Aurora Cannabis Stock Forecast
The medical and recreational cannabis industry is one of the most exciting industries out there. Even if you don’t necessarily enjoy smoking marijuana, there’s no denying that there are millions of people who do. Any company that is able to capitalize on the habits of millions of people stands to make a great deal of money. For this reason, it’s worth asking yourself if you should add a marijuana stock to your portfolio.
If this question has ever crossed your mind then you might have taken a look at Aurora Cannabis (Nasdaq: ACB) as a potential candidate. Aurora Cannabis is currently the eighth largest cannabis company in the world by market capitalization. It’s ranked behind the U.S. marijuana companies Curaleaf, Green Thumb Industries, Trulieve Industries and WM Technologies. It’s also ranked behind fellow Canadian companies Canopy Growth Corporation, Cronos and Sundial Growers.
At its biggest, Aurora Cannabis had eight production facilities, five sales licenses and operations in 25 countries. In some years, its stock has soared. In others, it has dropped like a rock.
So, where does Aurora Cannabis stock stand today? Is it worth adding to your portfolio? Let’s take a quick look at an Aurora Cannabis stock forecast and find out.
Aurora Cannabis Stock Forecast
NOTE: I’m not a financial advisor and am just offering my own research and commentary. Please do your own due diligence before making any investment decisions.
Cannabis Marijuana Industry Update
The excitement behind marijuana companies has been bubbling for years. In fact, Aurora Cannabis was actually founded in 2006 which was over a decade before Canada legalized the retail sale of Cannabis in 2018. However, actual results across the marijuana industry have mostly fallen flat.
While selling marijuana legally sounds like a money-printing machine, the machine has been known to jam occasionally. To name just a few industry roadblocks, retail stores have been slow to roll out in Canada, vaping-related illnesses have become fairly common, there’s been an oversupply of commercial cannabis, and there’s been a general lack of profitability from cannabis producers.
Also, Aurora operates mainly in Canada where the market for cannabis sales is smaller. The U.S. market is much larger and represents 80% of the global market. Unfortunately, despite being geographically close, Aurora Cannabis doesn’t have a strong foothold in the U.S. market.
Due to the risk factors listed above, shares of marijuana stocks tend to be volatile. Aurora Cannabis stock is no exception.
Let’s take a closer look at an Aurora Cannabis stock prediction…
Aurora Cannabis Stock Prediction
Since going public in 2017, Aurora Cannabis has been a roller coaster. For the two-year period from 2018-2020, the cannabis stock saw its price shoot from $30 to $100 per share and then back down three separate times. This means that two investors could have bought Aurora Cannabis stock just a few months apart but had shockingly different returns.
Since its last big peak in early 2019, Aurora Cannabis has lost approximately 95% of its value. Part of the reason for this decline is that it posted an impressive $3.28 billion loss in 2020 on revenues of just $278 million. It simply has too much overhead and not enough revenue coming in.
Another risk factor to point out is that Aurora has come dangerously close to running out of money several times. To stay afloat, it’s resorted to diluting its stock. This is usually not a good sign because it means that it was unable to raise money through other methods. This can be a sign that investors don’t have faith in its business. In May 2020, it initiated a 1-for-12 reverse stock split. Its stock hovered below $1 for so long that it was at risk of being delisted from the exchange.
It’s safe to say that things have probably been stressful at ACB headquarters. So what is management’s plan to right the ship? Here’s the Aurora Cannabis stock forecast looking forward.
ACB Stock Forecast
One of the biggest changes that Aurora Cannabis has made is by finding a new CEO in Miguel Martin. Miguel has been the CCO for Aurora since early 2020 and was also the CEO of Reliva, which Aurora acquired in mid-2020. So far, one of Miguel Martin’s biggest initiatives has been to cut costs.
He’s sought to do this by closing several of its Canadian production sites to reduce its fixed asset footprint. He has also outsourced its sales team and is shifting the company’s focus to its highest-growth, highest-margin product categories. While announcing this new strategy, he reportedly shook his fist and exclaimed, “I want our margins to be higher than our customers!” (NOTE: He didn’t actually say this, but he should have).
While these cost-cutting measures will allow Aurora Cannabis to tread water for a little while longer, eventually it’ll need to improve sales. One of the ways that it’s hoping to do this is through its acquisition of Reliva, which mainly operates in the United States. After this acquisition, Interim CEO Michael Singer said…
The partnership between Aurora and Reliva is expected to create a market-leading international cannabinoid platform that we believe can deliver robust revenue and profitable growth.
Since Miguel Martin is the former CEO of Reliva, he should already have a good idea of how these two companies can combine forces to achieve profitability.
Aurora Cannabis is expected to announce its earnings on September 21, 2021. Analysts are expecting earnings per share of -$0.28 and revenue of $56.99 million. That would be a slight increase from its previous quarter, where it reported revenue of $55.16 million.
Keep in mind that Aurora Cannabis has missed four of its last four earnings per share expectations. Last quarter, it missed this metric by 40%.
September 21, 2021, will also be the one-year anniversary of Miguel Martin taking the helm. Whether or not this has been enough time for his initiatives to show up in Aurora’s financials is another story. Through its initiatives to cut costs and increase U.S. sales, it seems to be heading in the right direction.
However, it’s important to remember that investor expectations play a big role in a company’s short-term stock price. It doesn’t necessarily matter how much money it reports for earning on the 21st. What matters is how these earnings compare to the expectations set by investors. In particular, cannabis stocks seem to live and die by investor expectations. A small wind of good news can spread through Wall Street like wildfire. On the other hand, another earnings miss could mean that investors won’t go near Aurora Cannabis stock for another year.
Either way, it’ll be exciting to see what the future holds for Aurora Cannabis.
I hope that you’ve found this Aurora Cannabis stock forecast to be valuable in determining whether Aurora Cannabis is a good stock to buy! As usual, all investment decisions should be based on your own due diligence and risk tolerance.
Aurora also made our list of cheap marijuana stocks to buy. Feel free to check that out and also sign up for Profit Trends below. It’s a free e-letter that’s packed with investing tips and tricks. You’ll find some of the best investment trends to profit on.
About Teddy Stavetski
A University of Miami grad, Teddy studied marketing and finance while also playing four years on the football team. He’s always had a passion for business and used his experience from a few personal projects to become one of the top-rated business writers on Fiverr.com. When he’s not hammering words onto paper, you can find him hammering notes on the piano or traveling to some place random.