|Bid||3.2200 x 0|
|Ask||3.2300 x 0|
|Day's Range||3.2000 - 3.2500|
|52 Week Range||2.8200 - 13.6700|
|Beta (3Y Monthly)||1.56|
|PE Ratio (TTM)||N/A|
|Forward Dividend & Yield||N/A (N/A)|
|1y Target Est||N/A|
A big thesis of the Canadian cannabis LPs investment story was global expansion. The news last week of Aurora Cannabis (ACB) being blocked from Germany sales highlights the bigger problems of trying to operate in dozens of countries. With a concerning low level of cash, the cannabis giant doesn’t need another revenue problem while a competitor just opened up a potential financing source to solve the cash crunch.Unsurprisingly, investor sentiment is also very negative, with individual portfolios in the TipRanks database showing a net pullback from Aurora stock.Germany ProblemAccording to MJBizDaily, Aurora Cannabis’ medical cannabis products aren’t going to be on the Germany market until early next year at the earliest. Health authorities apparently are concerned about a “proprietary step” used by the Canadian company to ensure the shelf life of the products.The news outlet suggests Aurora Cannabis could have a problem with prescriptions following regulatory approval next year as German pharmacists move onto another product for treatment of patients. In the last quarter, the company had C$5 million in international cannabis sales with the majority of the revenues from the German market. The issue speaks to the bigger concern of trying to meet regulatory requirements in dozens of countries as the company ramps up global operations.Just last week, the company announced plans for entering Ireland. The CBD oil drops are approved by the Medical Cannabis Access Programme for three medical conditions.This news should again caution the excitement over global operations, especially considering Aurora Cannabis will report virtually nothing for ongoing international operations that were a cornerstone of the stock story.Facility Financing While investors are facing another revenue disappointment for Aurora Cannabis, the company got some good news from Aphria (APHA) and a potential game plan for resolving current cash crunch fears. The ability of Aphria to obtain a C$80 million secured loan with an interest rate in the 5% range is a very positive sign for Aurora Cannabis. The larger cannabis company has nearly C$1 billion worth of property and equipment on the balance sheet.The large cannabis company ended the last quarter with only C$237 million of cash on the balance sheet or roughly enough cash to wrap up the capital spending for the rest of FY20 ending next June. Aurora Cannabis must fund ongoing operating cash burn via funding sources such as the existing at-the-market stock offering which already sold C$107 million worth of stock in FQ2.The market would welcome low cost debt based on the massive facilities already in operation. Any anti-dilutive option is a concern with the company already having borrowings of C$282 million plus another C$283 million in convertible debt after the recent conversion of C$230 million worth of converts.Aurora Cannabis lacks the immediate path to EBITDA profits that makes Aphria a more attractive company to extend secure facilities loans.TakeawayThe key investor takeaway is that Aurora Cannabis faces more operational struggles after a big hit to their international expansion plan. The company can’t face any hits that impact the path to profitability.A low-cost loan, secured by facilities would be one strong signal that Aurora Cannabis has turned the corner. For now though, investors are best watching on the sideline waiting for the cannabis company resolve funding issues first.To find better ideas for cannabis stocks trading at fair value or better, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Even prior to the horrible September quarterly report, analysts were questioning the cash position of Aurora Cannabis (ACB). A big part of the problem was a large convertible debt due in March hanging over the stock. The recent decision for substantially all of the debtholders to convert into common shares was a painful dilution for existing shareholders, but necessary in order for Aurora Cannabis to attract new investors. The company still has more work to improve the balance sheet before the stock becomes a buy, but this convertible debt conversion was a key step.Convertible Debt ConversionAurora Cannabis announced that 99% of the company's C$230 million, 5% unsecured, convertible debentures due March 9, 2020 voluntarily elected to convert to common shares. As a result, the Canadian cannabis company will issue an aggregate of 69,135,117 common shares at a conversion price of C$3.2837.The company already had a diluted share count above 1.1 billion shares. This conversion places the diluted share count above 1.2 million shares.For investors not paying attention to this logical conclusion, the dilution is painful considering the stock once topped $10 earlier this year. At a stock price of $2.50, the fully diluted market cap is ~$2.6 billion.Still Needs More CashThe big question is where Aurora Cannabis goes now with the stock beaten down to $2.50 and the crucial convertible debt handled. The biggest remain hiccups are the operating losses combined with still large capital spending requirements despite halting the spending on their two primary facilities.On the FQ1’20 earnings call, management still outlined the following quarterly capital spending requirements for the rest of this fiscal year ending next June: * FQ2 - C$108 million * FQ3 - C$70 million * FQ4 - C$50 millionAurora Cannabis ended the September quarter with C$153 million in cash on the balance sheet. When combined with already completed at-the-market equity offerings, the company has raised enough cash to fund these remaining large capital spending plans for the year.The problem remains the ongoing operating losses must be completely funded. The company has plenty of options including selling assets with C$973 million in facilities and property and another C$115 million in investments or completing further equity offerings via the ATM, amongst other options. Of course, the other option is to cut the adjusted EBITDA losses from the large C$34 million loss in FQ1 to reduce funding requirements. This likelihood of cutting losses appears small in the near term as Aurora Cannabis invests for the Cannabis 2.0 rollout in Canada and the CBD market in the U.S.The requirement to raise more funds while these convertible debt holders are allowed to immediately unload their new shares will pressure the stock. A potential investor can wisely wait on the sidelines until further financing is resolved and the Canadian market rationalizes more supply while demand catalysts as Cannabis 2.0 take fold.Analyst Commentary * CIBC's John Zamparo: "Aurora has unveiled a promising array of items which should allow the company to maintain its market share leadership. The conversion of its 2020 debentures and $190MM reduction in capital spending on production reduce worries over the company's liquidity, though ongoing dilution still presents an impediment to owning shares. Net, we continue to view Aurora as fairly valued, as its strong Canadian performance is weighed against its balance sheet and lack of U.S. presence or strategic partners [...] Our price target falls to $5 (was $7), and Aurora remains Neutral rated. (To watch Zamparo's track record, click here) * MKM's William Kirk: "When a company shifts so rapidly toward conserving capital at the expense of diluting existing shareholders, one would normally start to look toward solvency concerns. However, at odds with recent trends, management sounded very confident about Aurora's strategy and viability, and its strong gross profit margin makes funding (which Aurora still needs) a bit easier to obtain. Kirk rates the stock a "sell" along with a C$3.00 price target. (To watch Kirk's track record, click here)Overall, Wall Street is pretty evenly split between the bulls and those choosing to play it safe. Out of 12 analysts tracked by TipRanks in the past 3 months, 5 say "buy," 5 suggest "hold," while 2 recommend "sell." However, the 12-month stock-price forecast stands tall at $4.96, marking nearly 100% in upside potential from where the stock is currently trading. (See Aurora stock analysis on TipRanks)TakeawayThe key investor takeaway is that Aurora Cannabis has made several smart moves to position the company for a bright long-term future in the cannabis market. Unfortunately, the company still needs to fund ongoing capital losses while facing a tough competitive situation in the Canadian market.The best move for investors is to continue waiting for further weakness in the shares while awaiting more clarification on the dilutive impacts of additional capital raises.To find good ideas for cannabis stocks trading at fair value or better, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
German pharmacies were recently asked to stop the sale of Aurora Cannabis (NYSE: ACB) products, according to Marijuana Business Daily. The products are awaiting for inspection by health authorities due to a proprietary step in Aurora’s production process, the publication said. Until the review is complete, the products will remain unavailable.
Glancy Prongay & Murray Reminds Investors of Looming Deadline in the Class Action Lawsuit Against Aurora Cannabis Inc.
Aurora Cannabis has been approved to sell CBD oil drops in Ireland. Marijuana stocks fell despite the news, with Aurora Cannabis stock reversing lower.
Cannabis stocks fell for a third straight day Monday, weighed down by the industry’s continued weak fundamentals with companies still posting losses as they struggle to generate revenue.
If you take a look at a recent chart for Aurora Cannabis (NYSE:ACB), it actually looks like what happened with the dot-coms during 2000-2001 - that is, an ugly grinding bear move. It's one of those things that seem to have no end, shaking just about everyone's confidence.Of course, with the dot-coms, there were some huge opportunities as seen with Amazon (NASDAQ:AMZN) and Booking Holdings (NASDAQ:BKNG), formerly known as Priceline.So then, with Aurora Cannabis, might we be seeing something similar? Could this be the time to make a buy? Or, could this be more like a situation of eToys or Pets.com?InvestorPlace - Stock Market News, Stock Advice & Trading TipsWell, I'm in the optimist camp. * 7 Entertainment Stocks to Buy to Escape Holiday Blues True, this is not to ignore the nagging problems. And yes, they are considerable. The legalization of cannabis in the Canadian market has not lived up to the lofty expectations (again, this is a parallel to the dot-com glory days). Keep in mind that governmental authorities have been agonizingly slow, especially with licensing of retail outlets. To make up for this, black market activities have become a major factor.As for Aurora Cannabis in particular, the company has had some of its own self-inflicted wounds. Let's face it: management has been too aggressive with its spending. It also looks like it has missed opportunities to strike strategic financings.However, while all these are serious problems, the markets have been factoring all this into Aurora's stock price. The result is that the market cap is a much more palatable $2.6 billion, which is not bad for a premier company in the space. Aurora's AdvantagesEven with the challenges in the Canadian market, it is still a nice source of growth. In the latest quarter, revenues for Aurora spiked by nearly 140% to $22.4 million. The company also has a decent amount of cash in the bank at $316 million.But next year there will be another catalyst for growth in the Canadian market - that is, Cannabis 2.0. This is when it will be legal to sell hemp-based edibles.Now the predictions are wide, with some estimates at over $2 billion. But even if it is half this, it should provide a nice opportunity for Aurora.The company is prepared for this, having invested in offerings like vapes, gummies, chocolates, mints, cookies and so on. There should also be help from Aurora's strategic advisor, Nelson Peltz, who is one of the world's top investors for consumer stocks. Some of his positions are in companies like Procter & Gamble (NYSE:PG), Mondelez (NASDAQ:MDLZ), and Wendy's (NASDAQ:WEN).It also should be noted that Aurora is not just in the recreational cannabis space. The company actually has a diverse platform, which should help it deal better with market conditions. For example, Aurora has been able to build a strong medical business, with more than 40 researchers who have conducted a long list of clinical trials and case studies. The company currently serves about 84,000 patients and has a global platform that which reaches about 25 countries. Bottom Line on Aurora StockOn the latest earnings call, Aurora CEO Cam Battley had this to say: "The past few months have been challenging for the broader cannabis industry, between issues of governance, evolving consumer demand, and provincial retail bottlenecks. There's been no shortage of negative news. That said, I want to reiterate that our view of the opportunity in the Canadian and global cannabis industry is still extremely robust."I think he is spot-on. Taking the long view of things is the way to approach companies like Aurora. This means there will continue to be lots of stomach-churning volatility. But we are still in the early days with cannabis - and more importantly, Aurora is positioned to be a winner.Tom Taulli is the author of the book, Artificial Intelligence Basics: A Non-Technical Introduction. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 7 Things to Watch for into 2020 for Safer Income & Growth * 7 Entertainment Stocks to Buy to Escape Holiday Blues * 5 "Strong Buy" Biotech Stocks With More Than 80% Upside The post Aurora Stock: An Interesting Speculation for 2020? appeared first on InvestorPlace.
Aurora Cannabis Inc. (NYSE: ACB) announced Monday that one of its oil products has obtained approval for use under Ireland’s new Medical Cannabis Access Programme. The company’s high CBD Oil Drops have been added to a regulatory schedule by the Irish Minister of Health, allowing the importation and prescribing of the oil. It's one of two products to receive such an approval, Aurora said.
Cannabis Countdown: Top 10 Marijuana Industry News Stories of the Week Welcome to the Cannabis Countdown . In this week’s rendition, we’ll recap and countdown the top 10 marijuana industry news stories ...
The U.S. Food and Drug Administration updated its stance on CBD late Monday, saying that the cannabis derivative may have the potential to harm people.
Aurora Cannabis Inc. (the "Company" or "Aurora") (NYSE │ TSX: ACB), the Canadian company defining the future of cannabis worldwide, today announced that one of the Company's oil products has now been approved for use under Ireland's new Medical Cannabis Access Programme (MCAP). Aurora's High CBD Oil Drops received approval from the Irish authorities and have now been added to a regulatory schedule by the Irish Minister of Health enabling importation, prescribing and supply under the scheme and is to date, one of only two products to gain such authorization.
Aurora Cannabis Inc. (the "Company" or "Aurora") (NYSE │ TSX: ACB), the Canadian company defining the future of cannabis worldwide, is pleased to acknowledge the Company's ranking in the 2019 annual Report on Business ("ROB") review of Corporate Boards, known as Board Games. Published in its 18th year, the ROB Board Games considers dozens of governance criteria, extending beyond those required by formal regulations. Aurora achieved a score of 67 (out of a total score of 100), representing a significant increase over the prior year, a substantially higher ranking than others in its peer group of companies.
Cannabis stocks were slammed anew on Tuesday, after the U.S. Food and Drug Administration issued new guidance on CBD that included a stark warning that it can cause liver injury and other damage to the human body.
Rosen Law Firm, a global investor rights law firm, announces it has filed a class action lawsuit on behalf of purchasers of the securities of Aurora Cannabis Inc. (NYSE: ACB) from September 11, 2019 and November 14, 2019, inclusive (the "Class Period"). The lawsuit seeks to recover damages for Aurora investors under the federal securities laws.
Aurora Cannabis (NYSE: ACB) (TSX: ACB) opened its flagship retail store in the West Edmonton Mall, the largest mall in North America. The roughly 11,000-sq.-ft. Aurora's flagship store will offer different products and events. The retail cannabis store will offer "a safe, age-gated retail experience in full compliance with all relevant federal and provincial regulations," according to a […]The post Aurora Opens Flagship Store in North America's Largest Mall appeared first on Market Exclusive.
In my Oct. 21 column, I warned readers that the worst was yet to come for Aurora Cannabis (NYSE: ACB) stock. With ACB stock down 40% in the two months before that piece was published, it may have seemed bold at the time. However, in just over a month since I wrote that article, Aurora stock has tumbled another 31.7%.Source: Shutterstock Aurora's balance sheet and cash flow situation will stay ugly in the near-term. But I still think Aurora stock can eventually become a viable, long-term investment.Worse-than-expected third-quarter numbers and a surprise early conversion of $171 million of bonds has sent ACB stock tumbling once again. The 7% shareholder dilution associated with this conversion at a 3.28 CAD ($2.46) price is exactly the type of semi-desperate action Aurora will have to take to keep its business going until its fundamentals improve.InvestorPlace - Stock Market News, Stock Advice & Trading TipsToday I want to focus on the signs that will indicate that it may be finally time to buy ACB stock. Here are five things Aurora needs to do to win back investors' trust, according to Cantor Fitzgerald analyst Pablo Zuanic. * Issue Honest GuidanceIt may seem tempting to provide ambitious guidance to please investors in the near-term. But if companies consistently fail to deliver on that guidance, they are doing nothing more than creating a reputation for constant disappointment. Zuanic says the $107 million Aurora raised from equity financing in October and the $216 million it has raised from bond conversions will be used up by the end of Q1 of 2020 unless the company's cash-burn rate drops. Management needs to either clearly outline its long-term financing plan or clearly discuss spending cuts because one of the two will be critical within the next six months. * 7 Stocks to Buy in December * Demonstrate a Path to ProfitabilityProfitability will eventually be key for all marijuana stocks. But Aurora stock has been especially plagued by ACB's cash burn and equity dilution. The company said it would reach positive earnings before interest, taxes depreciation and amortization (EBITDA) in the quarter that ended in June. It didn't hit its target. EBITDA margins took a bit step back in the September quarter, dropping from -12% of the company's sales to -56% of its sales."Even if some of this relates to one-off factors…, more clear guidance is required given the circumstances and even perhaps cost cuts," Zuanic says. * Taper Down the Stock CompensationThe amount of Aurora stock that the company uses to pay employees is unreal. Share-based comp was 33% of sales in the September quarter and averaged 43% of sales over the previous fiscal year. For perspective, OrganiGram's (NASDAQ: OGI) stock-based compensation was only 8% of its sales last quarter. Aphria's (NYSE: APHA) stock-based compensation was just 4% of its sales in Q3.Diluting shareholders to raise capital to grow the business is bad enough. Diluting shareholders to line the pockets of management adds insult to injury. Zuanic says management should make a gesture of good faith and freeze share-based compensation for one year until the company's fundamentals improve. * Scrap the CBD BusinessWhen times get tough, companies have to make tough decisions. Aurora's balance sheet is clearly spread dangerously thin. Zuanic says the company needs to focus on its core business. In fact, he says Aurora needs to drop its U.S. cannabidiol (CBD) strategy all together. It's unclear just how much time, money and resources Aurora has been devoting to the CBD business. But it seems unlikely at this point that it will end up being a market share leader in the U.S. CBD market."The market is overcrowded with a plethora of brands and future growth is now being questioned without clear FDA guidelines," Zuanic says. * Focus On CanadaOne year after Canada legalized recreational cannabis smoking, the nation recently legalized derivatives such as cannabis edibles and beverages. Zuanic says there will certainly be growth opportunities for cannabis companies in Europe.But Aurora needs to maintain and/or grow its market share in its core Canadian market in the near-term. Domestic medicinal cannabis still represents 36% of Aurora's total cannabis revenues. By continuing to milk the medicinal market, growing its market share in the recreational market and establishing a strong footprint in edibles, Aurora has all the near-term opportunities it needs right in its Canadian back yard, according to the analyst. How to Play Aurora StockUnfortunately, little has changed about Aurora's near-term outlook since I wrote my last article a month ago. I still see ACB stock as a show-me story and would recommend that investors stay on the sidelines until management proves it can get the company back on the right track.Zuanic is a bit more optimistic and says patient investors can co ahead and buy Aurora stock on weakness at this point. Cantor Fitzgerald has an "overweight" rating and a 3.11 CAD ($2.34) price target on Aurora Cannabis stock.As of this writing, Wayne Duggan did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 7 Stocks to Buy in December * 7 Unsteady Stocks Investors Should Consider Selling Before 2020 * 7 Entertainment Stocks to Buy to Escape Holiday Blues The post 5 Things Aurora Cannabis Must Do to Get ACB Stock Back on Track appeared first on InvestorPlace.
Attorney Advertising -- Bronstein, Gewirtz & Grossman, LLC notifies investors that a class action lawsuit has been filed against Aurora Cannabis Inc. ("Aurora" or the "Company") (NYSE: ACB) and certain of its officers, on behalf of shareholders who purchased Aurora securities between September 11, 2019 and November 14, 2019, inclusive (the "Class Period"). Such investors are encouraged to join this case by visiting the firm's site: www.bgandg.com/acb.
I have maintained a "Bearish" view on most of the cannabis stocks in the last few months. My view has been backed by factors of cash burn, lack of clinical research and regulatory hurdles for industry players. There are still no compelling reasons to consider exposure to Aurora Cannabis (NYSE:ACB), even with ACB stock sliding by 75% from the highs of 2019.Source: Shutterstock As I scroll through the company's presentation, Aurora Cannabis talks about a CAD$70 billion global market opportunity for medicinal cannabis.On the other hand, the U.S. Food and Drug Administration has issued warning letters to 15 companies. The reason is "for illegally selling products containing cannabidiol in ways that violate the Federal Food, Drug, and Cosmetic Act."InvestorPlace - Stock Market News, Stock Advice & Trading TipsThe FDA also mentions that it "has not approved any CBD products other than one prescription human drug product to treat rare, severe forms of epilepsy." * 7 Strong Buy Stocks That Are Bargains Right Now The bottom line: Most of the medicinal cannabis products in the market are based on claims than clinical research-backed evidence. With the FDA having a strong oversight, it is unlikely that the medicinal cannabis industry will grow anytime soon. The "assumed" $70 billion medicinal cannabis market is therefore significantly delayed.It's not all gloom, a recent study has shown that a derivative of cannabis can be useful in the treatment of metastatic pancreatic cancer. There will gradually be progress in medicinal cannabis, but cannabis stocks will have an extended period of cash burn. More Equity Dilution LikelyAnother reason to be bearish on Aurora Cannabis stock is the equity dilution factor. For the first quarter of 2020, Aurora Cannabis reported cash & equivalents of CAD$152 million.For the same period, the company's cash used in operations was CAD$95 million. This implies an annualized cash used in operations of nearly CAD$400 million. Therefore, if this rate of cash burn sustains, Aurora will need to raise funds through equity dilution or leveraging.Aurora Cannabis also seems to be more in-sync with the ground reality than before. The company has ceased construction activity at its Aurora Nordic 2 facility in Denmark. This will result in CAD$80 million savings over the next year. With a glut of dry cannabis and cannabis oil, it makes sense to postpone expansion activities and reduce cash burn.However, it does not imply that Aurora can generate profit at EBITDA level. With the introduction of value-added products like vape pens and edibles, investment in selling & marketing will remain high.In addition, R&D expenses will remain high as the company tries to introduce more value-added products. Therefore, the company will remain free cash flow negative and dilution is likely to take Aurora stock lower. Recreational Cannabis and ACB StockIn December, Aurora Cannabis will roll-out of vapes, concentrates, and edibles. Within edibles, the company plans to launch gummies, candies and baked goods. The company expects these products to boost margin and hence reduce cash burn.However, recreational cannabis also faces high regulatory risk. As an example, The Centers for Disease Control and Prevention is investigating 193 potential cases of severe lung illness associated with e-cigarettes. If there are clear conclusions on the harmful effects, it can impact the growth of vapes.My key point is that there are several risks related to cannabis and this will translate into regulatory headwinds. Only evidence-backed research can provide clarity and that will only happen gradually. My Final Verdict on Aurora StockFor a stock that has declined by 75% within one year, it might seem tempting to consider exposure. Temporary bounce back from oversold levels can't be ruled out, but Aurora stock is still unattractive from a long-term perspective.With prospects of sustained cash burn and continued equity dilution, Aurora stock is likely to remain sideways to lower.The positive is that Aurora has 40 clinical studies that are underway or completed. The company is therefore moving in the right direction in terms of evidence backed entry in the global medicinal market. However, investors need to wait patiently with the initial exuberance related to cannabis stocks completely fading away.As of this writing, Faisal Humayun did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 7 Strong Buy Stocks That Are Bargains Right Now * 7 Excellent Bank Stocks Worth an Investment * 4 Small-Cap, Big-Dividend Stocks The post The More You Look, the Less Compelling Aurora Stock Seems appeared first on InvestorPlace.
One of the ironies of the long decline in Cronos Group (NASDAQ:CRON) is that management actually seems to have been mostly correct so far. Unfortunately, it's done little for Cronos stock so far, which is down 72% from its 52-week high.Source: Shutterstock Those declines have come amid a broad sell-off in cannabis stocks. That sell-off has been driven by significant oversupply, and plunging selling prices, in the Canadian market. That in turn suggests sharply lower earnings potential for companies that have aggressively built out their production capacity.But Cronos isn't one of those companies. As CEO Mike Gorenstein put it on his company's second-quarter conference call in August, "Our business model is not to be the farmer."InvestorPlace - Stock Market News, Stock Advice & Trading TipsCronos is following the example of Altria (NYSE:MO), which owns a large stake in the company. Altria doesn't grow tobacco but is the most profitable tobacco company in the world. * 7 Strong Buy Stocks That Are Bargains Right Now That strategy seems particularly wise at the moment. Meanwhile, Cronos is sitting on a cash hoard at a time when fears of bankruptcy are rising across the space. So far, investors haven't given Cronos any credit for those positive attributes, and that might not change any time soon. But it likely will at some point. The Oversupply ProblemIndustry-wide pricing pressure makes it obvious that Canadian cannabis companies have overbuilt production capacity. For Cronos, the average selling price in the third quarter declined 28% from second-quarter levels and was nearly halved from year-prior levels.Other cannabis producers saw similar pressure. Tilray (NASDAQ:TLRY) saw roughly the same trend, though Aurora Cannabis (NYSE:ACB) did manage to keep prices relatively stable. Canopy Growth (NYSE:CGC) said on its earnings call that it would cut prices on softgels and oils, while an analyst on that call pointed to licensed producers in Canada "becoming more aggressive" on flower pricing as well.This really shouldn't be a surprise. Legalized recreational markets in the U.S. have had their own oversupply problems, with Oregon a notable example. In Canada, meanwhile, the news is unlikely to get better.As Will Ashworth pointed out on this site back in August, the Canadian market is estimated to need roughly 1 million kilograms of cannabis. There is as many as 3 million kilograms' worth of supply online or on the way.This is a huge problem for large-scale producers who are going to see harvests potentially go to waste and lower prices on what they can sell. Put another way, marijuana in legalized markets is going to become a commodity, just as skeptics have argued. And selling a commodity usually is a highly competitive and low margin business. Cronos Stock and OversupplyBut, again, Cronos largely saw this coming. It's not a large producer of cannabis. It's already cutting back on production capacity, shifting cultivation assets at its Peace Naturals Campus to R&D and warehousing. Cronos will buy at least some of the cannabis it needs from third-party producers, instead of growing its own.Going forward, Cronos is focusing on derivatives. Thanks to its Redwood acquisition, Cronos can become a significant player in the U.S. CBD (cannabinoid oil) market. In Canada, the company is aiming to be a major player in the so-called "Cannabis 2.0" products like beverages, edibles, and vapes.And so Cronos Group may well benefit from plunging wholesale prices. It doesn't have massive grow rooms that require the company to either use those assets at inferior margins or leave them idle. Rather, it can buy flower cheap at wholesale prices and, at least in theory, convert that flower to higher-priced, higher-profit derivatives. The Balance Sheet Edge for Cronos StockThe decision not to build out production capacity has positioned Cronos well in another sense. The company's balance sheet is rock solid.Thanks to its Altria investment, Cronos closed its third quarter with roughly CAD$2 billion ($1.5 billion U.S.) in cash -- and no debt. And its cash burn rate is much lower than that of other cannabis companies; as an analyst noted on the Q3 call, Q3 numbers suggest the company has 41 quarters' worth of cash left.That's not the case for other producers. Aurora just diluted its shareholders once again, the only way it could manage a problematic convertible bond that was due in March. Hexo (NYSE:HEXO) has a cash burn problem. Many smaller cannabis companies no doubt will struggle to adjust to the new normal of lower pricing.As Gorenstein put it on the Q3 call, "the focus is going to quickly shift to survival" in the industry. And some companies simply may not survive.There are going to be assets available on the cheap, whether from companies trying to salvage some sort of value for their shareholders or via a restructuring process. Cronos, moreso than perhaps any other cannabis company save Canopy, is best-positioned to capture some of those assets, potentially at a sharp discount to their cost. The Story Behind Cronos Group StockAgain, it looks like Cronos' decision not to chase production was wise, though that decision has done nothing to help CRON stock so far.Part of the issue has been the narrative behind CRON. The stock never has had a compelling story. In fact, as I wrote earlier this year, the best argument for CRON stock was that it was the pot stock for investors who believed pot stocks were overvalued. Unsurprisingly, that hasn't been a case that has drawn many buyers.But plunging stock prices and plunging cannabis prices themselves are changing that fact. A narrative for Cronos Group stock is emerging. It's the cannabis company that isn't going bankrupt. It's the company with the most flexibility in adapting to the new normal.Cronos can try to ramp spending behind derivatives as it competes against rivals who may be watching every penny. It should benefit from oversupply in a way that few Canadian companies can. The combination of Altria's distribution capabilities plus the Lord Jones brand acquired in the Redwood deal, make the company a strong player in CBD in the U.S.And Cronos Group, backing out that cash, now has an enterprise value below $1 billion. Suddenly, if thanks only to the plunge across the sector, there is a story behind CRON stock. Increasingly, it looks like the stock for investors who believe in the long-term opportunity in cannabis -- and in a short-term disruption that may well benefit Cronos. The Bottom Line on Cronos StockAll that said, I'm not rushing in to buy Cronos stock just yet. There is an opportunity here, but Cronos still needs to capitalize. It has to win in a U.S. CBD market that already is quite crowded. I'm personally not sold on the long-term viability of the CBD market, either, given the lack of proof of efficacy and widespread questions about dosing. It has to spend its capital wisely.Meanwhile, $1 billion might sound cheap in a sector where multiple companies had much higher valuations just months ago. But Cronos still is a company that generated just 12 million CAD in revenue in its most recent quarter.Obviously, lower production leads to lower revenue relative to other publicly traded cannabis companies. Still, Cronos is years from profitability and trades at a sky-high multiple to even 2020 and 2021 revenue.More broadly, I'm not convinced that the sell-off in cannabis stocks, and Cronos stock, is over. Fundamentally and technically, there's still little evidence of a bottom, even with some signs of life in recent trading.All that said, CRON stock at the least is intriguing if for no other reason that it finally has a real narrative behind it. The current cannabis environment is not what investors believed it would be -- but it's roughly what Cronos management expected. If they're as correct going forward as they have been in 2019, CRON stock has big upside from current prices.As of this writing, Vince Martin has no positions in any securities mentioned. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 7 Strong Buy Stocks That Are Bargains Right Now * 7 Excellent Bank Stocks Worth an Investment * 4 Small-Cap, Big-Dividend Stocks The post Cronos Stock Gets Closer to Being a Buy, but It's Not There Yet appeared first on InvestorPlace.
The woes continue for Aurora Cannabis (NYSE:ACB). ACB stock continues to fall as concerns increase about the financial health of the company. The early bet the company made on capacity has deeply hurt the company as sales fall alarmingly short of production levels.Source: ElRoi / Shutterstock.com As a result, investors have begun to balk at the premium stock prices previously commanded by Aurora and other marijuana equities. This has led to a perfect storm that continues to hammer the sector.While I do not think investors should lose all hope for Aurora Cannabis, the pain will certainly continue for ACB stock.InvestorPlace - Stock Market News, Stock Advice & Trading TipsMany had considered Aurora stock a "top-tier" cannabis equity due to its production capacity. As cannabis stocks gained interest, it worked to make itself the world's largest marijuana producer. Admittedly, that may have looked like a smart strategy in the past. * 7 Strong Buy Stocks That Are Bargains Right Now However, Aurora missed out in other critical areas. It has not made a U.S. hemp deal like Canopy Growth (NYSE:CGC). Neither has the company secured key investors from related industries like Canopy with Constellation (NYSE:STZ) or Cronos Group (NASDAQ:CRON) with Altria (NYSE:MO).Now, a supply glut has turned Aurora's bet on production into a huge disadvantage. ACB stock saw a massive drop following earnings in mid-November. While the company beat on earnings, it fell short on revenue. The worsening supply glut likely explains why.The numbers explain the fallout from the supply glut well. Aurora Cannabis produced 41,436 kg of dried marijuana in its most-recent first quarter. Unfortunately, the company only sold 12,463 kg during the same period. In the quarter before, it sold 17,793 kg and produced 29,034 kg. The recent legalization of edibles and beverages will only offer limited help under such circumstances. Exports Will Not HelpSo too will exports. In the previous two quarters, it exported 4,553 kg and 4,481 kg, respectively.Also, do not count on U.S. legalization to stop the death spiral anytime soon. Despite the passage of a bill to deschedule cannabis in a U.S. House committee, legalization still faces a long road. Senate Majority Leader Mitch McConnell has long opposed marijuana reform, though he met with industry leaders and toured cannabis facilities in October.Other politicians have echoed these sentiments. Joe Biden still called it a "gateway drug" before walking the comment back. In my home state of Texas, the Lieutenant Governor blocked a decriminalization bill that likely would have passed otherwise.About 67% of Americans now support legalization, a massive turnabout from 20 years ago when 63% opposed legal status for weed. For this reason, I think the pro-cannabis forces will eventually win these battles. Still, victory will probably not come quickly. ACB Stock Is Set to Fall FurtherWhether Aurora has enough time remains unclear. Aurora stock has fallen 30% since I started my "two difficult truths about ACB stock" in early November. I argued that Aurora will continue to fall as the cannabis stock bubble has not yet wholly popped. I also said the massive dilution and the drop in Aurora Cannabis stock would lead to a reverse split.Unfortunately, both of these remain hard truths despite the equity's difficult November. I have long criticized their massive dilution strategy. Now, others have begun to take notice of the company's precarious finances.Our own Ian Bezek also goes after the dilution strategy on Aurora stock. He calls it not only an effective way to raise money but also a "death spiral." Even though I think Aurora Cannabis may still survive, I also cannot disagree with his description. The Bottom Line on ACB StockOversupply means the pain will continue for Aurora stock. Analysts have considered Aurora a top marijuana stock due to its lead in production capacity. Unfortunately, this has turned into a liability as their ability to produce far surpasses market demand.With the lack of access to the U.S. market and further stock dilution likely coming, the company offers only reasons to bet against Aurora stock.Aurora's bet on supply could benefit the company eventually. However, first, it will have to find a way to survive the supply glut. Although it may do so, the company will have to sacrifice further value in ACB stock to achieve that end. Unless and until it can break the death spiral, investors should stay away.As of this writing, Will Healy did not hold a position in any of the aforementioned stocks. You can follow Will on Twitter at @HealyWriting. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 7 Strong Buy Stocks That Are Bargains Right Now * 7 Excellent Bank Stocks Worth an Investment * 4 Small-Cap, Big-Dividend Stocks The post An Early Bet on Capacity Will Continue to Haunt ACB Stock appeared first on InvestorPlace.
Investing.com - Aurora Cannabis (TSX:ACB) moved higher on Wednesday after it announced it was opening up its first flagship retail store in Edmonton, Canada.
Aurora Cannabis (ACB) stock took a beating since the latest earnings report, when it announced a 24 percent decline in net revenue sequentially, which included a 33 percent drop in Canadian recreational pot sales. Its market-leading gross margins and cost per gram of under C$1.00 weren't enough to support its share price.Consequently, the company announced it would stop construction at two facilities which will save it approximately C$190 million. It also took steps to reduce the amount of its convertible debentures coming due in 2020.While the company will continue to face short-term challenges, it's still one of the strongest positioned Canadian-based cannabis companies to take advantage of the long-term cannabis trend that is still in the early stages of growth.Long-Term Catalysts and Benefits to ReapThe two major catalysts for Aurora are the inevitable and significant increase in retail cannabis stores in Canada, and the impact derivative products will have on its top and bottom lines. Derivatives will be allowed to be sold in Canada in the last couple of weeks of December.Concerning the small number of retail cannabis stores, that has come from the slow approval rate of licenses in Canada. How quickly they are approved and the new stores are opened will determine the impact on Aurora's revenue and earnings.A key thing to understand there, beyond the obvious lack of places to sell cannabis out of, is that it also keeps the black market strong. That's relevant because it allows for lower-priced pot to compete against the higher-priced pot of legal competitors. That will change as the number of stores continue to climb.On the derivatives side of the business, it will provide Aurora with the opportunity to expand its already popular portfolio of brands into higher price products that include wider margins and stronger earnings.It's difficult to know how quickly this'll have an impact on Aurora because of the lack of visibility on how rapidly the company will roll out products, and how quickly they'll be embraced by the market.I see it having at minimum a decent impact on the performance of Aurora in the first calendar quarter of 2020, and probably giving a much clearer look at what it will mean for Aurora in the second calendar quarter of 2020, when the company should have close to a full array of derivative products offered to the market.In the short term, the pace of opening of new retail cannabis stores will determine the growth trajectory of Aurora.Taken together, the increase in cannabis stores and new product lines should have a meaningful impact on the performance of Aurora by the end of the second calendar quarter of 2020.The good news is as this catalysts start to mature, Aurora has more than enough production capacity to meet growing demand.Consensus VerdictWall Street is not convinced just yet on the Canadian weed giant, but cautious optimism is circling, as TipRanks analytics demonstrate Aurora as a Moderate Buy. Based on 12 analysts tracked in the last 3 months, 5 are bullish on ACB, 5 remain sidelined, and 2 are bearish. Importantly, the 12-month average price target stands tall at $4.96, marking over 100% upside from where the stock is currently trading. (See Aurora’s price targets and analyst ratings on TipRanks)ConclusionI don't see Aurora Cannabis having another earnings disaster as it did in the last reporting period. That doesn't mean its share price couldn't fall further, only that the numbers have nowhere to go but up.Only a disastrous incremental roll out of cannabis stores in Canada could keep the company from vastly improving sales in the quarters ahead. I don't include the final calendar quarter of 2019 among those quarters. The reason why is there doesn't seem to be a sense of urgency in Canada to expedite the licensing process.If there is any surprise on the positive side in the last quarter of 2019, it could surprise to the upside. I wouldn't count on it in the near term though.Over the long term I still see Aurora Cannabis being the top company in the sector. It has unrivaled international presence, superior production capacity for long-term growth, extremely low cost per gram, and the industry leader in gross margin. These will all become key factors in the months and years ahead.Investing in Aurora isn't for the faint of heart, and it should be considered a long-term play with enormous upside potential. It's not a stock to bet the farm on, but one that should be part of the portfolio allocated to growth.I maintain that patient investors are going to be rewarded significantly. We shouldn't focus on any one or two quarters, but the underlying fundamentals of the cannabis trend and Aurora.To find good ideas for cannabis stocks trading at fair value or better, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Are marijuana stocks on U.S. exchanges a good buy now? The marijuana industry gets a lot of hype, but look past the smoke and analyze pot stocks on their fundamentals and technicals.
Over the past six months, Aurora Cannabis Inc (NYSE: ACB ) shares have fallen almost 70%. On Tuesday, Cantor Fitzgerald reiterated a bullish stance on the cannabis company and updated its estimates based ...
Aurora Cannabis is opening its flagship retail store at the West Edmonton mall in Canada. Yahoo Finance's Adam Shapiro and Heidi Chung discuss on "The Ticker."