Desirable Branding Distinguishes Aphria Stock

In a sea of sameness, APHA offers a compelling fresh take

Not only is the cannabis market volatile, it can be incredibly bizarre. Consider the strange case of Aphria (NYSE:APHA). Like other sector heavyweights like Canopy Growth (NYSE:CGC) and Cronos Group (NASDAQ:CRON), Aphria stock skyrocketed off the potential of Canadian marijuana legalization. However, shares crumbled ahead of everyone else when short-seller Hindenburg Research blasted the underlying company.

In fact, Hindenburg notably labeled APHA stock as “a shell game with a cannabis business on the side.” Subsequently, management hired independent investigators to deep dive the company’s financials and business dealings. Investors also did the same from the comfort of their office chairs. Eventually, the heat faded, but not without forcing a change in executive leadership.

Today, Aphria stock is one of the most stable cannabis investments. Of course, I meant that in a relative sense. More accurately, APHA is one of the least bad of bad options.

For some folks, that still translates to an undesirable position. Unfortunately, I must concede this perspective makes logical sense. However, it’s important to note that from a year-to-date basis, the volatility in APHA stock isn’t unreasonable against peer comparisons.

For instance, APHA has shed 13% YTD. That’s not bad at all compared to CRON, which has dropped 33% YTD, or CGC, down 21%.

More importantly, Aphria stock is backed by substantive fiscal results. On an adjusted basis, the company is actually profitable, albeit barely. Still, that’s a lot more than other cannabis players can say.

Recall that earlier this year, Wall Street largely gave up on the sector as company after company failed to deliver hard numbers. Basically, the time for cute narratives was over. But only Aphria was putting meat on the table.

Brand Catalyst for Aphria Stock

As I mentioned a few times before, growing marijuana isn’t rocket science. That doesn’t mean that just anyone can start growing weed: you must have a modicum of discipline to make the good stuff, not that I would know or anything.

And while the legal marijuana discourse often centers on production capacity, that’s not the only thing that matters. With legalization, industry players must compete on a variety of levels, including price, potency and branding. Those companies that can differentiate themselves from the green muck stand a better chance of recovery.

However, because we’re still stuck in the production mentality, investments like APHA stock have been caught in the downdraft. Furthermore, the Canadian market has suffered an obscene amount of administrative delays. Even if ready cannabis firms want to roll out their products, the various backlogs have severely stymied progress.

The counterpoint, though, is that these are now known issues. Once these administrative backlogs work themselves out, Aphria stock enjoys a distinctive competitive advantage: desirable premium brands, as evidenced by its adult-use pricing increases.

Weed is weed, until apparently you try Aphria’s brands of potent and delectable marijuana products. Seasoned botanical experts recognize that not all marijuana-infused solutions. In fact, depending on the ratio of key cannabinoids like tetrahydrocannabinol (THC) and cannabidiol (CBD), similar-looking products can lever drastically different experiences.

Again, while I have zero experience in this arena, the essential oils (or terpenes) of particular cannabis strains can also impart various outcomes. For instance, some cannabis products may stimulate the sense while others soothe and relax.

In other words, those who are viewing Aphria stock strictly in terms of production capacity are missing the bigger picture. Yes, the numbers are important, but anybody can produce weed. Not everyone, though, can generate a compelling brand.

Viable Long-Term Narrative

Invariably, all cannabis stocks are banking on the ultimate, long-term payoff: global legalization trends, specifically the U.S.

Naturally, InvestorPlace analysts have various opinions about the possibility of U.S. legalization. In my view, I believe circumstances are pulling favorably for embattled entities like APHA stock. According to recent data from the Pew Research Center, 67% of Americans now support marijuana legalization.

While political holdouts against legalization remain, it’s becoming riskier to adopt this view.

Still, U.S. legalization is a tricky matter. That’s why if you’re pessimistic about this storyline, you should consider Aphria stock. APHA has a strong foothold in the German botanical market.

Not only that, the German government may welcome legalization. Due to various social and political shifts in the European powerhouse, the country has many problems, including terrorism. With marijuana legalization, German law enforcement agencies can tackle bigger problems than Dietrich lighting up a joint.

That said, you should consider all cannabis stocks as risky ventures. If you have trouble controlling your blood pressure, Aphria stock is not for you. But if you don’t mind the risks, APHA is a little more than merely the least bad option.

As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.