APHRIA INC (OTCMKTS:APHQF) is, without a doubt, one of the success stories in the legal cannabis space with huge growth potential. A strong product portfolio coupled with a solid financial position underscores why it could be a breakout cannabis stock this year, after an impressive 2017.Last year alone, the stock rallied by more than 150%, making it one of the best performers in the space. It goes without saying that the stock could record yet another impressive year as Canada moves a step closer to legalizing recreational use of marijuana.The stock is currently trading at record highs of $14.75 a share with room for further growth given the developments in the industry. On the downside, it faces immediate support at the $13 handle, below which it could drop to the $11 handle, another key support level. APHQF Daily ChartAny pullback from current trading levels should act as a buying opportunity for investors looking to diversify their portfolio with stakes in the fast-growing industry.Before we look at the catalysts that are likely to push Aphria to new higher highs, let us look at what makes the company tick.Aphria Business DescriptionAphria bills itself as a legal cannabis company, engaged in the business of producing, supplying and selling of medical cannabis in Canada. It offers, Sativa, Indica, and hybrid medical marijuana products as well as cannabis oils. It sells its products through its online store. The company also engages in the wholesale shipping of marijuana plant cuttings as well as dried buds to licensed producers.The company also offers medical consultations, group therapies and rehabilitation to veteran and first responders. With a market cap of over $1 billion, Aphria is edging closer to becoming a top cannabis player not only in North America but across the globe. Stock Catalyst Renewed investors interest in Aphria follows reports the company has moved to strengthen its position in the recreational cannabis space with a $10 million investment in Tokyo Smoke-Doja Combination. The investment paves way for the combination of TS BrandCo Holdings Inc. And Doja Cannabis Company limited, thus bringing together two premium lifestyle brands. The combined company is to be renamed Hiku Brand Company Limited.
"In Hiku, we are investing in refined, up-market brands that align with our commitment to encouraging a more dignified positioning of recreational cannabis use, something we expect will be an important and valuable differentiator for Aphria as Canada moves closer to legalizing recreational cannabis,” said Vic Neufeld, CEO of Aphria.
The investment in Hiku builds on a subscription agreement that Aphria entered, in June last year, with Tokyo Smoke. Pursuant to the agreement, the company purchased 140,845 shares worth $1 million.Aphria remains well positioned capitalize on Canada’s recreational cannabis market thanks to its investment in Tokyo Smoke. Hiku will offer the company access to multiple recognizable brands and strategies needed to operate cannabis stores across various provinces. The investment also marks Aphria’s first venture into British Columbia’s premium cannabis market.In addition, Aphria has entered into an agreement that paves way for it to become a medical cannabis supplier to shopper Drug Mart. The agreement highlights the company’s growing credentials in the space as it continues to pursue new streams of revenue.Under the terms of the agreement, Aphria is to supply Drug Mart with its branded medical cannabis products. The products are to be distributed online through the chain’s 1,300 locations.
"We have an impeccable record cultivating and producing high-quality, medical-grade cannabis. These traits make us a strong partner for an organization looking to serve and support Canadian patients," said Mr. Neufeld.
What Next The two agreements could not have come at a better time given that Aphria is in the process of expanding its marijuana growing capacity. The company is in the process of a $100 million four-part expansion plan. Phase IV should be complete by 2019, expected to take the company’s growing capacity to 100,000 kilograms of dried cannabis annually.The facility should allow the company to benefit even more, on the sales front, on the surge in medical cannabis patients. Demand for medical cannabis products is poised to continue growing as Health Canada notes that patient enrollment continues to grow at 10% every month.Legalization of recreational use of marijuana In July should open the door for new sales opportunities that Aphria remains well positioned to take advantage of.Bottom LineAphria remains well positioned for further growth given the recent developments. Expansion of the company’s growing capacity should allow it to have access to three key revenue streams. Given that it is among a handful of approved growers that can export dried cannabis, the company should be able to generate revenue from the domestic medical market, domestic recreational and the export market.It goes without saying that it is only a matter of time before Aphria becomes a target for a Fortune 500 company looking to expand its wings into the cannabis space. CANOPY GROWTH CORP (OTCMKTS:TWMJF) has already attracted a deal from Constellation Brands, Inc. (NYSE:STZ) as big brands continue to explore ways of gaining exposure to the fast-growing sector.We will be updating our subscribers as soon as we know more. For the latest updates on APHQF, sign up below!Disclosure: We have no position in APHQF and have not been compensated for this article.
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