Next week, Aphria, Inc. (APHA: TSX) (APHA: Nasdaq) will release third quarter financial results and we expect the announcement to receive a lot of attention as it is expected to be the Canadian Licensed Producer’s (LPs) last quarterly financial result before it completes the merger with Tilray Inc. (TLRY: Nasdaq).
Ahead of the earnings report, Stifel raised its price target on Aphria to C$22.00 ($17.50) from C$15.50. Although the price target hike is significant, the broker dealer lowered its third-quarter revenue estimates for Canadian cannabis company. After lowering revenue and EBITDA expectations, Stifel is forecasting Aphria’s third quarter results to come in below consensus and we will monitor how this impacts the current trend.
According to Stifel, the rationale behind the lower estimates is related to Canadian recreational cannabis shipment revenue to come in lower than the prior quarter. The broker-dealer believes that Aphria to report that its shipments have been negatively impacted by weaker consumption trends and provincial inventory reductions.
The broker-dealer believes that Canadian LP’s valuation does not recognize the structural challenges that are associated with the recreational cannabis market. The firm also said the Canadian LP is likely to face near-term headwinds which should put pressure on financial results for the first quarter of calendar year 2021.
Stifel has placed a hold rating on both Aphria and Tilray and is focused on the pending merger of the Canadian LPs. The rating is based on the combined company’s growth prospects and we will monitor how the two businesses are able to integrate and recognize substantial synergies between the operations.
Yesterday, Cormark Securities raised its price target on Aphria to $18.25 from $10.75 (CAD). Although the higher price target is important, Aphria is trading well above the $18.25 (CAD) level. We find this to be of significance and will monitor how other broker-dealers change estimates ahead of the earnings report.
Going forward, we will monitor how both Aphria and Tilray trade ahead of next week’s earnings report. We expect to see some volatility in the near-term and will monitor how firms like Stifel respond to the earnings report.
We will be closely following Aphria ahead of its third quarter financial report, please send an email to email@example.com with the subject “Aphria’s Quarterly Earnings” to be added to our distribution list.
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