Aurora Cannabis stock falls after Stifel says sell, slashes price target – MarketWatch

Aurora Cannabis\ stock falls after Stifel says \sell,\ slashes price target - MarketWatch
Pot Shorts Cash In On Hazy Profitability Path: Cannabis Weekly
Whether or not you’re new to investing there are a number of mistakes you’ve likely already been warned about. Buy low and sell high, meet with your banker before investing, diversify, do your own research.

All of these warnings are definitely ones to pay attention to, but there are other common mistakes that almost every investor falls prey to.

That leads to the obvious follow-up question: When will Aurora achieve profitability? The company didnt hit its goal of positive adjusted EBITDA in the fourth quarter. Ibbott said in the Q4 call that Aurora would report positive adjusted EBITDA “in the short term, not the long term.” He didnt say when that would happen, though, because Aurora continues to be dependent on the timing of the opening of retail locations to serve Canadas adult-use recreational cannabis market.

Let’s face it: a lot of us tend to get into investing because there’s a new and exciting industry that is just dying to be taken advantage of. Take the cannabis industry today. Shares of cannabis companies skyrocketed last year as investors clambered to get on the marijuana train before it left the station.

Well, that train has certainly left the station recently, with many large companies seeing share prices cut in half as investors now become wary ahead of a recession. Frankly, they’re also impatient, with many marijuana companies not putting out profits as soon as investors had hoped.

Now I’m not saying you shouldn’t buy anything in a niche market. Aurora Cannabis Inc. (TSX:ACB)(NYSE:ACB) is an excellent way to get in on cannabis right now.

The stock is selling at a low price, but is set up to be the largest cannabis producer in the world with potentially 700,000 kilograms by the end of next year. It’s already set up in 25 countries, including Canada, and is well on the way to reaching a price per sale per gram of $1 by the time its production is complete.

Aurora has taken the dilution solution to fund its growth more than any other Canadian cannabis producer. However, the growth at any cost perspective that many investors had in the earlier days of the cannabis industry has given way to a more sober view on the negative effects that issuing new shares causes. 

So while you can buy into niche markets, a mistake would be to buy up a bunch of companies in this industry and expect them all to rise. Instead, do your research and focus on a few.

You need a goal. That’s priority number one when it comes to investing. With no goal, your investing will be all over the place with nothing to show for it in the long term.

But positive adjusted EBITDA isnt the same thing as true profitability. Aurora Chief Corporate Officer Cam Battley stated in the Q4 call that the company is emphasizing a pathway to profitability more than some of its peers. However, its still uncertain how long that pathway will take.

Apart from the obvious goal of making money, what are you investing for? To pay down debts? To buy a car? To retire? Consider this and then speak to your banker about what number you’d like to reach, and in how long.

Hundreds of vape-related illnesses, even including five deaths, have been reported in the United States. This has become such a serious issue that the Trump administration plans to ban flavored e-cigarettes, with individual states taking action or considering doing so as well.

If you have time, considering a steady, low-risk stock would be a great place to put your cash. An exchange-traded fund such as BMO Low-Volatility Canadian Equity ETF (TSX:ZLB) is a great option as the company is managed by analysts looking for stocks that offer little-to-no risk.

That means while you won’t see a huge jump like you would with, say, Aurora, you will see a steady upward trajectory for your cash if you invest for the next few decades.

Battley took a few jabs at Canopy Growth, Auroras top rival, during the Q4 call. Theres one area, though, where Aurora is clearly trailing Canopy — entering the U.S. market. And it remains somewhat murky as to when Aurora might expand into the United States.

It’s the nature of the beast. Markets go up, and go down. Every day something can happen that send stocks into a tail spin, leading investors to panic. Take Shopify Inc. (TSX:SHOP)(NYSE:SHOP) for example. It could be said on both sides of this stock that investors let panic get the better of them.

Perhaps the biggest worry for investors in marijuana stocks is that there could be a supply glut on the way in Canada that drags down the entire industry. Despite these concerns, Aurora has moved forward with significant increases to its production capacity.

As the stock climbed higher, investors panicked that they would miss out. Now, the stock is falling as investors worry about the future of the tech industry, leading to investor panic yet again and a huge sell off.

But again, you need to research your companies and decide whether or not they are long-term buys. Sure, you want to buy low and sell high, but if you wait a long time you’re almost guaranteed to be selling high no matter what.

Currently, however, international cannabis sales account for only around 5% of Auroras total net revenue. The global market will need to pick up momentum in a major way for Auroras big bet on massive production capacity to pay off.

It’s far better to wait out a storm such as a recession and sell high in a few decades. Shopify is set up to be one such stock that could still see significant returns for the long-term investor.

Could these vaping concerns hurt sales in the coming Cannabis 2.0 market for cannabis derivative products in Canada? Its a huge question for Aurora, which continues to count on significant growth from vape-related products.

Its recurring revenue, fulfillment centres, and large clientele are just a few areas where the company has proven its strength. So stop watching its share price so closely! It will all come out in the wash.

Investors disappointment over Auroras Q4 letdown will probably fade away soon enough. But there are still five big unanswered questions for the company that probably wont go away so quickly.

Marijuana was legalized across Canada on October 17th, and a little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.

Besides making key partnerships with Facebook and Amazon, theyve just made a game-changing deal with the Ontario government.

This is the company we think you should strongly consider having in your portfolio if you want to position yourself wisely for the coming marijuana boom.

Fool contributor Amy Legate-Wolfe owns shares of Aurora Cannabis and Shopify. Tom Gardner owns shares of Shopify. The Motley Fool owns shares of Shopify and Shopify. Shopify is a recommendation of Stock Advisor Canada.

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