Aphria Inc. surged as much as 34 per cent Friday after the pot producer beat expectations on virtually all metrics. Analysts were particularly impressed with the 85 per cent quarter-over-quarter jump in net cannabis revenue after the company had guided to flat performance.

However, analysts are split on whether Aphria’s turnaround is sustainable. Challenges remain, including an ongoing ramp-up of production facilities, lumpy pot orders, marketing constraints and guidance for the current fiscal year that’s reliant on second-half performance.

Aphria climbed 27 per cent as of 9:40 a.m. in Toronto, it’s biggest gain this year.

Here’s what analysts are saying:

Canaccord Genuity, Matt Bottomley

Aphria’s fiscal fourth quarter shows that there’s potential for a “significant valuation re-rating” if it can continue to execute.

Bottomley was “pleasantly surprised” by the solid rebound in cannabis revenues, as well as the incremental improvement in adjusted gross margin as a result of improved packaging and distribution operations.

“Although we were discouraged in the previous quarter, we believe Aphria’s strong FQ4 indicates that the company is still competing for a top-three spot in the Canadian cannabis market.”

Maintains speculative buy rating, $16 price target.

BMO Capital Markets, Tamy Chen

Although the results were a “notable turnaround” from the prior quarter, it’s difficult to fully assess how sustainable it will be given the ongoing ramp-up of facilities and lumpy provincial pot orders.

Chen calculates that industry-wide recreational pot sell-in volumes rose 52 per cent during Aphria’s fiscal fourth quarter, while Aphria’s volumes grew almost threefold, giving it a market share of 8.8 per cent.

Maintains market perform rating, $10 price target.

GMP, Justin Keywood

Results show Aphria “is executing on a plan to significantly improve how it operates, while expanding rapidly.” Believes Aphria could be an industry leader, but valuation remains below its peers.

GMP recently spoke to a government contact at the distribution level and a partner of Aphria, and “received very positive feedback.” Product quality was mentioned as “one of the best”, and contacts said Aphria “has greatly improved operationally” and made strong efforts to improve relationships with its partners and distributors.

Maintains buy rating and $14 price target.

CIBC, John Zamparo

Aphria’s solid results don’t alter Zamparo’s view that advertising constraints will limit industry growth, that Aphria’s fiscal 2020 guidance is “very reliant” on second-half performance, and that consensus estimates for fiscal 2021 “remain aggressive.”

“Aphria can credibly claim it has one of the largest production footprints in the industry, as well as one of the strongest brands” with Broken Coast, but market constraints may limit industry growth and “uncertainty on performance remains.”

Reiterates underperform rating, raises price target to $7 from $6.50.