Robinhood investors especially like high-flying stocks. It's not surprising, therefore, that Ocugen (OCGN -5.60%) and Aphria (APHA) rank in the top 100 most widely held stocks among Robinhood investors. Ocugen's shares have soared more than 500% year to date, while Aphria has more than doubled.
However, just because a stock has delivered huge returns in the past doesn't mean that it will continue to do so in the future. Which of these popular Robinhood stocks is the better pick going forward? Here's how Ocugen and Aphria stack up against each other.
Image source: Getty Images.
The case for Ocugen
A partnership with India-based drugmaker Bharat Biotech pushed Ocugen into the limelight near the end of 2020. Bharat's COVID-19 vaccine, Covaxin, is already authorized for use in India. The company teamed up with Ocugen in the hopes of bringing the vaccine to the U.S. market.
Bharat recently reported really good results from a second interim analysis of a late-stage study of Covaxin conducted in India. The vaccine achieved 78% overall efficacy against COVID-19, with 100% efficacy against severe cases of the disease.
Ocugen hopes that the U.S. Food and Drug Administration (FDA) will allow it to use this data as the basis of its filing for Emergency Use Authorization (EUA). It remains to be seen, however, if the FDA will grant Ocugen's wishes or require the company to conduct a pivotal phase 3 study in the U.S.
Assuming Covaxin wins U.S. EUA, the key hurdle for Ocugen will be to secure a supply agreement. If it can do so, the small biotech could have some big dollar signs in its future. Under its deal with Bharat, Ocugen will receive 45% of any profits from U.S. sales of the COVID-19 vaccine.
While Covaxin is the big story for Ocugen, the company also is developing gene therapies targeting eye diseases. It plans to kick off four phase 1/2 studies in 2021 and 2022 of lead candidate OCU400 assuming it obtains permission from the FDA.
The case for Aphria
Aphria currently ranks as one of the leading Canadian cannabis producers. Soon, though, it should move into the top spot to become the biggest cannabis company in the world based on revenue. This promotion will happen once Aphria's merger with Tilray (TLRY) closes.
The new entity following the merger will use the Tilray name. Make no mistake about it, though: Aphria is the dominant player in the deal.
Aphria led the industry in cannabis sales in Alberta and Ontario in its latest quarter. It also moved into the No. 2 spot in Quebec. After the Tilray merger wraps up, the company will claim the leading market share nationwide in Canada's cannabis market.
Looking beyond Canada, Aphria should be in an even stronger position in Europe after the Tilray transaction closes. Aphria's CC Pharma unit is a leading cannabis distributor in the region, especially in the German medical marijuana market. Tilray has a large cannabis production facility in Portugal.
Canadian marijuana stocks can't retain their listings on major U.S. stock exchanges and operate in the U.S. cannabis market as long as marijuana remains illegal at the federal level. However, many investors hope that cannabis reform will change the status quo, clearing the way for Aphria to expand into the U.S.
The company already owns Sweetwater Brewing, a U.S. craft beer maker that focuses on the cannabis lifestyle. Tilray's Manitoba Harvest is a top hemp foods maker with a significant U.S. presence. Aphria thinks that these businesses could give it a solid launchpad to move into the U.S. cannabis market once it's federally permissible.
Better Robinhood stock?
Aphria already generates hundreds of millions of dollars of revenue on an annual basis. Its revenue should approach $700 million after the Tilray merger is completed. Although the company isn't consistently profitable, Aphria has delivered eight consecutive quarters of positive adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA).
On the other hand, Ocugen's only revenue comes from collaborations. It continues to post big net losses. That situation would improve significantly if Covaxin is authorized in the U.S. and wins a major supply deal. However, there's a real risk that won't happen, at least not in the near term.
My view is that Aphria is the less risky choice between these two Robinhood stocks. However, I don't think that it's a great pick for investors at this point. There are simply too many challenges in Canada and too many even better cannabis stocks (particularly in the U.S.) to buy Aphria right now.
