The investors in Aurora Cannabis Inc.'s (TSE:ACB) will be rubbing their hands together with glee today, after the share price leapt 41% to CA$15.35 in the week following its third-quarter results. It was a pretty good result, with revenues of CA$76m, and Aurora Cannabis came in a solid 14% ahead of expectations. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Taking into account the latest results, the most recent consensus for Aurora Cannabis from 17 analysts is for revenues of CA$418.1m in 2021 which, if met, would be a substantial 37% increase on its sales over the past 12 months. Losses are predicted to fall substantially, shrinking 91% to CA$1.32. Yet prior to the latest earnings, the analysts had been forecasting revenues of CA$418.1m and losses of CA$1.72 per share in 2021. Although the revenue estimates have not really changed Aurora Cannabis'future looks a little different to the past, with a the loss per share forecasts in particular.
The consensus price target fell 33% to CA$16.77 despite the forecast for smaller losses next year. It looks like the ongoing lack of profitability is starting to weigh on valuations. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Aurora Cannabis analyst has a price target of CA$42.00 per share, while the most pessimistic values it at CA$6.20. We would probably assign less value to the analyst forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. With this in mind, we wouldn't rely too heavily the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. We would highlight that Aurora Cannabis' revenue growth is expected to slow, with forecast 37% increase next year well below the historical 88%p.a. growth over the last three years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 33% next year. So it's pretty clear that, while Aurora Cannabis' revenue growth is expected to slow, it's expected to grow roughly in line with the industry.
The Bottom Line
The most obvious conclusion is that the analysts made no changes to their forecasts for a loss next year. They also reconfirmed their revenue estimates, with the company predicted to grow at about the same rate as the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Aurora Cannabis' future valuation.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for Aurora Cannabis going out to 2024, and you can see them free on our platform here.
It is also worth noting that we have found 3 warning signs for Aurora Cannabis that you need to take into consideration.
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