Why Aphria’s marijuana stock plunged on Thursday

What happened

A day after making the most shocking announcement in its history, the Canadian marijuana company Aphria (NASDAQ: APHA) saw its stock close 5.5% lower on Thursday. It was quite the comedown from top of his Wednesday news that he did indeed acquire a rival, Tilray (NASDAQ: TLRY), to create the largest cannabis company in the world. A leading analyst chilled on Aphria after the announcement.

So what

Stifel Financial prognosticator Andrew Carter cut his recommendation on Aprilia shares on Thursday; it now rates them a hold, from the previous purchase. In doing so, however, he raised his target price on the share to 9.90 Canadian dollars ($ 7.77); it was previously CA $ 8.25 ($ 6.48).

In her note to investors, the analyst wrote that “Aphria has managed to achieve a leading position in the Canadian adult use market organically, and we question the opportunity cost of capital / band management pass to undertake this acquisition.

“We believe stocks will likely remain in a short-term holding pattern as investors gain confidence in the long-term potential of the combined platform,” he added.

Now what

That in itself shouldn’t deter marijuana stock investors; they are a robust bunch used to negative press / analysis.

Specifically, they generally accept that the cannabis business is a long-term game given its many challenges (regulatory bottlenecks, black market competition, legal status of weed, etc.). Tilray 2.0, with today’s Aphria in the lead, will be a well-diversified company (hopefully) able to take advantage of economies of scale.