To say Aurora Cannabis stock (NYSE:ACB) has been in bear market is the understatement of the year. The shorts have driven the stock over the past year from a split-adjusted basis of $108 to lows of $5.60 a share. As you can see from the chart, the downtrend has been steady and relentless.
However, we believe things are looking up for Aurora Cannabis stock. A better than expected earnings report has the stock bidding higher after-hours and as we take a closer look, a new bull run looks to be starting as the shorts get squeezed.
About Aurora Cannabis
Aurora is a global leader in the cannabis industry serving both the medical and consumer markets. Headquartered in Edmonton, Alberta, Aurora is a pioneer in global cannabis dedicated to helping people improve their lives. The Company’s brand portfolio includes Aurora, Aurora Drift, San Rafael ’71, Daily Special, AltaVie, MedReleaf (MEDFF), CanniMed, Whistler, and ROAR Sports. Providing customers with innovative, high-quality cannabis and hemp products, Aurora’s brands continue to breakthrough through industry leaders in the medical, performance, wellness, and recreational markets wherever they are launched. For more information, please visit our website at www.auroramj.com. Aurora’s Common Shares trade on the TSX and NYSE under the symbol “ACB”, and is a constituent of the S&P/TSX Composite Index.
Aurora Cannabis Fiscal Q3 Results
There was a lot to like with the company’s fiscal Q3 results. Cash in the bank at quarter’s end of $230.2M, with $154.6M cash use in FQ3 down 43% from previous quarter. Aurora Cannabis remains on track to have positive adjusted EBITDA in FQ2021.
Net revenue: $75.5M (+34.8%); Canadian medical cannabis net revenue: $27.0M (+5.5%); consumer cannabis net revenue: $41.5M (+23.9%); cannabis net revenue: $69.6M (+32.1%). Non-GAAP EBITDA: ($50.9M) (+36.5%). Aims to achieve positive EBITDA by FQ1 2021.
Cannabis inventory and biological assets: $244.5M (+12.8%). Product cost/gram: $0.85 (-3.4%). Kilograms produced: 36,207 (+17.8%). Kilograms sold: 12,729 (+34.0%).
In the earnings call, Aurora Cannabis executives said that the company observed some consumer stockpiling in March as the coronavirus pandemic spread across the world — but the company also experienced a surge in sales of the brand of cheap pot called “Daily Special” it recently launched. The March gains, however tapered off in April and provincial buyers returned to pre-pandemic levels.
Interim Chief Executive Michael Singer said that Aurora it was “pleased” with the progress it had made to reduce its selling, general and administrative expenses to $C40 million to C$45 million by the end of the fourth quarter. The company has also said it would reduce its capital expenditures below C$100 million for the second half of fiscal 2020.
Anyone that has traded cannabis stocks for as long as we have here at Insider Financial knows that the cannabis market is a boom/bust type of market. Either things are really good for cannabis stocks or they really suck. It’s either a bull or a bear market. No in between.
In addition to strong quarterly numbers, Green Thumb Industries Inc (OTCMKTS:GTBIF) blew the lid off its quarterly numbers. Revenue of $102.6M (+267.6% Y/Y) beats by $10.19M. This is a big beat on pretty impressive numbers in a beaten down sector, growing at a time when others go bankrupt, we MAY be on the verge of the cannabis resurgence 2.0. Next week Trulieve Cannabis Corp (OTCMKTS:TCNNF) and Curaleaf Holdings Inc (OTCMKTS:CURLF) report earnings as well. Strong reports from those two giants can lift the entire sector higher.
Currently trading with a market cap of $596 million, shares of Aurora Cannabis are more than due for a bounce. Matter of fact, the stock has gotten awfully cheap and trades at just 2.3x sales and 0.19x book. Compare this to industry leader Canopy Growth Corp (NYSE:CGC) that trades at 15.8x sales and 1.17x book and you see that Aurora Cannabis is a discount entry opportunity. While we know shareholders have suffered greatly in this bear market, better days are ahead for Aurora Cannabis. Buckle up and wait for the ride!
Good luck to all (except the shorts)!
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Disclosure: We have no position in any of the stocks mentioned and have not been compensated for this article.