Aphria Inc. (NYSE:APHA) isn't the only marijuana stock that's tumbled since adult sales began in Canada, but a 63% loss since Oct. 17 seems a bit extreme. Aphria will soon be capable of producing enough cannabis to fill stadiums, or at least enough to gain a large share of a global market for legal cannabis expected to reach $57 billion by 2027. A recently depressed stock price has attracted some bargain shoppers and investors who missed out on this stock's tremendous run-up earlier this year. Has bad news pressured Aphria shares down to a lower price than they deserve right now? Let's measure reasons for and against adding this former highflier to your portfolio to find out.

Reasons to buy

Aphria's market cap peaked at $3.3 billion on Oct. 17 and has since fallen to just $1.2 billion. That means you can scoop up the shares at around 29 times trailing sales. That's a high multiple, but not entirely unreasonable considering the company's place within Canada's recently legalized adult-use program.

Recreational marijuana sales are expected to approach 6.5 billion Canadian dollars in 2020. Aphria had supply agreements with official distributors in all 10 provinces ahead of the rollout, including an agreement to supply 175,000 kg of cannabis to Emblem Corp. over a five-year period that begins next May. 

Although Canadian consumers have experienced shortages during the early days of Canada's adult-use program, oversupply issues similar to those we've already seen in U.S. states could make it hard for most producers to turn a profit. Compared to its peers, Aphria appears well-poised to avoid losses after reporting an impressive CA$1.83 per gram all-in cost of production for cannabis it sold at CA$8.99 per gram during the three months ended August. 

Aphria expects its licensed production space to expand from 300,000 square feet in October to over 1.1 million square feet in January. Once the company's flagship Aphria One greenhouse is able to run regular crop rotations, the company's production costs could fall again significantly. 

Canada isn't the only country where cannabis is legal. Uruguay began allowing all its adult citizens to purchase marijuana in pharmacies last summer, and neighboring countries have burgeoning medical marijuana programs.

To get a head start on the action heating up down south, Aphria has been expanding aggressively. Most notably, the company acquired LATAM Holdings earlier this year by issuing 15.7 million new shares. This collection of cannabis-related businesses spread throughout the Caribbean and South America could give the company a foothold in several important markets.

Reasons to be nervous

Aphria shares recently crashed after a short-seller accused the company of double-dealing. In a nutshell, investors betting against Aphria claim company insiders purchased dubious Latin American assets that Aphria acquired at a huge markup as part of its LATAM Holdings acquisition. 

This isn't the first time Aphria used hard-earned money provided by investors to acquire businesses at least part-owned by company insiders, and the expenses are taking a toll. Whether recent accusations of rampant, undisclosed double-dealings are true or not, stock dilution is reason enough to be nervous about buying this stock right now. Aphria's outstanding share count has risen 77% in just two years, which means that investors who held the stock that long have seen the company's market cap soar 174%, while the price of their shares rose just 39%. 

Aphria's operations actually lost CA$10 million during the three months ended this August, and staffing dozens of businesses that it now owns around the globe could expand those losses. Also, oversupply issues are almost certainly going to pinch profits in the years ahead, which means investors buying the stock now could end up facing another round of dilution.

Wait for some good news

Aphria recently appointed a special committee to review the questionable LATAM Holdings acquisition. Even if we assume the committee confirms the company's beliefs that it did nothing wrong, bargain shoppers would be much better off waiting for some good news on a fundamental level.

Now that Aphria's market cap has fallen to just $1.1 billion, gaining a large share of the Canadian market could allow the stock to outperform over the long run -- but only if marijuana prices hold up through an oncoming supply glut and the company stops using its own shares like Monopoly money. Right now, those just don't seem like risks worth taking.