Aphria Inc.’s U.S.-listed shares rose about 3% Tuesday, after news that the company has achieved GMP status in the European Union, clearing the path for it to start selling medical cannabis to pharmacies in Germany and other countries.
The GMP certification—the acronym stands for Good Manufacturing Practices—is key for the company to access EU markets. Aphria APHA, +4.17% APHA, +1.42% expects to start its first shipments in the fourth quarter of fiscal 2020. The company has a June to May fiscal calendar.
Jefferies analyst Owen Bennett said the move may drive upside to his bullish estimates for Aphria, which remains his top pick among Canadian cannabis companies following its second-quarter earnings released last week. The stock fell immediately after the numbers were released as it posted yet another loss and revenue that rose sharply but still missed consensus estimates.
Aphria also lowered revenue guidance for fiscal 2020, which Bennett said means he now expects them to meet the low end of guidance, instead of missing it.
“For us, the most encouraging aspect of Aphria’s delivery to date is the sustained demand it is seeing for its brands in the recreational channel, with this translating to impressive share gains,” Bennett wrote in a note to clients. In Ontario, the company has a 14% share now compared with 12% last quarter, 9% at the start of the summer and just 6% in 2018.
“Not only does this look good for the introduction of 2.0 products, it also positions the company well for its upcoming step change in capacity once Aphria Diamond products are introduced to the market in Q4,” he wrote. “Our own analysis also shows that the Riff and Good Supply brands are two of the best-positioned brands in the market in terms of THC-potency, price per gram and average reviews.”
Further upside could be provided by a dropping of the vape bans in Alberta and Quebec, and if the company succeeds in launching beverages in fiscal 2020, said the note.
Jefferies rates the stock a buy, although it lowered its stock price target to C$10.30 ($7.88) from C$11.00, to reflect its lowered guidance.
At Alliance Global Partners, analyst Aaron Grey initiated coverage of Aphria stock on Tuesday with a buy rating and C$11 price target. The analyst said Germany is one of the company’s most significant opportunities after it won five of 13 domestic cultivation licenses, while its CC Pharma unit gives it access to 13,000 pharmacies.
“We look for fundamentals to improve from continued success in the Canadian market and beginning of sales in Germany – and see potential partnerships within the US and other markets as a potential catalyst for the stock,” Grey wrote.
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