Aphria Inc. (APHA:CN) (APHA) PT Raised to Cdn$32.50 at Cantor Fitzgerald
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Cantor Fitzgerald analyst Pablo Zuanic raised the price target on Aphria Inc. (APHA:CN) (NASDAQ: APHA) to Cdn$32.50 (from Cdn$26.00) while maintaining an Overweight rating.
The analyst commented, "The recent significant bout of volatility in Canadian cannabis stocks may be another deterrent for investors looking at this subsector (aside of mixed fundamentals and valuation). But with US MSOs landlocked, we continue to think the larger better managed Canadian LPs deserve a premium for global growth potential. In this sense we continue to appreciate the strategic logic and value of the merger of Tilray and Aphria. But given the wide gap between the two stocks (APHA trades at a 51% discount to the merger conversion price), we prefer to invest in the merger through APHA shares (rated Overweight) rather than via TLRY (rated Neutral). We estimate the market is paying 50-90x EV/EBITDA for Canopy Growth’s cannabis business, ex US (based on FY24 guidance); the wide range stems from our valuation of the CPG unit (based on acquisition price or based on bullish FY24 guidance?) and the value of US optionality beyond the contingent stakes. We believe the combination of APHA and TLRY could eventually be inviting to potential partners from the consumer packaged goods (CPG) industry, and we would not rule out contingent deals in the US before the end of MJ Prohibition. If so, to value the cannabis EBITDA of the new company, which we estimate will be close to 2x the size of Canopy Growth in Canada rec sales, at 50x CY22E EBITDA seems reasonable to us; Canopy’s 50-90x range is based on FY24E numbers, i.e., Apr 2023 through Mar 2024). Given recent volatility, we do not focus much on the current spread (APHA trades at a 51% discount to the conversion price). Based on our valuation of the combined company, we foresee 51% upside for APHA shares and 4% upside for TLRY, which reports this Wed (2/17) after the close."
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Related EntitiesCantor Fitzgerald, Definitive Agreement
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