Shares of Canadian cannabis company Aphria Inc. APHA,
HERE,
rose 4.4% in premarket trading Tuesday, after Stifel raised its C $ 15.50 ($ 12.18) price target from C $ 9.80, and said recent results underline the company’s long-term outlook. But analysts led by W. Andrew Carter also reiterated a hold rating for the stock. While Aphria’s earnings were better than Stifel’s estimates, they included lower Canadian adult sales, which were dampened by stronger distribution sales and higher global medical sales, the analysts wrote in a note to customers. Yet they said they were. However, we were surprised by the stock’s outperformance – it’s up 25% after earnings, while the S&P 500 SPX,
is down 1% – as a result of the revenues and post-election strength. “We believe that the Canadian LP’s outperformance with regard to the prospect of US federal reforms has limited merit in pushing valuations to unfounded levels, but we believe our robust fundamental outlook alongside the growth prospects of the upcoming combination Tilray Inc. TLRY,
are limiting factors for a more negative approach, “the analysts wrote.” But we believe the robust valuation (11x EV / FY22E net cannabis revenues) is a barrier to material outperformance as the stock is likely to remain volatile. Cantor Fitzgerald raised his 12-month price target for Friday’s Aphria to account for the merger with Tilray, even though it was unimpressed by the company’s quarterly earnings. %, while the Cannabis ETF THCX,
has gained 29%.