Cantor Analyst Raises Aphria And Tilray Price Targets Amid Merger

Cantor Fitzgerald analyst Pablo Zuanic expressed disappointment by Aphria Inc. APHA APHA quarterly results in an analyst note published Friday.

What Happened? The Leamington, Ontario-based company recently published second-quarter financial results. Aphria reported a net loss of CA$120.6 million, or CA$0.42 per share, compared to a net loss of CA$7.9 million, or a loss of CA$0.03 per share in the same quarter of the prior year.

The company also highlighted its plans to finalize the merger with Tilray Inc. TLRY.

The deal — previously announced in December — is scheduled to close by the end of the second quarter of 2021, or by “late March to early April.”

Why It's Important: Aphria's stock was up 20% on Thursday, Zuanic noted.

"But we think other reasons were at play," he added. "It is about what APHA + TLRY can do in a fast-deregulating cannabis world."

Zuanic raised the price target to CA$26.00 from CA$11.75 with an Overweight rating.

Tilray maintains a Neutral rating. Zuanic raised the price target to $24.20 from $11.00.

“Unlike the US MSOs, the Canadian LPs are not land-locked, and we would think they (the better-performing ones, with sturdier B/Ss and credible track records) will have first-mover advantage,” once recreational market overseas open, Zuanic noted.

He cited markets like Israel, Mexico and Germany.

The newly formed company will benefit from the development of international med markets and their eventual entrance into the US, he added.

Zuanic has praised the merger, believing consolidation can solve oversupply problems and “historically low flower retail prices.”

Both companies, as one entity, can contribute to the fast-deregulatization of the cannabis world, he said.

What's Next?: Canopy Growth Corp. CGC and Cronos Group Inc. CRON are valued at 18-21x CY21 EV/sales.

Aphria has value since the combination of Aphria and Tilray trades at 13x.

Zuanic points out that 30 to 40x CY22 EBITDA “is not unreasonable” for the newly formed entity, taking into account “global opportunities and domestic aspirations.”