Cannabis Stock Climbs on Acquisition Buzz

The potential presidential election outcome is also boosting the cannabis sector

Deputy Editor
Nov 5, 2020 at 10:13 AM
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Cannabis stock Aphria Inc (NASDAQ:APHA) is smoking hot on the charts today, as the sector enjoys a boost from former Vice President Joe Biden's Presidential election race. Furthermore, the Canada-based pot company plans to buy SweetWater Brewing Company for $300 million, allowing it to distribute its "420" beverages in Canada as it looks to expand to the U.S. APHA is currently up 9% to trade at $5.42.  

Today, Aphria stock is trading at levels not seen since the mid-October bear gap following its annual high. Now eyeing its first weekly gain in four weeks, the equity just surpassed its year-to-date breakeven mark. 

The brokerage bunch is already on board, with all nine analysts in coverage sporting a "buy" or better rating on the stock. Meanwhile, the 12-month consensus price target of $5.30 holds a slight premium to last night's close, and now a slight discount. 

The options pits are of similar sentiment, with 16.23 calls bought for every put in the last 10 weeks at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio stands higher than 87% of readings from the past 12 months, revealing a strong penchant for long calls as of late. 

However, some of this call buying could be shorts hedging, and it's at least worth noting that the 32.86 million shares sold short make up 11.4% of the stock's available float. In other words, it would take over five days to buy back these bearish bets, at APHA's average pace of trading. 

Lastly, now looks like a good time to weigh in on Aphria stock's next move with options, per the security's Schaeffer's Volatility Index (SVI) of 82%, which sits in the 18th percentile of all other annual readings. In simpler terms, this means the stock sports attractively priced premiums at the moment.

 

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