|Bid||10.63 x 4000|
|Ask||10.68 x 3200|
|Day's Range||10.22 - 10.74|
|52 Week Range||3.71 - 26.40|
|Beta (5Y Monthly)||3.26|
|PE Ratio (TTM)||49.31|
|Forward Dividend & Yield||N/A (N/A)|
|1y Target Est||N/A|
Aurora Cannabis (ACB) investors are a resilient lot. The Canadian cannabis producer is notorious for diluting its shares via cash raising efforts. The company has continually burnt a hole through its reserves, and the share count has ballooned over the years as it has attempted to put the fires out. Its latest move has involved another attempt to pad the coffers; On Thursday, the company announced a bought deal of $125 million, in which it has agreed to sell approximately 12 million units for $10.45 each. Within a 30-day period, the underwriters can also buy an additional 10% of the units. Should the warrants be exercised, the full dilution going by Thursday’s closing price would be 9%, and could reach 9.8%, should the additional 10% option be exercised. So, further bad news for shareholders? Actually, not so, says Jefferies analyst Owen Bennett. “We welcome this after flagging a risk of underinvestment following the recent business update,” the analyst said. “Since then, US political developments also mean the US market could open up sooner rather than later. ACB will certainly need cash to establish a US foothold, yet we still wonder if this is enough.” Cannabis companies have opened the year on the front foot as investors have banked on President Biden and the new U.S. administration plowing ahead with federal marijuana reform. The move could open the door for the Canadian LPs to enter the lucrative U.S. market. As a result, shares of Aurora are up by a massive 125% over the past 3 months, and Bennett has pondered whether the share gains have been justified. The favorable legislation, he says, will mostly benefit the local U.S cannabis companies “unless a Canadian name has the ability to establish a strong US presence.” Can Aurora be one of these? The analyst is doubtful. “Aurora's balance sheet rules out acquiring US assets unless it issues shares at a material dilution,” Bennett summed up, “So while the additional cash is encouraging, we do wonder if still too little to really get a strong US CBD and THC presence.” There’s no change, then, to Bennett’s rating which stays an Underperform (i.e. Sell). Going by the CA$4.59 ($3.63) price target, Bennett expects shares to slide by a painful 66% over the next 12 months. (To watch Bennett’s track record, click here) The Jefferies analyst is not the only Aurora pessimist. The stock has a Moderate Sell consensus rating based on 8 Holds and 4 Sells. While not quite as bearish as Bennett’s forecast, the projection is for downside of 17%, given the average price target currently stands at C$11.17 ($8.82). (See ACB stock analysis on TipRanks) To find good ideas for cannabis stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights. Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
Back in September, I said Aurora Cannabis (NYSE:ACB) stock finally started to look like a risk worth taking. Since that time, ACB stock is up 63.9%. Source: Shutterstock Aurora shares have nearly tripled since Nov. 1 based on optimism about the path to U.S. federal legalization. But even if the U.S. eventually legalizes cannabis, Aurora will still be at a competitive disadvantage to better-positioned companies. Aurora still has major financial problems. The company recently completed its latest in a string of dilutive capital raised to fund its growth efforts. With the stock up big since Election Day, ACB stock investors should at least be taking some of those profits off the table at this point.InvestorPlace - Stock Market News, Stock Advice & Trading Tips Reasons to Like ACB Stock Despite its struggles, there are still plenty of reasons to be optimistic about Aurora’s outlook in the long term. 7 Great Sub-$20 Stocks to Buy After Inauguration Day Morningstar analyst Kristoffer Inton is projecting Canadian medical marijuana sales volume will grow by about 5% annually from 2020 to 2029. He is also optimistic that Aurora will eventually achieve profitability. Eventually. “By 2029, we expect [operating] margin to reach about 19%, due to the full ramp-up of production and fixed-cost leverage against overhead expenses. We forecast Aurora to reach positive free cash flow generation in 2025 as profits rise and the company manages capital spending,” Inton says. Morningstar is projecting revenue growth will accelerate from 13.4% in 2020 to 33.6% in 2021 and 50.6% in 2022. That growth would certainly be impressive. It is likely one of the driver’s behind Inton’s “buy” rating and $26 fair value estimate for ACB stock. Funding Concerns Remain Long-term ACB stock investors know the bear case has always been all about access to capital. In November, Aurora once again raised $172.5 million in capital via an at-the-market equity offering. It’s the latest in a parade of dilutive equity offerings for the company. ACB stock investors are no strangers to seeing their investments chipped away with one offering after another. Incredibly, the stock’s outstanding share count has increased by more than 11,800% in the past six-plus years. Meanwhile, Aurora has pushed to control costs by cutting its production in half. It sacrificed potential international growth opportunities. And it failed to find a major financial backer, unlike many of its Canadian cannabis peers. Cantor Fitzgerald analyst Pablo Zuanic says Aurora is certainly better-positioned to start 2021 than it was to start 2020. He estimates Aurora ended the fourth quarter with only about $41 million in net debt. “We certainly do not blame management for making use of the steep post-election bump experienced by the stock,” Zuanic says of the latest offering. He also said ACB trades at a valuation discount to its Canadian legal producer peers. “Taking the equity offering price (10% discount), ACB trades at a discount to all major LPs, which we think should protect the downside, in relative terms,” Zuanic says. Unfortunately, given the uncertainty in Aurora’s outlook, he doesn’t see much upside for the stock either. Cantor Fitzgerald has a “neutral” rating and C$12 ($9.45) price target for ACB stock. How to Play It I’ve repeatedly pounded my fist about the best approach for investors to take with cannabis stocks. I believe there will be some huge winners in the long term. But there is simply too much risk, too much uncertainty and too much competition at this point to be putting all your eggs in one basket. My favorite cannabis stock is Canopy Growth (NASDAQ:CGC). It has the largest Canadian market share. It has a strong financial backer in minority investor Constellation Brands (NYSE:STZ). And it is well-positioned in the U.S. market via multiple buyout deals contingent upon U.S. federal legalization. But for now, I continue to recommend cannabis investors hold a portfolio of at least four or five of the best Canadian LPs and U.S. multi-state operators. The path forward will likely continue to be difficult from a legal and financial standpoint in the near term. Cannabis investors should consider things like cash flow, debt levels and growth rates, none of which is Aurora’s strong suit. Aurora may still have some tremendous long-term upside ahead. But now is a great chance to take at least some of your ACB stock profits and diversify into other cannabis stocks or other opportunities. On the date of publication, Wayne Duggan held a long position in CGC. Wayne Duggan has been a U.S. News & World Report Investing contributor since 2016 and is a staff writer at Benzinga, where he has written more than 7,000 articles. Mr. Duggan is the author of the book Beating Wall Street With Common Sense, which focuses on investing psychology and practical strategies to outperform the stock market. More From InvestorPlace Why Everyone Is Investing in 5G All WRONG Top Stock Picker Reveals His Next 1,000% Winner It doesn’t matter if you have $500 in savings or $5 million. Do this now. 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Shares of Canadian cannabis grower Aurora Cannabis (NYSE: ACB) dropped today after the company announced a new share offering. Aurora announced that it will be issuing 12 million new shares, plus additional warrants to purchase shares. Aurora will use the $125 million in proceeds "for general corporate purposes, which may include opportunistically reducing debt."