Aurora Cannabis Gains Nearly 70% (May 15, 2020)

Aurora Cannabis

All month, cannabis-centric news outlets have been focused on one company: Aurora Cannabis Inc (TSX:ACB) (NYSE:ACB). Beginning with the company’s decision to conduct a 12:1 reverse split in mid-April, Aurora has become the most talked-about litmus test for the cannabis space. If ACB can reclaim even a fraction of its former glory, perhaps it will bolster other pot stocks.

Well, it looks like that optimism has come to fruition (at least in the short-term). Today, Aurora experienced its busiest trading day ever. Within one session, ACB gained 69% of its value and moved nearly 18 million shares or nearly six times its average volume.

Is this a new beacon of hope for the industry? Or is there more to Aurora’s gains than meets the eye? Let’s find out.

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Aurora Cannabis’s Better-Than-Expected Q3 Results

Yesterday, after trading, Aurora published its financial results for the third quarter of fiscal 2020, which ended on March 31, 2020.

For the quarter, ACB’s net revenue came to $78.4 million, an increase of 18% from the prior quarter. This far outpaced the average analyst estimate of $66.7 million. Consumer cannabis revenue, in particular, is up 24% from Q2. Meanwhile, cash cost to produce each gram of dried cannabis sold at $0.85, down from $0.88 in Q2.

Aurora Cannabis adds that it remains on track to deliver its commitment to positive adjusted EBITDA by Q1 2021. The company also improved its cash position to reach $230.2 million. In total, it spent $154.6 million in Q3, which represents a 43% decrease from Q2.

While these results are much better than expected, the question remains: is this the beginning of a major turnaround for ACB?

Analysts Weigh in on Aurora’s Future

Cantor Fitzgerald analyst Pablo Zuanic maintained his “overweight” rating on ACB and set a price target of $22. He added: “The company has started to deliver on its reset, with cost cuts and capex in line with guidance, while delivering above-market average growth and maintaining leadership in key segments.”

According to MarketBeat, however, a majority of analysts believe Aurora Cannabis’s share price will decline from here. While a few have updated their outlook since the Q3 report, there’s still plenty of bearish sentiment that could bring the stock back down.

Either way, ACB is a stock worth keeping track of. Its Q4 results will be hotly anticipated over the next few months and could have profound consequences on the future of cannabis stocks.

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