Aurora Cannabis (ACB) is a stock that is usually either loved or hated. It took me a while to figure out what all the hate was directed toward the company by some, and I finally figured out what it was: Aurora doesn't do business in the same way as its competitors, or like many other companies.
The result of this is that many don't really understand what management is doing, as they interpret their actions based upon what is considered the "normal way of doing things."
Its overall strategy
There are several aspects related to the general strategy of Aurora Cannabis management, led primarily by the aggressive use of its stock to rapidly grow and expand its business. Second, its refusal to court a large corporation in order to raise capital by allowing it to take a big position in the company.
Those are probably the two major parts of its strategy that its detractors tend to hate. It's also why the company is undervalued, as these are the typical metrics used to measure the viability and potential of cannabis companies. Without them, many analysts, pundits and commentators flounder about as to how to take the company.
One of the things suggested is Aurora can't attract a large suitor, when in reality it has had a number of talks with large corporations. What it won't do is break from its business model and go the traditional route. It's one of the major things that attracted me to the company in the first place. Maintaining its entrepreneurial spirit and vision is vital to the long-term success of the company, which I believe, over time, will outperform all its competitors.
As for its use of its shares as a means of doing business, I have no problem with that either, when considering the company's refusal to sell a lot of itself to a large corporation.
It needs to be understood that with that being a part of its strategy and culture, the primary way it could expand and be one of the top cannabis companies in the world was to use its stock to acquire companies and other expansion-related actions.
While it obviously has diluted the stock, the alternative would have been to be another low-level producer struggling to survive in the challenging environment it faces.
There was only a relatively small window of opportunity for growth, and Aurora's management took it. Again, I consider that a positive, not a negative.
Taken together, this has allowed the company to take a sizable lead in international markets, where it now has operations in 24 countries. As it quickly grows its production capacity, these markets will be key differentiators as even its largest competitors struggle to match the growing global demand Aurora will be able to supply. That's especially true concerning highly profitable medical cannabis.
Last, its aggressive strategy has ended with the finishing up of its Aurora Sky facility, which is superior to any other in the world. It will empower it to lower costs and widen margins as it reaches full production capacity this year.
Aurora Cannabis has decided to take a different route to success, and I believe if it hadn't done so, it would be listed among the many unknown names in the industry that would either be acquired or fail.
Not only has it been wildly successful in the business model to this date, but it has the type of momentum that should help it maintain its market leadership for years into the future.
No company at this time is able to bring the supply to the market that Aurora can, and within about a year, it should be much farther ahead of its competitors. Consequently, its efficiencies and productivity will make it the go to company for all the markets looking for a reliable and consistent producer and supplier.
For those and many other reasons, I consider Aurora Cannabis by far the market leader in the cannabis industry. It's only a matter of a relatively short time before that's reflected in the numbers.
To read more on the nitty gritty of what’s going on in the rising cannabis industry, click here.
Disclosure: The author put his money where his mouth is, taking a Long position in Aurora stock.
Read more on ACB:
- The Good and the Bad News for Aurora Cannabis (ACB) Stock
- Aurora Stock Is at the Mercy of Investors
- Aurora Cannabis (ACB) Stock Is Still a Buy, Says Analyst