Aurora Cannabis is a reputable Canadian cannabis manufacturer. They are listed on Nasdaq and Toronto Stock Exchange. The company operates in 25 countries, has 8 manufacturing facilities and 5 sales licenses.
Since its inception in 2006, Aurora Cannabis has experienced steady growth. Like many other successful marijuana and hemp enterprises, the business has taken advantage of the current market trend. The question is if this trend will continue and whether it’s worth it to buy Aurora Cannabis stock.
In this article, we will analyze some of its key parameters, threats, and opportunities. Keep in mind that our company does not provide financial advice to potential buyers.
Aurora Cannabis history
The company was founded by Steve Dobler, Terry Booth, Chris Mayerson, and Dale Lesack. Dobler and Booth were the first ones to invest in the idea with $5 million.
Aurora Cannabis’ first facility was established in Mountain View County, Alberta, on a 160-acre ground. They had to wait for a while to get the license, but in 2014 they were finally able to start growing plants. In fact, they were the first company in Alberta to get federal approval.
There was a good reason why they started business in Alberta, despite the fact it is hard to get a cannabis license in the province. Alberta has low tax rates and great credits for agricultural growers. This gave the company an enormous advantage in the North American market.
Over time, the organization has opened new facilities in Europe, Latin America, Asia, and Oceania. In 2017, Aurora Cannabis received a license to sell medical hemp oil.
Cannabis laws in Canada
Today, Canada has very lenient cannabis laws. A few years back, the government decided to stop fighting drug-related crimes and use that money for drug rehabilitation. In 2018, a new Cannabis Act came into power. According to this particular act, every province had full jurisdiction regarding cannabis sales and distribution.
Alberta government has the full authority to decide how cannabis is sold, who can sell it, and where the stores are placed. They can also change the minimum age and possession limit.
As one of the first players to enter the market, Aurora Cannabis has a dominant position in Canada. However, they are still somewhat limited by Alberta’s governing body. Generally speaking, having a company in this province is much better than running a cannabis business in most American states.
Aurora Cannabis’ Previous projects
Besides having a great positioning on the local market, the company aggressively buys off other businesses. Pedanios GmbH was one of their biggest acquisitions. They are a German company that exports, imports, and distributes medical hemp within the EU. In fact, they are the biggest cannabis distributor in the Union.
Besides having full access to the German market, they also managed to get a supply agreement for Italy via Pedanios. According to an Aurora Cannabis statement from 2019, they have the capacity to produce 625,000 kilograms of substance annually. Unfortunately, this news was followed by several cash problems and a subsequent drop in stock price.
Another major acquisition occurred in 2017 when they bought all stocks of CanniMed Therapeutics. According to rumors, only 38% of the shareholders approved of this move. To prevent acquisition, CanniMed Therapeutics decided to merge with Newstrike Resources. Due to suspicions of foul play on both sides, the whole situation was investigated and monitored by the Ontario Securities Commission. In the end, Aurora Cannabis still managed to acquire the company.
In 2018, the company merged with MedReleaf. Aurora Cannabis had access to 9 Canadian manufacturing and processing plants and 2 in Denmark upon completing the agreement. At the moment of the merger, the new entity’s value was assessed at 7 billion dollars. That would make them bigger than Canopy Growth Corporation, one of the industry leaders.
Although the company sells oils, they have been interested in derivatives for quite a while. This type of product was prohibited on the Canadian market, but since October 2019, you can freely sell them. These are substances such as edibles, vapes, concentrates, and cannabis-infused food.
As soon as the legislation changed, Aurora Cannabis made moves to enrich its offer. Nowadays, they sell various items such as concentrates, vapes, baked goods, gummies, mints, and chocolates. While this sounds like great news, the company hasn’t launched any new products since 2019, which concerns many potential investors.
One of the things that the company has missed is cannabis beverages. It is an enormous market segment, and Aurora Cannabis has been reluctant to manufacture these substances. According to Grand View Research, the beverage market can be worth up to $2.8 billion by the year 2025.
Aurora Cannabis stock forecast
According to CNN Business, Aurora Cannabis’ high estimate is $8.64, which would be a 20% increase from its current price of $7.10. The low estimate is $3.18, which would be a 55% drop. Most experts agree that it’s best to hold their stock. Some of them even think you should sell it.
What’s even more concerning is that their earnings per share have dropped by $0.18 on a quarterly basis. However, their annual earnings per share, as well as predicted quarterly and annual sales, should increase in the following year.
Experts claim that the company’s loss in value has to do with its inability to increase revenues. Their September 2021 sales are 20% down compared to the same month last year. Furthermore, they had a 9% loss in revenues this year compared to 2020.
As the company shifts towards the medical hemp market, they experience numerous issues. This segment demands that a company has higher prices and higher margins. Aurora Cannabis didn’t manage to adjust to the change, which is why they are struggling. They recently changed their CEO and made other transformative decisions, but they still didn’t manage to improve their cash flow.
So, should you buy Aurora Cannabis stock?
If you don’t have them in your portfolio, it is probably much better to postpone the purchase. If you already have them, you should hold onto them for the moment.
Note: This is not financial advice.