2021 is already proving to be a great year for the cannabis industry and Canada has been one of the greatest beneficiaries of this.
So far this year, the merger between Aphria (APHA.TO) (APHA) and Tilray (TLRY) has been one of the most highly discussed topics and investors have been piling into each Canadian Licensed Producer (LP).
In January, Tilray and Aphria were two of the top performing cannabis stocks and the trend has continued into February. Currently, both companies are trading at overbought levels (based on the relative strength index) and we are closely following the trend from here.
We believe the increased interest in both operators is related to the strength of the combined company. We are of the opinion that the combined company will compete with Canopy Growth Corp. (WEED.TO) (CGC) and are bullish on the growth prospects that are associated with it.
The combined company will have a leadership position in several burgeoning international markets, and we consider this to be one of the most exciting aspects of the transaction. Although Tilray and Aphria are both Canadian LPs, the businesses are focused on different aspects of the cannabis value chain and consider this to be an important aspect of the story.
During the last month, Tilray has reported significant announcement as it relates to the cannabis opportunity in the European Union (EU) and we believe this has played an important role in the recent rally. We believe the EU cannabis market is attractive due to the size of it and the economics that are associated with it. When compared to North America, the cost of medical cannabis is much higher in the EU and we attribute this to the market being much less saturated.
Last month, Tilray was selected to participate in a French medical cannabis experiment. A few weeks later, the company received the necessary approvals and market authorization to offer branded medical cannabis products in Portugal. We are favorable on these developments and believe that it is a testament to the strength of Tilray’s medical cannabis business.
Aphria also has attractive leverage to the EU cannabis market and has been highly focused on the opportunity in Germany. The company has substantial distribution capabilities in Germany (and in the EU) and we expect this aspect of the story to play an important role in the growth of the combined company.
Going forward, we will monitor how Tilray and Aphria continue to perform and expect to see leading broker-dealers change their respective price targets on both operators. Following the closing of the acquisition, we expect to see a relatively seamless integration process, and this is a story that our readers need to be aware of.
If you are interested in learning more about the growth prospects that are associated with the combined company, please send an email to email@example.com with the subject “Aphria and Tilray” to be added to our distribution list.