In December, cannabis stocks’ (HMMJ) overall valuations fell and seemed to be in the oversold territory. In January, there was a bounce back, which we’ll discuss in more detail.
In the above chart, you can see that nine cannabis stocks’ median EV-to-EBITDA multiple, including Canopy Growth (WEED), Tilray (TLRY), and Cronos Group (CRON), started moving higher in January. As of January 31, the forward EV-to-EBITDA multiple was ~17.7x compared to the low point of 10.2x in December. Aphria’s (APHA) valuation multiple was at 13.8x, which increased from the low of 7.7x in December.
Taking a step back and looking at the broader timeframe, the industry and Aphria continued to look cheap in January. In the past six months, Aphria has traded at a discount to peers’ median. Investors seem to discount Aphria due to uncertainty about its growth. Investors might be penalizing Aphria for being riskier. We think that short sellers challenging Aphria’s recent acquisition might have tilted the valuation lower due to increased risk perception.
Aphria might go higher based on the valuations.