Aphria revenue estimates lowered by Stifel ahead of Q3 earnings on weak cannabis consumption trends

Stifel analysts lowered their fiscal third-quarter revenue estimates for Canadian cannabis company Aphria Inc. on Tuesday ahead of their release next Monday, putting their revenue and EBITDA forecasts below consensus. Analysts led by W. Andrew Carter said they now expect Canadian adult use shipment revenue to fall from the second quarter, due to weaker consumption trends and provincial inventory reduction/rationalization impacting shipments. "Amid renewed excitement for the cannabis sector yielding disproportionate gains for U.S. listed Canadian producers during 1Q21 (+98%, S&P 500 +6%), we believe valuations overall are incognizant of the market's structural challenges and near-term headwinds likely to pressure 1Q21 results," the analysts wrote in a note to clients. "Our focus remains on the pending merger with Tilray with our hold rating balancing our enthusiasm for the combined vehicle's robust growth prospects against more challenging near-term results with execution/integration critical to the platform's long-term success." Stifel rates Aphria and Tilray at hold. It raised its stock target price for Aphria to C$22.00 ($17.50) from C$15.50, or just below its closing price Monday of C$22.79. Stifel is now expecting Aphria to post revenue of C$163 million, from from a prior forecast of C$175 million. Aphria shares have gained 159% in the year to date, swept up in a broad-based rally driven by hopes for a relaxing of U.S. cannabis rules. Tilray is up 167% in the period. The Cannabis ETF has gained 58% and the S&P 500 has gained 8.6%.

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