APHA) (NYSE:APHA) has steadily accrued value. Between the 14th and the 23rd, APHA jumped 16.8% from $6.49 to $7.58.
This morning, however, the stock sank 7% and is currently trading at $7.05. This is despite the fact that Aphria had some great news to report today. So why did this formerly red-hot stock suddenly drop?
As always, Rich has the answer.
Aphria Receives $100 Million Strategic Investment
In a press release published this morning, the company announced that it has entered into an agreement to receive a strategic investment from an institutional investor. This investor has agreed to purchase 14,044,944 units of Aphria at a price of C$7.12 each. This will generate gross proceeds of C$100,000,001.
This deal helps strengthen the company’s cash balance pro forma to nearly $600 million.
The cannabis company says it will use this fresh capital injection to pursue “opportunistic” international expansion efforts.
Talking to BNN Bloomberg, Aphria Chief Executive Officer Irwin Simon said that the investment demonstrates confidence in the company’s management and strategy.
“It shows [the investor] is a believer in the [cannabis] category where a lot of licensed producers have had trouble finding any type of financing. We didn’t have to do this. We have close to $600 million on our balance sheet. It just gives us a much stronger balance sheet to continue doing what we’re doing.”
Simon goes on to say that, over the next six months, the cannabis industry will “condense and consolidate.” Aphria’s balance sheet gives it the perfect ability to do just that.
The company is incredibly well-funded, is full to the brim with investor confidence, and has a clear growth strategy.
So why is APHA stock down today?
“Because they raised money at $7.12, lower than the market price,” Rich explains. “The market is naturally going to take the stock down because they consider this dilution. But in my opinion, this is an amazing investment.”
Aphria Projects Approximately $600 Million in Net Revenue for 2020
Rich says that after Aphria’s current price dip is over, the stock could “explode.”
“Mark my words, Aphria is a screaming buy,” he adds. “Do not get intimidated by this price drop. This is one of the biggest and one of the best cannabis companies in the world.”
One of the ways that Aphria stands ready to provide value is through its international expansion. Specifically, the company is hoping to improve sales in Germany, Europe’s largest cannabis market.
Earlier this week, the Aphria One facility in Leamington, Ontario received EU GMP certification. This means the facility can supply bulk dried flower throughout the European Union, including the lucrative German medical market.
Simon called this a “game-changer” both for the company’s position in Europe and its revenue projections.
For fiscal 2020, Aphria expects net revenue of $575 million–$625 million and an adjusted EBITDA between $35 million and $42 million. This would make it the industry leader in sales.
Rich remains bullish on Aprhia. What are your thoughts? Will the stock continue to drop before it goes up? Let us know your play for APHA.
Featured image: Canva