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We could talk about a match between Aphria Inc. (NASDAQOTH: APHQF) and Constellation Brands, Inc. (NYSE: STZ) as a marijuana player against a marijuana payer.
Aphria is one of the best cannabis producers in Canada, a pure marijuana stock, if it is one. Large alcoholic beverage maker Constellation Brands dipped last year into the water of the cannabis sector by buying a 9.9% stake. Cover growth (NYSE: CGC). And Constellation plunged into the water in August with another $ 4 billion investment in Canopy.
But which of these two titles is the best buy for long-term investors? Here's how Aphria and Constellation Brands compare.
The case of Aphria
Why should investors consider Aphria? The global marijuana industry is growing like a weed. It's puny but true. And Aphria could be one of the main beneficiaries of this growth.
Aphria is demanding all the ingredients it needs to succeed in the Canadian market for recreational marijuana, which will open on October 17th. The company certainly has a large production capacity, with other projects coming soon. Aphria expects to be able to produce 255,000 kilograms of cannabis each year by next year.
It also has the distribution channels necessary to succeed. Aphria has signed supply agreements for the marijuana market for recreational purposes with the 10 Canadian provinces as well as the Yukon Territory. The company has selected Great North Distributors, a subsidiary of the largest distributor of wines and spirits in North America, Southern Glazer & # 39; s, as a distribution partner for its recreational cannabis products.
The biggest opportunity for Aphria however lies in the international marijuana markets. The acquisition of Nuuvera by Aphria earlier this year gives it a strong presence in several countries that have legalized marijuana for medical purposes. The company has expressed confidence in its prospects in these markets, particularly in Germany, which boasts the largest marijuana market outside of North America.
For now, Aphria can not expand on the largest marijuana market – the United States. The company began operations in the United States last year, but violated the Toronto Stock Exchange's listing requirements, which prohibit cannabis producers from operating in markets where Marijuana is illegal at the federal level. But it is possible that US federal laws will be revised to allow Aphria to expand into the market of its southern neighbor.
There is also a real chance that Aphria associates with a large company outside of the cannabis industry. The most recent rumor is that the tobacco giant Altria Group speaks with Aphria about a potential deal. Aphria has also been considered one of the best candidates for a partnership with the Guinness butter manufacturer Diageo.
The case of Constellation Brands
At the same time, Constellation Brands' revenues over the past 12 months have been more than double the total market capitalization of Aphria. Better still, Constellation's revenues and profits continue to grow.
The company has announced revenue growth of 10% over the second quarter. Adjusted earnings per share jumped 16% year-over-year. Constellation continues to benefit from strong growth in its beer-based products, particularly Corona and Modelo.
Constellation is expected to see more positive results for its beer brands. The launch of Corona Premier has been fantastic. This is the first major addition to the Corona line for nearly three decades and is already ranked as the top premium imported beer brand in the United States.
What about the big Constellation gamble on marijuana? Chief Executive Officer Rob Sands said at the company's second quarter teleconference that "the emerging cannabis space is potentially one of the most significant global growth opportunities of the next decade." ". The initial investment of Constellation in Canopy Growth last year has already generated a huge comeback.
If the cannabis market takes off as the Constellation management thinks, Canopy could become the next big growth engine for the liquor giant. The two companies plan to launch a variety of cannabis-infused beverages when Canadian regulations on these products are finalized, which should be next year.
In addition to its growth prospects, Constellation offers an additional benefit to investors. The company's dividend currently yields 1.33%. Even if it is not a very high performance, it should increase the total yield of Constellation long term.
Better buy
Aphria is one of my favorite Canadian marijuana stocks. I like the low cost structure of the company. I like his overall strategy. And, even though Aphria's stock is certainly not cheap, it's a better deal than most of her peers.
But if I could own one of these two companies (and that's really what it's like to buy an action), it would be Constellation Brands. Aphria hopes to generate billions of dollars in revenue and revenue. Constellation already does it.
I also think that Constellation's bet on Canopy Growth could pay off in the long run. It would not surprise me if Constellation exercises its option to increase its stake in Canopy to more than 50% over the next few years.
For investors looking for a strong, well-established company that offers the opportunity to capitalize on the marijuana boom, Constellation Brands seems like a good choice, in my opinion. This marijuana payer could become a real marijuana player.
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Keith Speights does not own any of the shares mentioned. The Motley Fool recommends Diageo. Motley Fool has a disclosure policy.
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