The countdown is on.
In just 10 days, the global cannabis industry will be dramatically reshaped. On Oct. 17, Canada opens the market for the legal adult use of recreational marijuana. The impact from the first major economic power to allow recreational marijuana on a nationwide level will be enormous.
Dozens of companies that have previously supplied only medical cannabis in Canada anticipate a surge in revenue. But with the big day drawing close, there are three stocks that could be the biggest winners of all: Canopy Growth (NYSE:CGC), Aurora Cannabis (NASDAQOTH:ACBFF), and Aphria (NASDAQOTH:APHQF).,,
Aphria
Like Canopy and Aurora, Aphria is sitting pretty when it comes to production capacity. The company is on track to be able to produce 225,000 kilograms of cannabis per year by early 2019. Aphria should edge out Tilray to rank as the No. 3 marijuana grower in terms of capacity.
Finding buyers for its capacity shouldn't be a problem. Aphria has supply agreements in place with all 10 Canadian provinces plus another agreement with the Yukon Territory. In addition, the company recently signed a deal with Emblem Cannabis to supply 175,000 kilograms of cannabis over a five-year period beginning in 2019.
Aphria, like Aurora Cannabis, has been listed as a top prospect as a cannabis partner for a major beverage maker. Coca-Cola was reportedly interested in Aphria before turning its attention to Aurora. Perhaps the most likely partner for Aphria, though, is Diageo. Lining up a major partner could enable Aphria to make a big splash in the cannabis-infused beverages market next year.
How high?
While the remaining days before Canada's recreational marijuana market opens will go by quickly, there's one big question on investors' minds: Just how high will demand really be? Some predict tremendous demand with supply shortages -- at least right out of the gate. Others aren't so optimistic.
Arcview Market Research and BDS Analytics took a very analytical approach with projecting the Canadian marijuana market size. They think that the recreational market will be around $2.1 billion next year with another $600 million for medical cannabis. If these estimates are relatively accurate, Canopy Growth, Aurora Cannabis, and Aphria are likely to see their revenue skyrocket.
However, a quick look at the companies' market caps shows that expectations of sky-high growth are already baked into the stocks' prices. For Canopy, Aurora, and Aphria to justify their premium valuations, they'll need to significantly increase sales outside of Canada as well.
Oct. 17, 2018, will be a big day. But it probably won't be big enough.
$-0.01 EPS Expected for Aphria Inc. (APH)
October 7, 2018 - By Mary Kidd
Aphria Inc. produces, supplies, and sells medical cannabis in Canada. The company has market cap of $4.07 billion. The firm offers sativa, indica, and hybrid medical marijuana products, as well as cannabis oils. It has a 90.61 P/E ratio. It also provides support services in the form of medical consultations, group therapies, and rehabilitation to veteran and first responders.