Aurora Cannabis Inc. (ACB - Get Rating) is a Canadian producer of medical and adult-use cannabis products. 

The company was founded in 2013 and has sales and operations in 18 countries. It offers a product portfolio that includes the cannabis brands Aurora, Aurora Drift, San Rafael ’71, Daily Special, AltaVie, MedReleaf, CanniMed, Whistler and Reliva CBD. 

The company’s growth over the years was fueled with acquisitions, most dramatically with a 2017 hostile takeover bid for CanniMed Therapeutics, the first action of its kind in the Canadian cannabis industry – after the intervention of the Ontario Securities Commission, the companies agreed on a friendly acquisition transaction in 2018.

The company has recently endured more than its fair share of problems, most dramatically in late 2019 with a threatened NYSE delisting when its stock value plummeted – a 1-for-12 reverse stock split in May helped keep it on the board. In February, founder Terry Booth stepped down as CEO as the company laid off 500 members of its workforce. During the summer, a rumor was floated that rival Canadian cannabis company Aphria Inc. (APHA) was considering a possible acquisition – instead, APHA announced a merger earlier this week with Tilray Inc. (TLRY).

In September, ACB announced the appointment of Miguel Martin as its new chief executive officer. Martin, who joined the company in June as chief commercial officer, was previously the chief executive at Reliva CBD, the Massachusetts-based company acquired by ACB in May.

Here’s how our proprietary POWR Ratings system evaluates ACB:

Trade Grade: D

ACB is trading at $8.94, which is much closer to its 52-week low of $3.71 than to its 52-week high of $27.84. Since the beginning of the year, the stock has lost nearly two-thirds of its value, and it was trending down for weeks before experiencing a sharp ascension surrounding its Q1 2021 earnings report in early November. However, it appears to have difficulty maintaining an upward path, stalling when it could be sailing. 

The disappointing stock performance mirrors the company’s continuing operational problems that still dominate its news. Last week, Marijuana Daily News reported ACB cut roughly 200 jobs in the marijuana greenhouse at its Edmonton headquarters and entered into an agreement in principle to sell at least two of its Canadian cultivation facilities that were closed earlier this year. 

When Martin took over as CEO, his interim predecessor, Executive Chairman Michael Singer, acknowledged ACB spent the prior six months “focused on building the infrastructure and capabilities necessary for a successful and diversified business.” 

Martin echoed Singer’s sentiment, noting that “material progress has been made to optimize our Canadian operations and put Aurora on a much stronger footing.” Yet this doesn’t appear to be strong enough to fully reanimate the stock. 

Still, there are investors who believe in the company: in September, ACB raised approximately US$172.50 million via an underwritten public offering of 20 million shares, with the goal of channeling the new funds into the company’s working capital requirements and expansion plans.

Buy & Hold Grade: F

The stock’s proximity to its 52-week high, which is a key factor that our Buy & Hold Grade considers, is not favorable in ACB.

In late November, ACB announced its Q1 fiscal 2021 returns, covering the three-month period ending Sept. 30. The results were decidedly mixed: Q1 2021 total and cannabis net revenue was C$67.8 million, not much higher than the Q4 2020 C$67.5 million. While its C$33.5 medical cannabis net revenue marked a 4% increase from the prior quarter, its C$34.3 million in consumer cannabis net revenue was a 3% decrease over the same period. ACB’s adjusted EBITDA loss was C$57.9 million in Q1 2021, a result that reflected C$47.5 million in restructuring payments including contract and employee termination costs.

Peer Grade: D

ACB ranked #102 out of 240 stock in the Medical – Pharmaceuticals category. With a glut of competition, including some of the world’s most powerful companies, it is a little too easy for ACB to get lost in this shuffle.

Industry Rank: A 

The Medical – Pharmaceuticals category ranks #15 out of 123 stock categories, and the companies within this category have an average POWR Rating of B. This puts ACB at being decidedly below-average.

Bottom Line

ACB’s efforts to realign itself into a leaner and more operationally efficient company appear to be well-focused, and the company is trying to gain more muscle with overseas deals, including a recent a strategic supply agreement with Israel’s Cantek Holdings and the first European-produced supply of medical cannabis to the German market by its subsidiary Aurora Europe. 

Still, the company is still struggling and other Canadian cannabis stocks are generating a more robust performance. At this point in time, a wait-and-see strategy might be best for ACB.

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ACB shares were trading at $8.96 per share on Tuesday morning, up $0.02 (+0.22%). Year-to-date, ACB has declined -65.43%, versus a 15.88% rise in the benchmark S&P 500 index during the same period.

About the Author: Phil Hall

Phil is an experienced financial journalist responsible for generating original content on the weekly Fairfield County Business Journal and Westchester County Business Journal, plus their respective daily online news sites, podcasts and video interview series.  He is the winner of 2018, 2019 and 2020 Connecticut Press Club Awards and 2019 and 2020 Connecticut Society of Professional Journalists Award for editorial output. More...

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