A report that tobacco giant Altria Group Inc. (MO) might be keen to buy a stake in marijuana firm Aphria Inc. (APH) has sparked conflicting views from analysts about the benefits of companies expanding their businesses.
In a research note, published shortly after Aphria dismissed claims that it had signed a deal with the holding company of Philip Morris USA, Stifel’s Christopher Growe wrote that tobacco companies have been wise to avoid investing in Canadian pot producers.
According to Barron’s, the analyst said that leading marijuana companies are too expensive, trading on an aggregate enterprise value of around $60 billion Canadian dollars, even though their addressable market will be worth just $5 billion Canadian dollars when recreational cannabis becomes legal in Canada Oct. 17. Growe also repeated Philip Morris International Inc.’s (PM) warning about the potential “reputational risk” of entering the marijuana sector.
Bull Versus Bear
Citron Research reached a different conclusion. In a