According to Investor’s Business Daily, Aurora Cannabis (NYSE:ACB) is the most widely held equity on Robinhood. That’s the commission-free trading platform popular with millennials and Gen Z-ers.
So, does the fact that millennials and Gen Z-ers are bullish on ACB stock make it a buy?
Here are arguments for and against this theory.
Millennial Ownership of ACB Stock Is a Big Deal
No question, younger investors are going to be more open to investing in cannabis stocks. They’re more familiar with the product itself and aren’t nearly as concerned about the stereotypes surrounding its use.
For example, the average age of Robinhood’s six million users is 32, smack dab in the middle of the millennial generation. Specifically, this demographic includes those born between 1981 and 1996.
Perhaps that’s one reason why four of the top 20 stocks held by Robinhood users are cannabis stocks. The others are Cronos Group (NASDAQ:CRON), Canopy Growth (NYSE:CGC) and Hexo (NYSEAMERICAN:HEXO), ranked number six, 11, and 14, respectively.
Interestingly, the latter three on Robinhood’s list are my favorites. However, Aurora stock has piqued my curiosity recently.
InvestorPlace feature writer James Brumley recently wrote a piece about ACB stock that highlighted the moves the company’s making to diversify its holdings beyond Canada. Take for example its purchase of Uruguay-based ICC Labs in November.
Aurora paid $290 million for the company which controls 70% of the Uruguayan recreational market. The deal also gives ACB access to other countries in Latin America. The longer-term potential there for Aurora Cannabis stock is readily apparent. With a combined population of more than 650 million, this is a very lucrative market.
As Brumley wrote, the purchase of ICC Labs gives Aurora a platform for growth in Latin America.
Millennials recognize Aurora’s big-picture view of the cannabis industry. In their view, management’s carefully selected bets on regions and companies enhances the profile of Aurora stock.
At the end of the day, millennials understand pot, they aren’t scared of it, and the growth potential they see excites them.
For Aurora to be at the head of the class is excellent news for owners of ACB stock.
Youthful Exuberance for Aurora Stock Is Also a Risk
Here’s the big problem with Aurora sitting on pole position for Robinhood’s list: millennials may view the volatility of ACB stock and cannabis investments in general as a pathway to quick riches. You can’t necessarily blame them, as the sector tends to move wildly on the smallest of news.
Fortune recently reported on the millennials use of Robinhood. Not all of it was good.
Financial planner Tara Falcone, founder of financial-wellness program provider ReisUP, suggested several reasons why Robinhood clients might be high on Aurora Cannabis stock and its ilk:
“When you’re talking about first getting into trades, you click on browse [on Robinhood] and one of the first things you see is the 100 most popular list,” Falcone told Fortune. “To the untrained investor who has now decided to start buying individual stocks, thinking ‘I haven’t done any research on my own, what are other people investing in?’”
The fact that Aurora Cannabis stock appears at the top of the list suggests a seal of approval. But as Falcone points out, that’s not always the case.
Wall Street professionals would not consider these two as strong buys.
The Bottom Line
As every day passes, I get more enthusiastic about Aurora stock. While I’m not entirely sold on its overall business, I appreciate its efforts to become a global player. This is a strategy that’s right in line with Canopy Growth and some of the other large Canadian cannabis companies.
And despite the negatives, at the end of the day, the fact that Robinhood users love ACB stock is further confirmation Aurora’s making all the right moves.
At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.
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