Aphria Inc (NYSE:APHA): The Rally May Have Just Begun

Aphria Inc (NYSE:APHA) popped up about 25% on Tuesday, October 15. That happened after the company reported strong fiscal first quarter earnings and the management maintained revenue guidance for fiscal year 2020. We believe Aphria still has a lot of room to run and that the recent rally may just be the beginning of the rebound in the stock.The Tuesday rally lifted Aphria stock price to $5.43. That indicates huge upside potential considering the stock traded at around $11 early this year. Moreover, Aphria is currently a long way from its $15 peak reached about a year.As Aphria’s stock price rises, we believe short-sellers will scramble to cover their positions, which should further boost the rally in the stock. However, if Aphria pull back below its critical support at around $4, we believe that could incentivize short-sellers to surge in again and push the stock even lower. APHA Daily Chart

About NYSE:APHA

Aphria is Canadian cannabis company with a global footprint. It has operations in Latin America and Europe. In fact, Aphria says it is the only licensed cannabis producer in Germany with permission to grow all three strains of medical cannabis with the approval of the German authority.[embed]https://www.youtube.com/watch?v=eikfArKjQ50&t=2s[/embed]

Aphria reports second consecutive quarter of profitability

On October 15, Aphria released financial results for its fiscal first quarter ended August 31. Here’s what the company reported:

• Net income was C$16.4 million, up from C$15.8 million in the previous quarter.
• Revenue came in at C$126.1 million, an increase of 849% year-over-year.
• Aphria exited the quarter with C$464.3 million of cash reserve, which it could invest toward developing its business such as through acquisition of more assets.

Recent operational developments during Aphria’s fiscal first quarter

• Aphria launched Plant Positivity, its social impact platform. Through Plant Positivity, Aphria aims to provide greater education and access to plants in the communities it serves.
• Aphria completed its Cannabis Vault in Bad Bramstedt, Germany.
• Marigold Project Jamaica, Aphria’s subsidiary in Jamaica, officially opened its first retail Herb House.
• Aphria signed on as a brand partner for the PAX Era device and platform (more on this shortly)

Aphria’s fiscal 2020 outlook

• Aphria expects to generate of between C$650 million and C$700 million in its fiscal year 2020.
• Aphria expects to post adjusted EBITDA of between C$88 million and C$95 million in fiscal year 2020.

After posting strong fiscal first quarter results, Aphria believes its fiscal year 2020 targets are now more within reach.

“This solid start to the year keeps us on track to achieve our fiscal year 2020 financial outlook. Going forward, we remain focused on our highest-return priorities both in Canada and internationally as our team furthers the development of our medical and adult-use cannabis brands to drive growth through innovation and return value to shareholders,” Aphria chairman and interim CEO Irwin Simon said in a statement.

Potential catalysts for Aphria stock rally

Aphria may have just started a long rebound cycle. Here are some of the potential catalysts for Aphria stock rally:

Canada expands its cannabis market

Canada will this month expand its cannabis market with the legalization of more cannabis products. For example, vape pens, the devices used in some recreational consumption of cannabis, will become legal in Canada from October 17. Sale of cannabis vape pens is set to begin in Canada on December 16, in time for the Xmas.Aphria has partnered with PAX Labs to enable it take advantage of the expanded cannabis market in Canada. In June, Aphria struck a deal that will allow it to sell PAX Labs’ vape pens called PAX Era.Aurora Cannabis (NYSE:ACB), Organigram Holdings Inc. (NASDAQ:OGI), and The Supreme Cannabis Company, Inc. (FIRE) also struck similar vape pen sales deals with PAX Labs.Deloitte predicts that the additional cannabis products such as vape pens that are set to become legal in Canada could expand the country’s legal cannabis market by C$2.7 billion annually. Therefore, Aphria stock could rally further as more investors come to realize its potential in the vape pen business.

Aphria taking market share from competitors

Aphria is taking market share from competitors in Canada, management said at an investor briefing following the release of the fiscal first quarter results. Aphria cited data showing it now controls 12% share of the cannabis market in Canada and interim CEO Irwin Simon described that as excellent. Investments in brand awareness, wider product distribution and high-quality products are helping Aphria capture more market share.Therefore, we believe Aphria’s stock rebound could be even stronger as more investors discover how the company is turning tables on the competition.

Bottom line

At $4.86 a share, Aphria still has a lot of upside potential from here and there are strong catalysts to fuel a long rebound in the stock.We will be updating our subscribers as soon as we know more. For the latest updates on NYSE:APHA, sign up below!Disclosure: We have no position in NYSE:APHA and have not been compensated for this article.