Yesterday looks more and more like a terrible, horrible, no good, very bad day for Aurora Cannabis (TSX:ACB) (NYSE:ACB). After a mostly decent start to the year, ACB has tripped and fallen, showing no near-term signs of recovery.
So what has happened to one of the biggest pot stocks? What kind of ramifications will its bad news have on the rest of the sector? Will ACB ever return to its $10.00 highs, or should investors cut their losses and abandon this sinking ship?
“I’m so disappointed by Aurora. I’m disappointed in so many ways,” says Rich. “Something’s just not right here. There’s definitely something they’re not telling us.”
Aurora Cannabis Lays Off 500 Staffers, CEO Steps Down
In a press release published yesterday, Aurora announced that its founder and CEO, Terry Booth, is leaving the company. Effective immediately, Executive Chairman Michael Singer has been appointed interim CEO as Aurora looks for Booth’s replacement.
Hidden deeper in the release, however, is the news that Aurora will also terminate the positions of about 500 staff. Around a quarter of these are corporate positions.
According to Aurora’s website, the company is comprised of 3,400 employees. This means the staff losses would result in a 15% reduction in its workforce.
The move is being branded as a “comprehensive transformation plan to significantly reduce the company’s expense base.” Aurora also expects to better rationalize its capital expenditures and align its balance sheet with current market conditions.
Aurora Cannabis projects that, with this plan in place, the company will be able to achieve positive EBITDA.
In a conference call with analysts, Interim CEO Michael Singer said:
“We believe … the rationalization of our business will make Aurora much stronger and more focused than ever before. We believe these are the right moves at the right time, and put our shareholders in the best position for value creation.”
Unfortunately, Rich is not convinced.
ACB Likely to Get Worse Before it Gets Better
“Aurora is going to have slower revenue growth in the next two quarters,” Rich says. “I don’t think Aurora’s stock will be going up anytime soon.”
Rich’s prediction is already coming true, as ACB plummetted after markets closed yesterday. As of today, the stock is down 15.3%, falling from $200 to $1.70.
This brings the once-mighty Aurora Cannabis to its lowest share price since July 2017, well before legalization came to Canada.
Aurora is still one of the world’s largest cannabis companies, with operations in 25 countries. Its subsidiaries include MedReleaf, CanvasRX, and CanniMed Therapeutics.
Signs that something might be wrong with ACB first arrived when news broke in January that the company was looking to sell one of its greenhouses. Analysts immediately began forecasting more divestitures and write-downs.
Now, the company says that as much as $775 million in write-downs can be expected.
Due to decreasing cannabis sales, Aurora Cannabis says net sales could fall to between C$50 million and C$54 million. According to Barron’s, this has caused Stifel analyst W. Andrew Carter to lower his price target to $1.00.
“You’re in 25 countries, you used to do $100 million in revenue just a few quarters ago,” says Rich. “Now you’re reporting $60 million or less? I think these guys are going to $1.00.”
What do you think? Is it time to give up hope on Aurora Cannabis? Or did this long-term growth play just became a loooooooooooooong term growth play? Let us know your thoughts.
Featured image: Canva