Like most other cannabis stocks, Aphria (NYSE: APHA) stock has taken it on the chin recently. In the past three months, Aphria stock is down more than 27% to under $5 per share.

However, Cantor Fitzgerald analyst Pablo Zuanic says the Aphria dip may be a buying opportunity for patient investors.

After recently meeting with Aphria management, Zuanic says there are plenty of reasons to be optimistic about the outlook for Aphria stock.

Here are five reasons to buy APHA stock today.

1. Achievable Sales Guidance

One of the biggest problems for cannabis stocks in recent months has been their inability to hit their guidance targets. Aphria management has previously guided for full-year fiscal 2020 revenue of between CAD$650 million and CAD$700 million.

Zuanic estimates CAD$400 million of that revenue should come from the company’s German distribution business. That leaves between CAD$250 million and CAD$300 million in Canadian cannabis revenue needed to hit its guidance target.

Zuanic estimates Aphria will need to roughly double its May quarter 2019 revenue of 30 million CAD to hit the low end of its guidance. Cantor is projecting Aphria will generate about CAD$150 million in cannabis sales for the full fiscal year. Consensus Wall Street estimates are calling for CAD$210 million, which is also well short of company guidance. Aphria seems convinced that its guidance is achievable, which would be a major surprise to Wall Street and a potentially huge bullish catalyst for APHA stock.

2. Merger and Acquisition Opportunities

Aphria management says Aphria and OrganiGram (NASDAQ: OGI) are the two lowest-cost producers. In addition, Aphria says there is a shortage of high-quality flower in the Canadian market.

Aphria management says current Canadian production capacity estimates for the coming years are too high given the number of cannabis producers that will not survive.

“It expects the industry to consolidate (bankruptcies) and thinks given its [balance sheet] it is well-positioned to benefit and opportunistically acquire assets such as brands, contracts, medical/science platforms, among others,” Zuanic says.

A difficult environment allows companies with cash to spend (like Aphria) to cherry-pick buyouts of smaller companies that are struggling.

3. Overseas Growth Potential

Many Canadian cannabis investors are focusing primarily on the Canadian and U.S. markets. However, Zuanic says overseas expansion could be a bullish catalyst for Aphria stock.

Aphria is slated to begin production in Germany by the end of 2020. The company was awarded the right to grow one ton per year in Germany. Aphria estimates German demand is already five times the total production capacity awarded to Aphria and other initial German producers. That supply-demand imbalance bodes well for German pricing.

In addition, Aphria should benefit from infrastructure the company is building in other parts of Europe and Latin America as well, Zuanic says.

4. U.S. Election Season

Cannabis is already shaping up to be a core issue in the U.S. 2020 election. Recent polls suggest roughly two-thirds of all American voters and even 55% of Republicans are in favor of federal cannabis legalization. Clearly cannabis could be a critical issue for swing voters.

There are already multiple bills in the House of Representatives that would potentially open the flood gates for the U.S. cannabis market. The Secure and Fair Enforcement (SAFE) Banking Act would protect cannabis companies operating in states where marijuana has been legalized.

In addition, the Marijuana Opportunity, Reinvestment and Expungement (MORE) Act would legalize recreational cannabis on a federal level and expunge previous marijuana-related convictions. Regardless of whether the bills become law, positive dialogue on legalization should improve cannabis investor sentiment, Zuanic says.

5. Aphria Stock Valuation

Finally, Zuanic says Aphria is trading at a compelling valuation relative to its peer group. Zuanic estimates Aphria’s core cannabis business is valued at about 14 times last quarter’s annualized sales.

That valuation is slightly above the roughly 12.5 average multiple of Aphria’s largest peers. However, Zuanic says Aphria’s guidance implies much better growth potential. In other words, Aphria stock price could see upside even if its valuation multiple remains steady.

All the cannabis stocks are pricey based on their current businesses. But APHA stock is currently trading at just around 10.3 times Cantor’s fiscal 2024 EPS estimate.

How to Play APHA Stock

Cantor Fitzgerald has an “overweight” rating and $7.88 price target for APHA stock. That target suggests nearly 70% upside from current levels.

I hesitate to place a price target or a timeline on such an unpredictable stock. But I am generally bullish on cannabis, and Aphria stock is no exception.

But I would recommend not going all-in on APHA stock or any other cannabis play just yet. Instead, I have been suggesting cannabis bulls buy a basket of their four or five favorite picks and diversify their holdings.

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