Stocks

Four Horsemen Of The Cannabis Space – Aurora Cannabis

Aurora Cannabis Inc. produces and distributes medical cannabis products in Canada and internationally.  The company has one of the broadest international footprints, with operations in 24 countries and production capacity that may exceed 700,000 kilograms per year at peak.

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Although Aurora Cannabis is one of the largest producer of cannabis, they still don’t have a partner?  May though Coca-Cola was going to buy stake in the company, but discussions broke down. This is why Aurora Cannabis has hired relationship expert, Nelson Peltz last week.  Nelson Peltz will serve as a strategic advisor to help it explore potential partnerships.

If you don’t know who Nelson is, he is the founder and CEO of Trian Fund Management, a multibillion-dollar investment firm. Trian owns significant stakes in several big companies, including packaged-foods company Mondelez, consumer-goods giant Procter & Gamble, food-products wholesaler Sysco, and fast-food chain Wendy’s.

This past week, Aurora announced their fourth quarter results which fell short of expectations. In addition, Aurora executives pushed back predictions of profitability to the 2020 fiscal year.

In the statement, the company said “the Canadian consumer channel continues to experience challenges at the retail level in key markets and resolution of this issue is beyond the Company’s control. Aurora is working closely with all our regulatory and channel partners to streamline distribution as the Company continues to track toward positive adjusted EBITDA on a consolidated basis.”

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On the bright spot, gross margins improved, meaning their production operations are getting more and more efficient.  In addition, what should help sales in the future is the launch of cannabis-infused hard baked goods, chocolates and mints slated for December. Nevertheless, analysts are mixed on Aurora at this time with the exception of Stifel Nicolaus analyst’s Andrew Carter who has a sell rating on the stock.

He wrote in a note to clients that Aurora’s fiscal fourth-quarter results point to a “less robust in-market performance and difficulty to continue positioning for the larger global opportunity.” Carter said he believes Aurora’s financing efforts will be “challenged” against a backdrop of “overwhelmingly negative investor sentiment” towards the sector, damaged credibility and limited near-term catalysts to drive enthusiasm.

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Thus, the chart suggests price has a bit more downside, but nearing a level worth going long if price can make it down to the daily demand at $5.00.

This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.

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