Aurora Cannabis is angling to become the worlds leading cannabis company, and the Canadian operators next big move could come south of its border.
Overall, Azer is cautious on third-quarter results for the Canadian producers. Shes more optimistic on the U.S. cannabis companies, which had a largely favorable backdrop with quarterly sequential retail sales growth throughout the year, and few of the bottlenecks that have inhibited Canadian adult-use rollout. However, they too are facing the twin risks of outsized cash burn and Ebitda losses.
Aurora plans to aggressively pursue the United States cannabis market with an acquisition in the hemp-derived CBD space as its likely first big play.
Aurora Cannabis Announces 2019 AGM Voting Results
"We expect to have a significant footprint in the U.S. in the coming quarters," Aurora chairman Michael Singer told CNN Business on Thursday.
U.S. sales of products containing hemp-derived cannabidiol, commonly known as CBD, have boomed following last years passage of the Farm Bill, which legalized hemp. The bill also left CBD to the purview of the U.S. Food and Drug Administration, which is still reviewing how or if products that contain CBD can be consumed.
Aurora entered the U.S. CBD space earlier this year via a multiyear research partnership with the Ultimate Fighting Championship.
While several Canadian licensed producers have landed high-profile American investors — Corona maker Constellation Brands in Canopy and Marlboro maker Altria in Cronos Group — Aurora has been noticeably absent from such billion-dollar deals.
Aurora has conducted a "review tour" of Americas multi-state cannabis operators and is leveraging the contacts of new strategic advisor Nelson Peltz in those efforts, Singer said. Peltz, the billionaire activist investor, has also set up conversations between Aurora and several companies in other industries for potential future partnerships, said Singer in an interview Thursday following Auroras fiscal fourth-quarter earnings call.
Auroras stock fell more than 9 per cent on the results, which included a $2.3-million net loss and quarterly revenue of $98.9 million, which missed analyst estimates and its own guidance of $100 million to $107 million. For the year, Aurora reported a net loss of $290.8 million and revenue net of excise taxes of $247.9 million amid investments to build out production and a slow-to-develop Canadian retail market.
• Institutional Capital & Cannabis, better known as IC3, holds a real estate conference in Los Angeles • Charlottes Web Holdings Inc. reports pre-market • Sundial Growers Inc. reports post-market
"I think that the [markets reaction] is surprising, and I dont really understand it looking for profit really early in the lifestage of these companies," said Kristoffer Inton, a Morningstar analyst who tracks Aurora, Canopy and other leading cannabis companies. "From my perspective, it was a good quarter."
The performance Thursday continued a trend of Wall Street not reacting favorably to cannabis companies near-term losses. After Canopys earnings triggered investor uncertainty, interim CEO Mark Zekulin last week went on a media blitz to shore up investor faith in the business.
Canadas four largest pot companies by market value will report results for the quarter ended Sept. 30 this week. Cronos Group (CRON.TO)(CRON) will report before the opening bell on Tuesday, and Tilray after the markets close. Thursday will be bookended by Canopy Growth results in the morning and Aurora Cannabis results in the evening.
Expect weakness from this earnings season, Cantor Fitzgeralds Pablo Zuanic wrote in a note to clients on Sunday. We are generally below consensus, in part because of management commentary, and also because while data shows solid underlying trends at the end consumer level, the provinces buying offices continue to adjust inventories.
This followed on a note from Zuanic last Monday that he is calling “the bottom on Canadian cannabis stocks,” citing a long list of tailwinds ranging from improved recreational sales, to sector consolidation, and more attention from major consumer packaged goods companies.
The New-York based analyst initiated coverage on Aphria (APHA.TO)(APHA) and Organigram (OGI.TO)(OGI) with an overweight rating; Aurora Cannabis (ACB.TO)(ACB), Tilray (TLRY), and Canopy Growth (WEED.TO)(CGC) with a neutral rating; and HEXO (HEXO.TO)(HEXO) with an underweight rating.
EDMONTON, Nov. 11, 2019 /CNW/ – Aurora Cannabis Inc. (the "Company" or "Aurora" or the "Issuer") (NYSE │ TSX: ACB), the Canadian company defining the future of cannabis worldwide, today announced the voting results from its Annual General Meeting of Shareholders (the "Meeting"), held in Edmonton, Alberta, on November 8, 2019. The total number of shares represented by shareholders present in person and by proxy at the meeting was approximately 437.9 million, representing 42.6% of Auroras issued and outstanding Common Shares.
He now warns that shipments by licenced producers to provincial warehouses may not reflect the current uptick in consumer spending on pot as some provinces overstocked initially, and continue to unwind that inventory.
Some provinces… are now fine-tuning specific formats and strains, or may now want to clear space for 2.0 [vapes, edibles, drinks, etc.], Zuanic wrote. We understand some provinces also have 120 days to return goods.
All of the matters put forward before shareholders for consideration and approval as set out in the Companys Management Information Circular dated September 17, 2019, were approved by the requisite majority of votes cast at the Meeting. The details of the voting results for the election of directors are set out below:
Bank of Montreal analyst Tamy Chen shares those concerns, and expects industry-wide sales to provincial wholesalers to drop 20 per cent quarter-over-quarter. She also notes that some of the larger licenced producers have issued cautious commentary on their near-term revenue expectations.
Chen maintains speculative market perform ratings on Cronos Group, Canopy Growth, Aurora and Tilray.
Last month, Cowen analyst Viven Azer slashed price targets across the board on the Canadian cannabis companies she covers. Azer said growth in the sector has come in below expectations, despite sales moving higher.
As investors continue to reset expectations in Canadian cannabis, we look for indications of incremental progress from the LPs heading into calendar 3Q19 earnings, she wrote in a note to clients. As such, having already reset our expectations and lowered our numbers, we look for indications on whether category headwinds are beginning to abate.
Competition in the sector is set to intensify into 2020, even as more retail stores open and value-added next generation pot products hit shelves, according to Canaccord Genuity analyst Matt Bottomley.
It is clear to us that many producers will be competing for a piece of a finite pie, he wrote in an Oct. 31 research note. We have made substantial downward revisions to virtually all our Canadian LPs under coverage.
Bottomley maintained a hold rating on Cronos, but lowered his price target to $13 from $17. He maintained a speculative buy rating on Canopy Growth shares, and dropped his price target to $40 from $60. He also maintained a speculative buy rating on Aurora shares, and reduced his price target to $8 from $13.50.