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Canada now has a third pot stock worth more than $2-billion

Some of Aphria's medical marijuana plants grow in their greenhouse in Leamington, Ontario, May 26, 2014.

GEOFF ROBINS/The Globe and Mail

There's another cannabis stock that has breached the $2-billion mark in market capitalization.

Shares of grower Aphria Inc. soared 16 per cent and to new highs on Tuesday, closing at $13.53. The rally pushed Aphria's market cap to just over $2-billion. The Leamington, Ont.-based company is joining the likes of Canopy Growth Corp. and Aurora Cannabis Inc., whose stocks are worth $3.6-billion and $3-billion, respectively.

Investors piled into Aphria's stock a day after the company said it will supply Canada's largest pharmacy chain with medical marijuana.

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The deal will see Aphria supply both dried bud and oils to Shoppers Drug Mart, which is owned by retailer Loblaw Cos. Ltd. Shoppers is looking to sell the drug to patients through an online portal and has applied to Health Canada for a license to do so. By law, the drug can be distributed to users through the mail.

The tie-up with Aphria is a sign that larger retailers want to sell medical marijuana, meaning that patients may soon have greater access to the drug. One analyst called the deal "a watershed moment for the industry." Another said that it is "a major milestone for Aphria and for the sector at large."

Aphria has seen the value of its shares more than double since mid-October amid a frenzy around pot stocks.

Many analysts who cover Aphria have raised their 12-month target price for the stock, pushing the average price from a little over $10 a share to just over $13, which is still below Tuesday's closing price of $13.53. Seven analysts have rated the company's stock a buy. One analyst says it's a hold.

Canada's legal cannabis market is young but growing up fast. The last watershed moment for the industry came in October after alcohol giant Constellation Brands Inc. acquired a stake in Canopy, the largest publicly traded marijuana company.

The entrance of big companies such as Constellation and Shoppers made a splash and may help begin to erase some of the stigma still associated with cannabis.

To date, pharmacists have not been integrated in Canada's regulatory regime for medical cannabis. This is why Shoppers has to be granted a license before it can sell the drug. Other retailers, such as Metro Inc., have said they would sell the drug to patients if they are permitted to do so by law.

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Andrew Willis: Why you shouldn't buy into the pot boom and bust (The Globe and Mail)
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About the Author
Capital Markets Reporter

Christina Pellegrini is a reporter at The Globe and Mail and a regular contributor to Streetwise, covering capital markets, the exchange business and market structure.She writes about the capital markets divisions of BMO, CIBC and National Bank; independent brokerages such as Canaccord Genuity; and the Canadian operations of foreign dealers including JP Morgan, Goldman Sachs, Credit Suisse and Citigroup. More

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