The legal marijuana industry has hit a crossroads. The inherent structural weaknesses in the Canadian market -- such as too few retail locations per province -- have wrecked havoc on quarterly earnings reports in the latter half of 2019, as well as earnings forecasts for 2020. These regulatory roadblocks, in turn, are already starting to separate the contenders from the pretenders. 

This population bottleneck, if you will, offers investors a truly compelling opportunity right now. The big-picture issue is that the handful of names that survive the industry's rather volatile infancy should prove to be tremendous wealth generators for early-bird investors. It's quite possible, in fact, that the elite few left standing once the dust settles could transform an initial investment of $10,000 into a million-dollar payday by the end of the next decade. 

Bags of money against a green backdrop.

Image source: Getty Images.

Which pot stocks have what it takes? Aphria (APHA) is one major Canadian marijuana cultivator that could conceivably cross the Rubicon and go on to become a titan of the legal marijuana industry. Here's what investors need to know.  

Aphria's strengths and weaknesses

Aphria has three well-defined value drivers

  1. It's the third largest cultivator in Canada in terms of fully funded production capacity.
  2. The company has a sizable footprint in Germany through its subsidiary CC Pharma.
  3. Aphria owns one of the most highly coveted brands in Vancouver Island's Broken Coast. 

As a bonus, Aphria's shares are also trading at a steep discount relative to the other big-name Canadian licensed producers. So there's a lot to like about this pot stock as a potential long-term investing vehicle. 

That said, there are a few big knocks against Aphria. Chief among them, the company's Latin American asset scandal has raised serious concerns about its corporate culture. While Aphria has quieted some of its main critics by taking positive steps to allay these fears, it's arguably going to take more than two profitable quarters in a row to completely shake off the criticism. 

Time to buy? 

Aphria definitely has the means to remain in the game for the long haul. That much is evident at this point. What's not clear is whether Aphria will remain an independent entity during the industry's maturation phase.

The crux is that Aphria may not be able to compete toe-to-toe against the likes of Aurora Cannabis or Canopy Growth if the Canadian cannabis market does begin to suffer from oversupply and international markets fail to open up quickly enough to absorb the overflow. After all, Aurora and Canopy both sport several operational advantages (economy of scale, vertical and horizontal bandwidth, etc.) over Aphria. That means that Aphria might end up as a second-tier player within a field dominated by a small handful of giants. 

So there's a solid rationale to think Aphria's management may choose to sell the company soon to maximize shareholder value. That wouldn't necessarily be a bad outcome for current shareholders, but it would almost certainly fall well shy of a million-dollar payday. 

What this all boils down to is that Aphria clearly needs to go big-game hunting to level the playing field against its chief Canadian rivals, Aurora and Canopy. The acquisition of a high-end cannabis retailer in America, for instance, would go a long way toward securing a spot for the company in the pantheon of big weed. Such a bold move, in turn, would greatly enhance its potential as a possible millionaire-maker stock.