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Aphria Stock (TSX:APHA) (NYSE:APHA) Falls Back From highs: What to Expect Now?

April was not a particularly great month for many stocks and especially so for those who belong to the cannabis sector. However, Aphria Inc (TSX:APHA) (NYSE:APHA) proved to be one of the exceptions in this regard and went against the tide to record substantial gains.

Major Developments

Aphria stock managed to deliver gains of 25.5% for the month, and there are two significant factors behind the spike. In March, the stock had recorded significant declines as investors sold off their positions due to the impact of the coronavirus pandemic on supply chains and sales. However, those fears had not actually amounted to much, and many investors returned to pick up the stock in April.

That was one of the reasons behind the rally. In addition to that, the company’s announced its financial results for the fiscal third quarter on April 14, and the numbers were impressive. Its German arm CC Pharma managed to beat analysts’ estimates for both revenues and for earnings. Despite the company’s decision to withdraw its yearly guidance, investors seemed to be happy to buy into the Aphria stock.

The company possesses one of the strongest balance sheets in the industry, and if an investor believes in the long term prosperity of the cannabis sector, Aphria could well be one of the stocks to watch out for.

Aphria has been one of the more conservative companies in the industry and had avoided the pitfalls of heavy investments on acquisitions or infrastructure building. Hence, it is one of the better-positioned stocks at this point in time. This is a time when many other cannabis companies are struggling, and hence, Aphria has the chance to move away from the pack. At this point in time, the stock is trading at only 2.6 times its sales, and that is a significantly cheap valuation. In contrast, Canopy Growth, the biggest cannabis company by market cap, is trading at a price to sales ratio of 22.

Is Aphria Stock (TSX:APHA) (NYSE:APHA) A Solid Value Buying in May?

The cannabis sector has gone through its fair share of difficulties over the past year, but some stocks have managed to garner interest among investors all the same in recent days. The stock in question is Aphria Inc (TSX:APHA) (NYSE:APHA). There had been a lot of optimism around the sector in the past, but over the past year or so, a range of issues damage the cannabis space significantly.

Key Analysis

Oversupply, slow rollout of stores and the continued presence of the black market are some of the factors. However, over the past month, Aphria has enjoyed a rally, and it is important to figure out if it is the top cannabis stock at this point.

While the Aphria stock is down 54% this year up until April 23, it should be noted that it has gained 28% over the past month and remains one of the five major cannabis producer stocks on the TSX. Its performances in the fiscal third quarter are possibly the reason behind the rally in recent weeks.

Revenues for the quarter soared to as much as $144.4 million, and that reflected a year on year rise of 96%. The sequential rise stood at 20%. While it made a loss of $9.6 million in the prior-year period, Aphria generated a net income of $8.7 million in Q3 2020.

Last but not least, investors should also consider the fact that at the end of the third quarter, the company had $551.1 million in cash and cash equivalents. It will help Aphria in navigating the current period of uncertainty effectively and also allow it to make strategic acquisitions if the opportunity arises.

While the present state of affairs at Aphria is promising for the stock, investors might be looking for a bump in the whole sector. However, the sale of cannabis has soared since March due to the lockdowns, and that is a major positive for Aphria. Many markets in Europe are also set to open, and that is another positive for the company.