Aurora Cannabis Inc. (NYSE: ACB), headquartered in Edmonton, Alberta, Canada with funded capacity in excess of 500,000 kg per annum and sales and operations in 23 countries across five continents, Aurora is one of the world’s largest and leading cannabis companies. Aurora is vertically integrated and horizontally diversified across every key segment of the value chain, from facility engineering and design to cannabis breeding and genetics research, cannabis and hemp production, derivatives, high value-add product development, home cultivation, wholesale and retail distribution.
With its strong performance in the Canadian medical and consumer markets, early mover advantage in a growing list of relevant international markets, together with the undisputed leadership in high-quality, CBD-rich hemp production, Aurora is strategically positioned across the entire cannabis industry value chain to extend its rapid growth further. Also, the company is well poised to become the industry leader, led by its recent acquisitions, projected production, and immense growth opportunities from the opening of the Canadian adult use market. It has already matched Canopy Growth in the last quarter with its quantity of production and is likely to take a permanent lead before the end of 2019.
The company’ shares are trading with robust volumes after it featured in Cowen’ Top Pick in the sector, highlighting the substantial growth opportunities in the Canadian legal recreational market and burgeoning international medical market along with
The company’ business, operational and market profile also leverages on its strong management team. The company’ management team longstanding experience makes it second to none, and their visible and aggressive strategies have placed the company on a rapid growth trajectory to become a name to reckon with.
Key and unique differentiating factor:
Management’ commentary on Recent Performance:
Aurora continues to execute strongly across all of its market segments, as demonstrated by the 83% revenue growth over last quarter and the significant increase in confirmed production results,” said Terry Booth, CEO of Aurora. “Our brands continue to resonate extremely well in the consumer market, our patient numbers continue to increase steadily, and we have maintained our market leadership in Germany and other key international markets. We are experiencing exceptional demand for our Canadian medical and consumer products, as well as sustained strong demand internationally. With our Aurora Sky and MedReleaf Bradford facilities ramping up production as anticipated and our other licensed facilities operating at full capacity, we are reiterating our earlier guidance of achieving sustained EBITDA positive results from the second calendar quarter of this year (our fiscal Q4).”
So far financials are concerned, the company has seen yet another quarter of robust Patient and Revenue Growth. Aurora’s financial performance in the second quarter fiscal 2019 reflected the numerous achievements and quite gratifying progress. Net revenue was up 363% year over year. Furthermore, the management is very comfortable in reiterating its earlier guidance of achieving positive EBITDA in its fiscal Q4 from April to June 2019 with positive operating cash flow all in shortly after that.
ACB continue to successfully execute its differentiated and diversified strategy committed towards domestic and international expansion in the medical cannabis market, adult consumer use sales, production scale-up, innovation, plant, and medical research, and product development. Given the strong unmet consumer demand evident across Canada, the management is confident that its rapidly increasing production capacity will result in the continued acceleration of revenue growth.
Furthermore, the company also continue to perform well in its international medical business. Across its international activities, ACB have established significant early mover advantage and market leadership. With the scale-up of Aurora’ domestic and international production facilities, analysts tracking the stock anticipates increased availability of the product to service these developing markets which will drive further global growth for the Company.
Analysts’ views: Research firms are incredibly bullish about the performance of Aurora with most of them re-rated the company basis its solid business and market profile and comfortable liquidity and overall financial flexibility. Per www.marketbeat.com, Their average twelve-month price target is $9.50, suggesting that the stock has a possible upside of 17.28%. The high price target for ACB is $9.50, and the low-price target for ACB is $9.50. Considering all this, the company is in an extremely favorable risk-reward position, and value investors should consider exposure in this sector as the backdrop remains favorable.
Below are the excerpts of recent ratings by brokerage house:
March 4, 2019 – Aurora Completes Whistler Medical Acquisition
Feb. 26, 2019 – Aurora Cannabis Expands into Portugal, Enhancing European Market Leadership. New Production Facility to Expand Supply to European Medical Cannabis Systems, Increasing Aurora’s International Footprint to 24 Countries
Feb. 25, 2019- Aurora Cannabis Receives Health Canada Licensing of Aurora Sky and MedReleaf Bradford. Sky and Bradford Facilities Combine for Over 128,000 kg per Year Production Capacity
Feb. 12, 2019 – Aurora Cannabis Announces Construction of Aurora Polaris. Centre of Excellence for Value-Add Products, Packaging and International Logistics
With this and other previous announcements, the company continues to exceed expectations. It is expected that the stock’s value will continue to appreciate as the market becomes more aware of its potential.
Exceptional market risk profile: Globally Positioned Industry Leading Production Capacity. Ramping up 11 state-of-the-art cultivation facilities with expected production capacity of over 500,000 kg/year by Mid 2020
Successful Canadian Adult-Use Market Launch:
Q2 2019 Financial and Operational Highlights
- Revenue growth was 83% quarter-over-quarter, and that comes after an average of 44% growth quarter-over-quarter over the previous six quarters.
- Liquidity and financial flexibility: As of December 31, ACB had $46.8 million in cash in equivalence subsequent to the quarter ACB closed US$ 345 million convertible note offering with a number of high quality, US, European and Canadian institutional investors.
Outlook: Path to profitability:
- Management reiterates previous guidance that based on the Company’s current confirmed production results; Aurora will have approximately 25,000 kgs available for sale in Q4 (April to June 2019).
- The Company anticipates that with Aurora Sky operating at full capacity, as well as the continued reduction in operating costs, the cash cost to produce per gram will trend significantly lower. Management reiterates its expectation that the sustainable long-term operating cost at its Sky Class facilities will be well below $1 per gram.
- Ongoing disciplined cost management is expected to result in SG&A costs growing modestly as compared to revenue growth over the remainder of the fiscal year.
- Consequently, and consistent with previous guidance, management believes that the combination of substantial revenue growth, low cost of production, and disciplined operating cost management will position Aurora to achieve sustained positive EBITDA beginning in fiscal Q4 2019 (calendar Q2 2019).
- Longer term, the Company expects that the launch of new higher value-added derivative product lines in relation to anticipated changes in Health Canada regulations, as well as the introduction of derivative products to international markets, will contribute to further revenue growth and margin expansion.
Key risk factors and potential stock drivers:
- The positive outcome of the upcoming catalyst (as outlined above), would be the key near-term trigger for the company
- Company’s ability to maintain its liquidity and financial flexibility to fund its incremental capital requirements.
- ACB’ ability to acquire and incubate other marijuana companies as the sector consolidates
- In this sector, the regulatory framework and science are rapidly changing and evolving. Therefore, new companies are emerging, and regulatory risk always exists for the players in the industry.
- On Wednesday, March 6th, 2019, ACB was at $7.95, on an above average volume of 45M shares exchanging hands. Market capitalization is $7.991 billion. The current RSI is 61.26
- In the past 52 weeks, shares of ACB have traded as low as $4.05 and as high as $12.52
- At $7.95, shares of ACB are trading above its 50-day moving average (MA) at $6.65 and above its 200-day moving average (MA) at $6.83
- The present support and resistance levels for the stock are at $7.07 & $8.81 respectively.
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