Aurora Cannabis (ACB) is set to report its fiscal 2020 first-quarter results on November 14, and investors are waiting with bated breath. The turmoil in the cannabis sector has led to a negative market sentiment, and Aurora Cannabis has seen its share of suffering this year. What do analysts expect for it going forward?
Aurora Cannabis is likely to have witnessed cannabis revenue growth across all market segments — Canadian Medical, Canadian Consumer and International Medical — in the third quarter. Higher production from companys facilities like Aurora Sky, Bradford, Aurora Air and Polaris might have contributed to growth. With more stores added in recent times, management expects to see a solid first quarter.
On November 6, Compass Point cut Auroras target price to 5 Canadian dollars from 8 Canadian dollars. The company reported disappointing fiscal 2019 fourth-quarter results on September 11, missing its revenue guidance. Peer Canopy Growth (CGC) (WEED) also reported lower-than-expected results. Multiple cannabis companies missing their revenue targets made analysts doubt the future of the sector. Hence, analysts cut the target prices of many cannabis stocks. Recently, PI Financial cut the target prices of a whopping 15 cannabis players.
In Italy, Aurora Cannabis recently won a public tender for supplying medical cannabis for a period of two years, which is likely to have boosted the fiscal first-quarter performance. The introduction of product formats in the Canadian and international consumer markets is also expected to reflect in the upcoming quarterly results.
A total of 17 analysts are following Aurora ahead of its first-quarter results. Their consensus target price for its stock is down at 7.68 Canadian dollars compared to 14.09 Canadian dollars prior to its fourth-quarter earnings release—a fall of 45.4%. Aurora Cannabis closed at 5.03 Canadian dollars on November 8. Its current revised target price shows a potential upside of 53% over the next 12 months.
After Auroras bleak fourth-quarter results, several analysts lowered their target prices. Heres what changes analysts have made to its target price since then:
Cannabis peer Canopy Growth (CGC) (WEED) will report its fiscal 2020 second-quarter results on November 14. Analysts expect its revenue to come in at around 108 million Canadian dollars.
Aphria (APHA) reported a strong fiscal 2020 first-quarter results. It reported a solid top line with revenue of 126.1 Canadian dollars.
Aurora Cannabis stock now has more coverage from analysts due to its strong fundamentals in the last 12 months. Despite the ups and downs in the sector, Aurora has a strong footing because of its growth and expansion strategies. Last month, it gave an update on the progress of its global operations and growth initiatives.
Furthermore, the number of analysts covering the stock increased from four to 17 over this period. Its target price also increased steadily. Analysts strong buy and buy recommendations also increased.
Earnings ESP: Aurora Cannabis has an Earnings ESP of -6.95%. You can uncover the best stocks to buy or sell before theyre reported with our Earnings ESP Filter.
Aurora Cannabiss target price fell after its fourth-quarter earnings release. However, analysts remain bullish on the stock. The overall rating on the stock is buy or strong buy.
Currently, of the 17 analysts covering the stock, three have given it strong buy ratings (down from four before its earnings release). Four have given it buy ratings (down from six before its earnings release).
Eight analysts have hold ratings on the stock (up from six before its earnings release). One calls the stock a sell, and one calls it a strong sell.
On one hand, its hard to see the companys income statement getting any worse from this point forward, which is a significant positive. Economies of scale should reduce its production costs on a per-gram basis, and Auroras second-quarter report showed notable improvements on the adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) front. Though I still suspect Aurora will lose money in fiscal 2020 (ended June 30, 2020), its very possible that an ongoing uptick in sales, coupled with a reduction in major capacity expansion expenses, may push its adjusted EBITDA positive on a recurring basis.
On November 8, Canopy Growth had a consensus hold rating and a price target of 44.4 Canadian dollars, a potential upside of 56.8% from its closing price of 28.3 Canadian dollars on November 8. Canopy closed November 8 with a gain of 4%.
To build on this point, Auroras economies of scale should lead to some impressive yields. At Aurora Sun, a 1.62 million-square-foot grow farm in Alberta, Aurora is forecasting at least 230,000 kilos of annual output, when at full capacity. This works out to about 142 grams of yield per square foot. By comparison, most growers are estimating that their yields will range from 75 grams per square foot to 125 grams per square foot. This combination of growing efficiency and economies-of-scale is expected to help Aurora keep its production costs below the industry average (on a per-gram basis).
Aphria has a consensus buy rating and a price target of 12.7 Canadian dollars, a potential upside of 89% from its closing price of 6.7 Canadian dollars on November 8.
Recently, Aurora was in the news providing updates on its growth strategy. It announced new products with CTT Pharma. These products will be for its medical patients in Canada. It also signed a sublicensing agreement with EnWave in Australia. However, Auroras rising debt concerns compared to its peers are something to keep an eye on. To learn more, read Aurora Cannabis: Why Investors Must Watch Its Debt.
The launch of cannabis derivatives has also been delayed by Health Canada. It was long believed that high-margin derivatives, such as edibles, vapes, and infused beverages, would find their way to retail store shelves no later than the one-year anniversary of recreational weed being legalized in Canada (Oct. 17, 2018). But Health Canada crushed those hopes midyear, noting instead that derivatives wouldnt find their way to dispensaries until mid-December. This means a longer wait for these high-margin products to have an impact.
Alphabets Waymo is shutting their Austin office to merge teams in Detroit and Phoenix. Waymo is looking for other ways to monetize technology.
Refining stocks like Marathon Petroleum (MPC), Valero Energy (VLO), and The Phillips 66 Company (PSX) have risen sharply in the fourth quarter.
As of November 8, IIPR was trading at $85.22, which represents an increase of 17.4% since its third-quarter earnings release on November 6.
Canada-based medical and recreational cannabis company, Aurora Cannabis (ACB) will report its Q1 fiscal 2020 results on November 14.
PG&E reported a net loss of $1.6 billion during Q3, mainly driven by $2.5 billion pretax charges for claims related to the 2017 and 2018 wildfires.
Chevrons (CVX) and ExxonMobils (XOM) stocks have reacted differently to the companies earnings releases on November 1.
While there are an abundance of pot stocks for investors to choose from, its Aurora Cannabis (NYSE:ACB) that often slots in near the top of the list. In fact, earlier this year it was learned that Aurora was the most-held stock on millennial-focused investment app Robinhood, above the likes of Apple and Amazon.com.
While the Apple TV+ streaming service has gained early momentum, all eyes will be on Disneys (DIS) streaming service, Disney+.
The Apple Card is currently under regulatory scrutiny related to gender-biased credit limit approvals, according to a Bloomberg report on November 9.