Why Aurora Cannabis Stock Dropped 12% Today
Last week was a wonderful week to own shares of Canadian marijuana producer Aurora Cannabis (NASDAQ: ACB). On March 18, Vice President Kamala Harris said that it's time to legalize marijuana, and on Friday, Germany announced that it will legalize it on April 1. Aurora shares shot higher to close the week up 53%.
But today, the stock is falling again, and was down 12% as of 12:25 p.m. ET on Monday.
Irrational exuberance?
This could be a case of irrational exuberance running its course. Harris has come out in favor of legalizing marijuana in the United States before. But she said something pretty similar four years ago, and marijuana is still outlawed by federal law.
In Germany, marijuana possession, home cultivation of it, and distribution among limited "social clubs" will all become legal next week. But Germany's new law doesn't allow companies (like Aurora) to grow marijuana in the country or sell it at retail stores.
Is Aurora Cannabis stock a buy?
So the news might not be good enough to move the needle on Aurora Cannabis stock in the short term or to save the company over the long term.
Aurora is not a healthy company. While S&P Global Market Intelligence data shows that it earned a net profit last year, operating profits were negative, and it suffered $71 million in negative free cash flow.
The company had $109 million in cash at last report, and even a $71 million annual burn rate implies it can survive to mid-2025. But full-year profitability isn't expected before 2026.
Aurora Cannabis might make it that far and survive to reap the benefits of widespread marijuana legalization. But it also might not. Investors are right to hedge their bets on this one.
Should you invest $1,000 in Aurora Cannabis right now?
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
Why Aurora Cannabis Stock Dropped 12% Today was originally published by The Motley Fool
