Is Now the Time to Buy Aurora Cannabis (ACB)?

: ACB | Aurora Cannabis Inc. Common Shares News, Ratings, and Charts

ACB – Aurora Cannabis reported its Q1 2020 financial results after the market closed yesterday, Thursday, November 14th, 2019.

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Aurora Cannabis reported its Q1 2020 financial results after the market closed yesterday, Thursday, November 14th, 2019. Despite the fact that cannabis stocks had a terrible day because of Canopy Growth’s disappointing earnings release yesterday morning, shares of Aurora Cannabis continued to decline over 10% after hours. 

Aurora Cannabis posted a gross profit of $53.7 Million and 58% Cannabis Gross Margin. Aurora Cannabis generated Total Revenues of $75.6 Million which Included Medical and Consumer Cannabis Net Revenue of $60.5 Million and Wholesale Cannabis Net Revenues of $10.3 Million.

Aurora Cannabis saw a significant decline in revenues due to provincial ordering that slowed down considerably during the summer, as distributors sold through inventories. Also, the industry was impacted by the slow pace of retail store licensing. Canadian consumer cannabis revenues took the biggest hit declining 33% sequentially due to these factors.  

The Canadian government is responsible for causing a bottleneck in cannabis production, which in turn has led to many of the large-cap cannabis stocks, including Aurora Cannabis, to suffer.  This puts many of these cannabis companies in a very tough spot as they ramp up production, yet they are not able to sell their products due to a lack of sales channels. These companies need retail revenues to materialize.

Declines in revenues for two of the largest cannabis companies, Canopy Growth and Aurora Cannabis, on the same day was a double whammy, and their unimpressive results are being felt throughout the marijuna industry.  Just this week, the largest cannabis ETF, ETFMG Alternative Harvest ETF (NYSE:MJ), is trading 13% lower.

Investors want to see a clear path to profitability and growing revenues, which was essentially the opposite of what happened this quarter. However, there is some positive news and potential catalysts on the horizon for Aurora Cannabis: 

  • In yesterday’s report, Aurora Cannabis revealed that their cost per gram sold declined 25% sequentially to $0.85 per gram, which did deliver on the company’s promise to produce under 1 dollar per gram. 
  • They also reported that their market for medicinal marijuana is strong, as revenues increased 3% sequentially and their patient base grew 8% to 91,116 active patients. 
  • Aurora Cannabis ia looking to capitalize on then “cannabis 2.0” market which includes edibles and many different high margin products. 
  • And the rollout of more retail stores across Canada which should also help Aurora Cannabis grow revenues in the near term but this will all depend on how fast the government will allow new stores to open. 

Though the cannabis industry’s performance recently has been quite lackluster, we are still positive for the long-term.  When the Canadian government stops causing a bottleneck in the industry we believe Aurora Cannabis, and its competitors, will be able to grow revenues dramatically.  And we think Aurora Cannabis is positioning themselves to be an industry leader, not only in the Canadian market, but on the international front. 

(Disclosure: The author owns shares of Aurora Cannabis)

 

 


ACB shares were trading at $3.12 per share on Friday morning, down $0.17 (-5.17%). Year-to-date, ACB has declined -37.10%, versus a 26.25% rise in the benchmark S&P 500 index during the same period.


About the Author: Aaron Missere


Aaron is an experienced investor who is also the CEO of Departures Capital. His primary focus is on the cannabis industry. He also hosts a weekly show on YouTube about marijuana stocks. Learn more about Aaron’s background, along with links to his most recent articles. More...


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