Aphria Stock Is Rising After Reaching a Marijuana Vape Deal With PAX Labs -- Barrons.com
2:32 pm ET June 7, 2019 (Dow Jones)
By Connor Smith
Aphria stock was flying high Friday morning after the marijuana firm announced it was among four Canadian growers to partner with San Francisco-based PAX Labs for cannabis vape products.
The back story. Aphria stock (ticker: APHA) has faced an uphill climb in 2019. The stock is up 30% in 2019 through Thursday's close, but down 21% from a year prior.
The Canada-based cannabis grower was wrapped up in some controversy after short-sellers alleged former CEO Vic Neufeld and other Aphria founders engaged in self-dealing transactions by spending C$280 million on what it said were cannabis businesses in Colombia, Jamaica, and Argentina. Neufeld has denied the report and said it had no impact on his decision to retire in January.
Barron's wrote last week that cheaper cannabis production from Colombia could be the next big threat to North American firms.
Aphria stock lost some of its gains in mid-April, when the company reported a larger loss than Wall Street anticipated. It is significantly discounted to peers; Aphria's enterprise value to upcoming four quarters' estimated sales is around 4.5 times, compared to Aurora Cannabis (ACB) at 19.1, Cronos Group (CRON) at 68.4, and Canopy Growth (CGC) at 26.8, according to Bloomberg.
Read More: Only One Marijuana Stock Looks Like a Buy, Analyst Says
What's new. Aphria says it will partner with PAX Labs to bring "premium cannabis extracts" from itd Solei, RIFF, and Aphria medical cannabis brands to PAX's Era device -- once they become legal in Canada.
The PAX Era is a pod-based marijuana vaporizer that resembles the JUUL -- PAX Labs originally developed the JUUL device before spinning it off into its own company. Marijuana vapes, edibles, and beverages are not yet legal in Canada, but growers expect approval from the government by late 2019.
"This partnership reflects Aphria's unwavering focus on innovation and new product offerings to meet the needs of all cannabis consumers, from novices to experienced users alike," Aphria vice president of marketing Megan McCrae said in a statement.
Aurora Cannabis, OrganiGram Holdings (OGI), and Supreme Cannabis Company (SPRWF) also announced similar deals with PAX.
Aphria stock was up 8.6% $7.48 Friday afternoon. Aurora Cannabis stock was up 2.8% to $7.74, Organigram was up 2.2% to C$9.86, and Supreme Cannabis stock was up 6.2% to $1.31.
Looking Ahead. GMP Securities analyst Robert Fagan wrote in a note to clients Friday that given PAX's "significant brand power" the deal represents an endorsement of the four partners' "execution capabilities, and their respective brand awareness amongst Canadian consumers."
"We believe that the association with PAX should also serve to elevate perceptions of these LPs' product quality amongst consumers, which in-turn could be an important driver of market share in Canada," he wrote.
BMO Capital's Tamy Chen resumed coverage of Aphria with a Market Perform rating and a $10 target price Thursday night. She noted that while Aphria's valuation is "a notable discount" to its peers, she believes there remains uncertainty in the company's production ramp over the near term.
Barron's has taken a cautious approach to cannabis stocks, especially U.S.-based growers.
Write to Connor Smith at Connor.Smith@barrons.com.
(END) Dow Jones Newswires
June 07, 2019 14:32 ET (18:32 GMT)
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