Thursday, 28 November 2019

Aurora Cannabis Inc. Stock Continues to Face Short-Term Challenges


Aurora Cannabis Inc. is a Canadian licensed cannabis producer. It is headquartered in Edmonton. It trades on the TSE (Toronto Stock Exchange) as ACB. 

As of 2018, Aurora Cannabis had 8 licensed production facilities, 5 sales licences, and operations in 24 countries. It had a funded capacity of over 625,000 kilograms of cannabis production per year. The bulk of this capacity is based in Canada. The company has a growing presence in international markets, especially Denmark and Latin America. This is the 2nd largest cannabis company in the world by market capitalization, after Canopy Growth Corporation. The company started trading on the NYSE on Oct. 23, 2018 using the ticker ACB.


Aurora Cannabis (ACB) stock did not get a good latest earnings report. This was when it announced a 24% decrease in net revenue, which included a 33% decrease in Canadian recreational pot sales. Share price could not increase, even though the company has a cost per gram of under C$1.00 and market-leading gross margins.

Because of these events, the company announced it would stop construction at 2 facilities. This will save it approximately C$190 million. Aurora Cannabis also took steps to decrease the amount of its convertible debentures coming due in 2020.

Right now the stock price is pretty much at the lowest point of the past 2 years. The company continues to face short-term challenges. However, it's still a strong positioned Canadian Cannabis Company. It is likely to benefit from the long-term cannabis trend that is still in the early stages of growth.

The increase of retail cannabis stores in Canada is significant. The approval rate is slow of licenses for these cannabis stores in Canada. The number of stores is increasing. How quickly these stores are approved and opened will have an effect on Aurora's revenues.

There is a new marijuana product that will be allowed to be sold in Canada in December: derivatives. What are marijuana derivatives? They are extracts from the Cannabis sativa plant, usually in the form of an oil. Derivatives can be natural or synthetic (man-made). Derivatives will provide Aurora with the opportunity to expand its portfolio of brands. It could have new higher price products that have wider margins and stronger earnings. It is not clear how quickly the company can roll out these new products. 

There are reasons to stay optimistic for Aurora Cannabis Stock. The increase in cannabis stores and new product lines should improve performance of Aurora in 2020. Aurora has enough production capacity to meet growing demand.

3 comments:

  1. Canada will move forward with the next phase of the marijuana legalization process. The regulations concerning derivative pot products will officially take effect. Derivatives include nondried flower products, such as edibles, cannabis-infused beverages, vapes, concentrates, and topicals (cannabis-infused lotions, balms, and oils that are absorbed through the skin for localized relief of pain, soreness, and inflammation).

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    1. I'm glad you like the article. Here's another interesting note: what is a tincture?

      Tincture (noun)
      1.
      a medicine made by dissolving a drug in alcohol.
      "the remedies can be administered in the form of tinctures"
      2.
      a slight trace of something.
      "she could not keep a tincture of bitterness out of her voice"
      (verb)
      be tinged, flavored, or imbued with a slight amount of.
      "John's affability was tinctured with faint sarcasm"

      A tincture is usually an extract of plant or animal material dissolved in ethanol. Solvent concentrations of 25–60% are most common, but may run as high as 90%. In chemistry, a tincture is a solution that has ethanol as its solvent.

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