Aphria: Canaccord Downgrades Company To Hold From Speculative Buy

Earlier this week, it was announced that Aphria Inc (TSX: APHA) (NASDAQ: APHA) and Tilray Inc (NASDAQ: TLRY) would be combining to create the largest Canadian cannabis company. The proforma revenue is estimated to be C$874 million, and management indicated there would be roughly C$100 million in annual synergies that would come to fruition within 24 months of the deal closing.

Analysts have been changing their price targets and ratings to conform to the arbitrage between the shares of Aphria and Tilray. Aphria now has a 12-month average price target of C$11.10, up from C$9.13 one month ago. Two analysts have changed their rating from strong buys to hold ratings. Tilray meanwhile has seen its average analyst 12-month price target climb to U$9.21, up from U$7.77 one month ago. One analyst has raised its rating from sell to hold.

Canaccord is one of the first investment banks to develop a more in-depth scope of the deal than just their preliminary thoughts.

On the 16th, we covered initial reactions to the merger news, specifically Matt Bottomley, who wrote, “We believe this deal will further cement the combined entity as the #1 player in the Canadian sector.” Today’s note sent out to investors reiterated those same points of bolstering both their European and US distribution/footprints, but Bottomley adds some more colour.

Bottomley downgraded Aphria to a hold rating while keeping their C$11 price target. He writes, “As a result, we have left our PT unchanged, but elected to reduce our recommendation to HOLD (from SPECULATIVE BUY) as we believe APHA shareholders are already getting full value using the terms of the proposed deal.”

He first writes that management has been looking at the consolidation of cultivation and production facilities in Canada to drive cost-saving and efficiency across the platform.

Onto brands, Bottomley writes, “We believe the proforma entity has one of the most robust product portfolios,” and the combined brands offer increased breadth and depth and caters to each type of consumer. Below you can see the combined brands and what consumers they are targeting, along with data from the latest OCS report.

Bottomley does talk about the synergies in the US, Germany, and Portugal but is a rehash of what was stated in his previous note.

Yesterday, Stifel sent out a note about the merger, and although they have the same points, W. Andrew Carter does have a somewhat negative tone. He writes, “executing this merger attracts scrutiny, in our view, given the expense of acquiring Tilray’s capabilities and assets for a roughly $1.7 billion enterprise value”.


Information for this briefing was found via Sedar and Refinitiv. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

Leave a Reply

Video Articles

Endeavour Mining Q1 Earnings: Cash Flow Is King

G Mining Oko West Feasibility: Move Fast, Break.. Nothing?

New Gold Q1 Earnings: What’s Behind The Market’s Surprising Reaction?

Recommended

First Majestic Posts Record Cash Flows In Q1 As Production Costs Fall

Brazil Potash Secures Funding In Support Of US$2.5 Billion Autozales Project

Related News

Alphabet: Analyst Consensus Points To Q2 Revenues Of $69.95 Billion

Alphabet (NASDAQ: GOOGL) will be reporting its second quarter financial results on July 26th after...

Monday, July 25, 2022, 03:03:00 PM

Kinross Gold: BMO Lifts Targets On Buyback News

Kinross Gold (TSX: K) this past week announced that it is launching a new share...

Saturday, September 24, 2022, 11:17:00 AM

SSR Mining Sees BMO Lift Price Target To US$29 Per Share

On Tuesday, SSR Mining (TSX: SSRM) reported its first quarter financial results for 2022. The...

Friday, May 6, 2022, 04:32:00 PM

Trulieve: Canaccord Raises Price Target From $45 To $51

Last week, Trulieve Cannabis (CSE: TRUL) announced that they are acquiring two Pennsylvania companies, PurePen...

Tuesday, September 22, 2020, 02:45:00 PM

Sundial Growers: Analysts Expect Positive EBITDA For Second Quarter

Sundial Growers Inc. (Nasdaq: SNDL) announced that they will be reporting their second quarter financials...

Wednesday, August 11, 2021, 11:58:00 AM