Marijuana stocks have been volatile of late, but Clarus Securities analyst Noel Atkinson thinks there is real value in Aphria (Aphria Stock Quote, Chart, News: TSX:APH).

On Wednesday, Aphria reported its Q2, 2017 results. The company eaned (U.S.) $6.45-million on revenue of $8.50-million, a topline that was up 63 per cent over the same period last year.

“We closed the quarter with strong top-line gains — revenue and kilograms sold reached record highs and we moved closer to our increased our production capacity expectations,” said CEO Vic Neufeld. “With a growing product mix and patient base from both new and exsiting clients, we continue to affirm our positon as a strong Canadian market leader as we remain focused on executing our strategy to drive sustainable growth and shareholder value. Looking ahead, we continue to explore strategic opportunities and partnerships to extend the Aphria brand and our product offerings in both the medical and adult-use marketplace. With our four-part facility expansion on schedule to be completed with first sales by January, 2019, we are in a enviable position to aptly supply Canadian and international markets with high-quality cannabis to meet the growing global demand. As a well-capitalized company, we have the expertise, leadership and drive to extend our footprint and the Aphria know-how system around the world.”

Atkinson says these quarterly results were not as substantive as certain other developments.

“Give that the Company is ramping capacity from 9,000 kg/year to 220,000 kg/year within the next 12 months, we believe the most substantial update yesterday was management’s outlook on demand for that capacity. Aphria revealed it is in discussions with at least four provinces for rec cannabis wholesale supply agreements,” the analyst says. “It appears the provinces have been asking for substantial supply volume guarantees, which reinforces our expectation that (a) the provinces would prefer to use a few primary suppliers under large-quantity contracts rather than spread orders around widely, and (b) the provinces have robust demand expectations. We continue to believe there will only be 2-3 big winners of provincial contracts nationwide (with Aphria being one of those big winners) along with a small handful of LPs that win a more modest share of total provincial contracts – while most LPs will win none at all.”

In a research update to clients Thursday, Atkinson maintained his “Buy” rating and one-year price target of $25.25 on Aphria, implying a return of 12 per cent at the time of publication.

Atkinson thinks Aphria will generate Adjusted EBITDA of $6.1-million on revenue of $20.4-million in fiscal 2017. He expects those numbers will improve to EBITDA of $9.5-million on a topline of $40.1-million the following year.

Shares of Aphria closed Friday down $12.3 per cent to $18.02.