Could it be? A Canadian cannabis producer tracking towards consistent profitability with confidence it can deliver strong sales without a bunch of new pot shops opening?

Jefferies analyst Owen Bennett is convinced Aphria (APHA.TO)(APHA) can pull it off following a meeting with the Leamington, Ont.-based company’s chief financial officer, Carl Merton, last week.

“You want to be in a name with all or some combination of near-term profitability, relatively healthy cash levels, execution evidence, [and] brands that are selling through,” he wrote in a note to clients last Friday. “Aphria ticks all boxes.”

The company reported its second-consecutive profitable quarter on Oct. 15, weeks before several of its larger peers would disappoint investors with lacklustre financial results amid complaints of sparse retail outlets in Ontario.

Interim CEO Irwin Simon told analysts on the post-earnings conference call that Aphria’s results “truly set us apart from our peers in the adult-use cannabis industry.”

In its outlook, Aphria reaffirmed its guidance for net revenue of about $650 million to $700 million in its 2020 financial year.

“The company is confident in hitting sales guidance, and it doesn’t require a material uplift in store trajectory,” Bennett wrote.

The slow pace of cannabis store openings in Ontario was the source of widespread frustration as the largest companies in the sector reported quarterly results in recent weeks. Bennett said he is encouraged that Aphria does not “model aggressively” with its expectation of 40 stores in the first three or four months of 2020. Canopy Growth (WEED.TO)(CGC), by contrast, based its models on 40 new stores per month beginning in 2020. The province currently has 25 brick-and-mortar stores.

Merton claims Aphria’s market share in Ontario has increased to 12 per cent from six per cent last year.

‘Not seeing issues reported by others’

Several analysts have warned that sales to provincial warehouses will be under pressure due to big orders placed to shore up supply in the months immediately after legalization.

Bennett is convinced Aphria is “not seeing issues reported by others,” in part because it was slower to ramp up production, limiting its ability to stuff sales channels early on.

Raising cash is expected to be another major challenge for the sector, especially given the decline of high-flying shares that previously allowed companies to easily access new debt.

Aphria ended its most recent quarter with $464.3 million of cash and cash equivalents on its balance sheet. Bennett said Merton believes “50 per cent of the industry could disappear in the next 12 months” given a lack of funding.

“They raised a significant amount of debt in better times with worries cash could dry up,” he wrote. “This still sits on the balance sheet - the third highest cash balance in the industry.”

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