Aurora Cannabis Inc (TSE:ACB) implosion from record highs is one that continues to raise serious concerns given that it comes at a time when the company appears to be doing extremely well in almost all fronts. The stock is down by more than 50%, for the year, fuelling suggestions that a reversal is on sight.
Aurora Cannabis Sell-off
A closer look at the chart, things are not looking good as the stock has broken key support level indicating that short sellers are in firm control. A breach of the $7.2 level all but reaffirms a bear run that has continued to push the stock lower, following blockbuster move early in the year.
With the stock currently trading at the $6.54 level, it faces immediate support at the $5.40 mark, below which it remains susceptible to further declines. The stock needs to rally and stabilize above the $7.50 level to have any chance of rallying back to record highs.
What Does Aurora Cannabis Do?
Headquartered in Edmonton Alberta Canada, Aurora Cannabis is one of the largest cannabis companies in North America. With a cannabis production capacity in the excess if 570,000 kg per year and sales operations in 14 countries the company is a force to reckon with in the industry.
The company stands out on the fact that it has deployed a unique, consistent and efficient production strategy. It boasts of multipurpose facilities for the cultivation, extraction, and production of cannabis.
Why is the stock tanking?
The bear run in the stock can be attributed to many factors. However, the underperformance of the company cannot be one of them. For starters, Aurora Cannabis appears to be one of the stocks that have borne the full brunt of a sell-off wave that has gripped the overall sector. In addition, the sell-off comes in the wake of the company announcing plans to acquire MedReleaf Corp, a deal which requires it to offer 375 free floating shares.
What Next For Aurora Cannabis
Aurora Cannabis is currently trading in oversold territories as speculation gains momentum that a bounce-back is on sight. The Canadian cannabis company has shown it has what it takes to succeed in the industry given the kind of investments it has carried out as well as acquisitions that have gone a long way, in strengthening its competitive edge in the industry.
One of the reasons why Aurora Cannabis long-term growth prospects remain intact has to do with the fact that it has enough product to meet demand. Completion of the MedReleaf acquisition is set to take the company’s cannabis production capacity to over 570,000Kg annually. With the capacity, the company should be able to service both the medical and adult use market across North America as well as overseas.
“Each of the strategic transactions Aurora has concluded has further advanced our envisioned business strategy of establishing a powerful, integrated and strongly differentiated cannabis company – positioned for continued rapid growth, and built to last,” said CEO Terry Booth.
Another reason why Aurora Cannabis is destined for greatness has to do with the fact that it has secured all the necessary government approvals needed to operate in the sector. In addition, the company boasts of a robust distribution network that allows it to serve both domestic and international markets in pursuit of sales.
Aurora Cannabis has also selected e-commerce giant Shopify to spearhead its e-commerce operation as part of an effort that seeks to strengthen the current sales channel. Shopify is tasked with the responsibility of transitioning Aurora’s e-commerce site into a Shopify platform with a view of improving customer experience.
“The Shopify platform will allow Aurora to provide a tailored customer experience that embraces and adapts to the unique demands of both consumers and regulators, adapted to the specific needs of the various jurisdictions in which Aurora operates,” said Loren Padelford, VP at Shopify.
Is Aurora Cannabis Due For A Reversal?
One thing for sure, Aurora Cannabis has been unfairly judged’ in the market given that, it has continued to improve in strength with each passing day. The acquisition of MedReleaf is a development that affirms its status as the largest medical cannabis company whose value can only be felt with the expansion of the medical marijuana sector.
The company’s shares are deeply entrenched in oversold territories amidst solid fundamentals that continue to grow in strength. The recent dip in value presents a perfect buying opportunity for investors looking to gain some exposure in the sector, through stock with massive long-term prospects.
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Disclosure: We have no position in ACB and have not been compensated for this article.