The week of quarterly reports continues as Aurora Cannabis Inc. (TSX:ACB) (NYSE:ACB) just released its Q1 2020 results. Along with the earnings report, the company detailed a corporate action plan that will guide it through the near-term future.
Aurora is one of the major market leaders in the cannabis space. When it reports growth, industry insiders tend to feel optimistic. When it reports losses, everybody prepares for the worst.
Aurora Cannabis Narrowly Beats Earnings Estimates
For the quarter ending September 30, Aurora is just barely able to report earnings per share, beating analysts’ consensus, which predicted a loss of $0.03.
The company’s EPS comes out to a grand total of $0.01. While it’s always great to see earnings, the figure is down from EPS of $0.09 a year ago. This the second quarter in the 12 months that Aurora was able to surpass consensus estimates.
Revenue came out to $57.02 million, which is a little below estimates but represents year-over-year growth from $22.71 million. The company’s 58% gross margin on cannabis sales is 58%.
While Canadian cannabis revenue is down 33%, due to a bottleneck in licensed retail, medical cannabis sales increased slightly. Aurora Cannabis also took this opportunity to tout its industry-best cost to produce each gram sold. The cost declined 25% sequentially to hit $0.85 per gram.
Finally, the company’s production volume increased 43% to 41,436 kgs. While this is considerably less than some other cannabis cultivators, it will keep the company’s margins clean and save Aurora from having to destroy excess crops.
Aurora Cannabis CEO Terry Booth had this to say:
“Despite short term distribution and regulatory headwinds in Canada that have temporarily impacted the industry, the long-term opportunity for Aurora in the global cannabis and cannabinoids market is immense.”
Aurora’s Stock Price and Forecast
ACB stock fell 16% in the immediate aftermath of the earnings report. As of today, however, the share price has largely bounced back. ACB stock is currently selling for just under $3.00, which represents a 43.6% loss in value from the start of the year.
“If you’re a value investor, and you see Aurora Cannabis at the lowest prices since 2017, how can you not think about positioning yourself in Aurora?” asks Rich. “We’re talking about a company that has 5.6 billion in assets, 128 in working capital, another 120 million in inventory. They’re very healthy.”
Discussing his company’s future plans, Booth said that Aurora Cannabis will focus on three big moves:
- The announcement of a formal plan to settle its 5.0% convertible debentures due March 2020.
- A reduction in capital investments over the next several quarters by more than $190 million to match near-term capacity expansion with anticipated demand.
- Raising over $124 million USD in gross equity proceeds since the start of fiscal 2020 through an at-the-market financing program.
In the near-term, Aurora will also be extending its footprint into the United States.
While these results aren’t nearly as bad as they could be, they aren’t a tremendous boost in confidence for cannabis stock investors. But as Rich notes, Aurora is still a healthy company and one of the most likely players in the cannabis space to show long-term growth.
What do you think? Is ACB worth a look at these prices? If you liked this article, check out Rich’s prediction that Aurora will double in value next year.
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