Aphria’s (TSX:APH) U.S. expansion strategy is a positive, but is not yet enough to move the needle on a stock that is looking fully valued, says Canaccord Genuity analyst Matt Bottomley.

Yesterday, Aphria announced that as part of a newly launched U.S. expansion, it would invest $25-million into a new special purpose private company that would raise an additional $35-million and acquire Chestnut Hill Tree Farm LLC, a licensed holder in the state of Florida, as an authorized dispensing organization of low-THC (tetrahydrocannabinol) medical cannabis to patients in need. The resultant company will list on the CSE.

“Aphria’s success story is no longer limited to Canada,” said CEO Vic Neufeld. “Aphria’s footprint expansion provides significant growth opportunities for our shareholders. The royalty agreement provides an additional cash flow stream to our industry-leading cash flow from operations. The additional equity received for our intellectual property continues the validation of our greenhouse model. We will continue to examine other U.S. opportunities and strive to introduce new states to Liberty’s business model.”

Bottomley says he believes Aphria deserves to be valued at a premium to peers because of its funded capacity. And while he views the U.S. expansion as a positive he says that at 13.1x its funded capacity versus the peer average of 9.1x, he sees the stock as currently fully valued.

“After recently increasing its ownership interest in Copperstate Farms (an Arizona-based medical cannabis cultivator), this transaction further diversifies Aphria’s US exposure to a market that is expected to experience significant near-term growth after recently legalizing medical cannabis,” says the analyst. “We believe as the opportunity set in the US continues to grow, Canadian LPs will be primed to invest in US operators that will likely want to leverage the technical proficiency and know-how accumulated as a result of the robust regulatory framework found in Canada.”

In a research update to clients today, Bottomley maintained his “Hold” rating and one-year price target of $6.50 on Aphria, implying a return of negative 5.2 per cent at the time of publication.

Bottomley thinks Aphria will generate EBITDA of $4.2-million on revenue of $20-million in fiscal 2017. He expects these numbers will improve to EBITDA of $19.0-million on a topline of $58-million the following year.