Cannabis Corner: APHA Signals the Shakeout

Hilary Kramer

Hilary Kramer is an investment analyst and portfolio manager with 30 years of experience on Wall Street.

Watching Aphria Inc. (NYSE:APHA) recover from last week’s slight revenue miss, I can’t help but think that the moment we’ve anticipated is here. The shakeout is finally coming.

Winners and losers are emerging in the cannabis industry. Investors are choosing companies that already have achieved economies of scale. It no longer is about hypothetical potential and a rising green tide that lifts all boats.

If you have real sales and a route to profitability, you have a chance in the cannabis landscape of tomorrow. Otherwise, you’re rapidly becoming a dead money proposition.

APHA has real sales. As of the recent quarter, this company has successfully captured a $500 million slice of the global cannabis market.

That’s a healthy 15 percent share of legal Canadian sales, growing a lot faster than the overall opportunity. In other words, APHA is squeezing smaller companies out of the space.

And as it grows, the barriers to new entrants get higher. If you haven’t created a healthy sales base here yet, achieving it is going to be increasingly difficult and expensive.

Furthermore, there just aren’t a lot of $500 million slices for the winners to split. A hopeful like

Tilray Inc. (NASDAQ:TLRY), for example, is much less far along on its journey to real economies of scale.

TLRY is growing fast, but at best, I see it hitting $300 million in revenue this year. It is not even going to be profitable below $500 million, which might take another six months to reach.

At that point, APHA’s dominant position in the medicinal marijuana market will have locked in about $700 million of the overall market, leaving even less for everyone else.

Wall Street can see that. Only a few cannabis suppliers are going to get big enough to generate a payout for their shareholders. The others will suffer.

share on:

Like This Article?
Now Get Mark's FREE Special Report:
3 Dividend Plays with Sky-High Returns

This newly-released report by a top-20 living economist details three investments that are your best bets for income and appreciation for the rest of the year and beyond.

Get Access to the Report, 100% FREE


img
share on:

PREMIUM SERVICES FOR INVESTORS

Dr. Mark Skousen

Named one of the "Top 20 Living Economists," Dr. Skousen is a professional economist, investment expert, university professor, and author of more than 25 books.

Product Details

  • Forecasts & Strategies
  • Home Run Trader
  • Fast Money Alert
  • Five Star Trader
  • TNT Trader
LEARN MORE HERE

Bryan Perry

A former Wall Street financial advisor with three decades' experience, Bryan Perry focuses his efforts on high-yield income investing and quick-hitting options plays.

Product Details

  • Cash Machine
  • Premium Income (exclusively for subscribers of Cash Machine)
  • Quick Income Trader
  • Breakout Options Alert
  • Hi-Tech Trader
LEARN MORE HERE

Jim Woods

Jim Woods has over 20 years of experience in the markets from working as a stockbroker,
financial journalist, and money manager. As well as a book author and regular contributor to
numerous investment websites, Jim is the editor of:

Product Details

  • Successful Investing
  • High Velocity Options
  • Intelligence Report
  • Bullseye Stock Trader
  • Eagle Eye Opener
LEARN MORE HERE

Bob Carlson

Bob Carlson provides independent, objective research covering all the financial issues of retirement and retirement planning. In addition, Bob serves as Chairman of the Board of Trustees of the Fairfax County (VA) Employees’ Retirement System, which has over $2.8 billion in assets.

Product Details

  • Retirement Watch
  • Retirement Watch Spotlight Series
  • Lifetime Retirement Protection Program
LEARN MORE HERE

Jon Johnson

Jon Johnson's philosophy in investing and trading is to take what the market gives you regardless if that is to the upside or downside. For the past 21 years, Jon has helped thousands of clients gain success in the financial markets through his newsletters and education services:

Product Details

  • Investment House Daily
  • Stock of the Week
  • Technical Traders Alert
  • Rapid Profits Stock Trader
LEARN MORE HERE

DividendInvestor.com

Used by financial advisors and individual investors all over the world, DividendInvestor.com is the premier provider and one-stop shop for dividend information and research.

Product Details

Popular tools include our proprietary Dividend Calendar, Dividend Calculator, Dividend Score Card, and many more.

  • Dividend Investor
LEARN MORE HERE