IB Net Payout Yields Model

Aphria: Avoid After Another Ugly Quarter


  • Aphria reported horrible FQ3 results for the period ending February.
  • The Canadian cannabis company only generates 35% of revenue from cannabis sales.
  • The stock is far too expensive with a $4.4 billion market valuation and their prime business only generating ~$210 million in run-rate revenues.
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Heading into the Tilray (TLRY) merger close, Aphria (APHA) reported a horrible quarter. The company further confirmed why overpaying for Canadian cannabis stocks is never warranted. My investment thesis remains negative on Aphria and the new entity despite a nearly 50% dip from the peak in February.

Read the full article on Seeking Alpha. 

Update - May 3

The deal closes with the new Tilray having a $8 billion valuation. The current FY revenue target is only $790 million, but the numbers include $350 million in non-cannabis revenues. The company just isn't the cannabis powerhouse that most think.

  • Tilray (NASDAQ:TLRY) announced the completion of the previously disclosed merger with its Canadian rival Aphria (NASDAQ:APHA).
  • Tilray shares will continue to trade on the Nasdaq Global Select Exchange and will start trading on Toronto Stock Exchange under the ticker symbol “TLRY” on May 5, 2021, the company said in a press release.
  • From today, Aphria shares will cease trading on Nasdaq with the closing of the deal.
  • The combined companies had a market value of ~$8B based on their last closing stock prices and Tilray shares have added ~2.0% in the premarket today.
  • With the merger, Tilray anticipates $81M (C$100M) of annual pre-tax cost synergies within eighteen months, an accelerated timeline from the previous 24-month target announced at the time of the merger announcement in December.
Tilray was a $10 stock back in November before the U.S. elections and the company doesn't benefit from U.S. legislation. The stock has a ton of downside risk here, especially after Aphria bombed the last quarter. 

Finviz Chart

Update - April 28

Do not follow these analysts still focused on the Canadians for U.S. legalization. 

  • Tilray (NASDAQ:TLRY) and Canopy Growth (NASDAQ:CGC) are both buys, according to Bank of America, because of their ability to enter the U.S. market should federal marijuana legalization occur and CBD beverage distribution.
  • BoA analyst Heather Balsky has reinstated coverage of Tilray and Canopy with price targets of, respectively, $23 and C$45.
  • She rates Aurora Cannabis (NYSE:ACB) as neutral and Cronos Group (NASDAQ:CRON) as underperform.
  • Thanks to the recent shareholder approved merger with Aphria (NASDAQ:APHA), Balsky expects "multiple expansion" thanks to the resultant gains in scale, efficiencies, and combined liquidity.
  • She is modeling $30M-$35M of quarterly EBITDA by 2H 2022.
  • Tilray is also helped by its November 2020 acquisition of SweetWater Brewing, giving it footing in the CBD beverage market and potentially THC-infused products.
The stock valuation is close to $8B and the BofA analyst only forecast $30M in EBITDA next year. The new Tilray will trade at over 60x '22 EBITDA estimates. 

Disclosure: No position mentioned. Please review the disclaimer page for more details. 


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