Canadian cannabis producer Aphria (NYSE: APHA) recently reported blowout fourth-quarter results that were wildly celebrated by investors. U.S.-based hemp cannabidiol (CBD) company Charlotte's Web Holdings (OTC: CWBHF) is only a few days away from announcing its latest quarterly results, which should also be very good.
So far this year, Charlotte's Web is the bigger winner between these two cannabis stocks. But which is the smarter pick for long-term investors? Here's what you need to know about how Aphria and Charlotte's Web stack up against each other.
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The case for Aphria
Despite the big jump following its recent quarterly update, Aphria stock still looks cheap relative to its top rivals. If we ranked the five biggest Canadian cannabis producers on market cap versus projected production capacity, Aphria would be the most attractive.
Aphria claims the No. 3 spot among Canadian cannabis producers based on production capacity. It's on track to produce 255,000 kilograms of cannabis per year.
The company also stands out as a top player in international medical cannabis markets. Aphria was one of only three cannabis producers selected by the German government to cultivate cannabis in the country. It was the only licensed producer in Germany granted permission to grow all three strains of medical cannabis approved by German regulators.
Aphria's acquisition of German pharmaceutical and medical cannabis distributor CC Pharma has proven to be a smart move so far. The distribution revenue generated by CC Pharma made a huge positive impact on Aphria's latest financial results.
European medical cannabis markets, especially in Germany, present a big growth opportunity for Aphria. But the company has a significant market at home in Canada, too. The Canadian adult-use recreational marijuana market is poised to expand in October when cannabis derivative products, including vapes and edibles, will become legal.
Aphria interim CEO Irwin Simon said in the company's Q4 conference call that he expects that vapes and concentrates will make up around 30% of total sales in the Canadian adult-use market by 2021. The company appears to be in a great position to capitalize on this new market, especially with its partnership with leading U.S. vaporizer company Pax Labs.
The main question mark for Aphria relates to its strategy for the huge U.S. market. The company can't enter the U.S. marijuana market while marijuana is illegal at the federal level and remain listed on the New York Stock Exchange and Toronto Stock Exchange. But it could potentially jump into the U.S. hemp CBD market. Irwin said in the Q4 call that Aphria is "always looking for opportunities in the U.S., but it needs to be that right opportunity."