Unnamed: 0 stringlengths 3 8 | Date stringlengths 23 23 | Article_title stringlengths 1 250 | Stock_symbol stringlengths 1 5 | Url stringlengths 44 135 | Publisher stringclasses 1
value | Author stringclasses 1
value | Article stringlengths 1 343k | Lsa_summary stringlengths 3 53.9k | Luhn_summary stringlengths 1 53.9k | Textrank_summary stringlengths 1 53.9k | Lexrank_summary stringlengths 1 53.9k |
|---|---|---|---|---|---|---|---|---|---|---|---|
37600.0 | 2020-03-14 00:00:00 UTC | Could This 1 Big Problem Derail the Growth of Cannabis-Infused Beverages? | ACB | https://www.nasdaq.com/articles/could-this-1-big-problem-derail-the-growth-of-cannabis-infused-beverages-2020-03-14 | nan | nan | Rewind back a couple of years and a lot of the hype in the cannabis industry circled around cannabis-infused beverages. Cannabis companies were securing deals with beer makers in an effort to get into what was supposed to be a big growth driver in the industry: cannabis-infused beverages. Canopy Growth (NYSE: CGC) joined forces with Constellation Brands (NYSE: STZ) in 2017 in the most notable deal thus far. Tilray (NASDAQ: TLRY) and Anheuser-Busch InBev (NYSE: BUD) agreed to work on cannabis-infused beverages in late 2018. There was even a rumored deal involving Aurora Cannabis (NYSE: ACB) and Coca-Cola (NYSE: KO) which never materialized.
Today, however, that hype has fizzled as companies have delayed the rollout of these beverages. There's also a new issue that's come to light that may explain why that's been the case: the polymer material that lines aluminum cans cause cannabis-infused beverages to lose their potency. It's an issue that cannabis producer Canopy Growth knew about for almost the past year.
Challenges with the rollout of beverage products
Canopy Growth's new CEO David Klein acknowledged in an interview with Yahoo Finance Canada that the company has run into multiple issues leading to the delay of the launch of beverage products, without directly specifying what those problems were. In January, Canopy Growth announced the delay of its cannabis-infused beverages launch but it has not provided a date as to when it expects its products will become available to consumers.
Image source: Getty Images.
As of March 1, there were still no cannabis-infused beverages on store shelves in Canada. Regulators technically legalized edibles on Oct. 17, 2019, but it wasn't until mid-December that edible products, including beverages, would actually be available. Canopy Growth VP of Communications Jordan Sinclair said, "The one thing that we didn't quite get right was managing expectations."
Even if the products get to market, potency poses a problem
There's little doubt that Canopy Growth will get cannabis-infused beverages to consumers at some point in 2020. However, Sinclair admitted that the potency issue is a key one for the company, noting that "We have a big R&D team, we've been working really hard on solving that problem." However, the company is attempting to downplay its significance, especially in the delay of cannabis-infused beverages.
The polymer liner in a can that causes the loss in potency through absorption isn't avoidable as the barrier prevents the drink from corroding the aluminum. If companies can't find a way around it, they may have to sell drinks in bottles instead. Either way, the potency issue is a critical one that producers need to find a way to solve.
According to chemist Harold Han who is the chief science officer at a California-based cannabis tech company Vertosa, the loss of potency is a big problem. He states that drinks "lose their potency and that is one of the big challenges in the industry in California." Now, the issue has improved to the point where he's seeing between a 5% to 10% loss in potency, and that's four months after the products are canned. Previously, he observed a loss of 70% after just five days.
Potency is a significant issue for consumers as getting a buzz from THC products is a key reason for consuming the beverages in the first place. And if users are disappointed with the products, it could undermine the industry's potential growth in Canada. Deloitte estimates that the total value of the cannabis-infused beverage market in Canada could be worth 529 million Canadian dollars annually.
Cannabis-infused beverages could fill a void for consumers as beer consumption in the U.S. was down for a fourth consecutive year in 2019. And for the first time in 25 years, wine consumption was also down. A new cannabis-infused beverage option could spark the interest of consumers who may be looking for a non-alcoholic beverage to try.
What does this mean for investors?
The edibles market is one area where investors were hoping to see some significant growth this year to help propel their top lines. And an underwhelming performance could make 2020 an even more challenging year for pot stocks. The industry has already been nosediving with Canopy Growth down more than 35% since the beginning of the year, and that's in line with how bad the Horizons Marijuana Life Sciences ETF has performed.
Canopy Growth is coming off strong third-quarter results but that hasn't been enough to turn the tide for its stock price, especially not when the markets as a whole are struggling due to the coronavirus which has caused investors to panic. Given the concerns surrounding a lack of cash flow in the industry and investors already wary of cannabis companies falling short of expectations, a let down in the edibles market, in particular, beverages, could make now a very dangerous time to be investing in marijuana. Investors may be better off waiting in the sidelines, for now, especially those who are risk-averse.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
David Jagielski has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Constellation Brands. The Motley Fool recommends Anheuser-Busch InBev NV. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | There was even a rumored deal involving Aurora Cannabis (NYSE: ACB) and Coca-Cola (NYSE: KO) which never materialized. There's also a new issue that's come to light that may explain why that's been the case: the polymer material that lines aluminum cans cause cannabis-infused beverages to lose their potency. Canopy Growth is coming off strong third-quarter results but that hasn't been enough to turn the tide for its stock price, especially not when the markets as a whole are struggling due to the coronavirus which has caused investors to panic. | There was even a rumored deal involving Aurora Cannabis (NYSE: ACB) and Coca-Cola (NYSE: KO) which never materialized. There's also a new issue that's come to light that may explain why that's been the case: the polymer material that lines aluminum cans cause cannabis-infused beverages to lose their potency. It's an issue that cannabis producer Canopy Growth knew about for almost the past year. | There was even a rumored deal involving Aurora Cannabis (NYSE: ACB) and Coca-Cola (NYSE: KO) which never materialized. Challenges with the rollout of beverage products Canopy Growth's new CEO David Klein acknowledged in an interview with Yahoo Finance Canada that the company has run into multiple issues leading to the delay of the launch of beverage products, without directly specifying what those problems were. Even if the products get to market, potency poses a problem There's little doubt that Canopy Growth will get cannabis-infused beverages to consumers at some point in 2020. | There was even a rumored deal involving Aurora Cannabis (NYSE: ACB) and Coca-Cola (NYSE: KO) which never materialized. In January, Canopy Growth announced the delay of its cannabis-infused beverages launch but it has not provided a date as to when it expects its products will become available to consumers. Even if the products get to market, potency poses a problem There's little doubt that Canopy Growth will get cannabis-infused beverages to consumers at some point in 2020. |
37601.0 | 2020-03-13 00:00:00 UTC | 3 Reasons Why This Cannabis Stock Is the Ultimate Bet for 2020 and Beyond | ACB | https://www.nasdaq.com/articles/3-reasons-why-this-cannabis-stock-is-the-ultimate-bet-for-2020-and-beyond-2020-03-13 | nan | nan | Over the past year, several pot stocks have lost significant market value. Canadian marijuana giants such as Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC) have been grappling with structural issues, including lower-than-expected demand, health concerns about vaping, massive losses, and much more.
The recent outbreak of the COVID-19 coronavirus has driven shares lower across the board, and it has affected global markets severely. However, there is one player in the marijuana space that has managed to hold its own.
Innovative Industrial Properties (NYSE: IIPR) was one of three pot stocks that ended February 2020 in the green. The Dow Jones and S&P 500 posted close to double-digit losses last month, while Innovative Industrial Properties was up just shy of 3%.
Now, the Dow Jones and S&P 500 are trading 28% and 27% lower than their record highs, respectively. Comparatively, Innovative Industrial Properties has lost close to 40% since Feb. 20, and is down 29.5% in the past five trading days. However, the current headwind remains a short-term one, which makes the decline attractive to contrarian investors.
Let's look at what makes Innovative Industrial Properties an ideal long-term buy for cannabis investors.
Stellar revenue growth
Innovative Industrial Properties is not a traditional cannabis play. It is a marijuana-focused real-estate investment trust (REIT), and it has managed to escape the industrywide weakness thanks to its stable cash flow and a somewhat predictable business model.
Most operators of cannabis businesses in the United States that do business in multiple states are struggling to gain access to traditional debt capital; as cannabis is still illegal at the federal level, most banks are unwilling to lend to licensed producers. Innovative Industrial Properties solves this problem by acquiring, owning, and managing specialized industrial properties and leasing them to licensed operators for regulated medical-use cannabis facilities.
Image source: Getty Images.
This business model has held the company in good stead. Innovative Industrial Properties has managed to increase sales from $6.42 million in 2017 to $44.7 million in 2019. Analysts have forecast company sales to increase to $132 million in 2020 and $181 million in 2021.
In the December quarter, sales rose by 269% to $17.7 million. This growth was primarily driven by the company's acquisition of properties. Between Oct. 1 and Feb. 26, Innovative Industrial Properties acquired 20 properties totaling 1 million rentable square feet.
It also executed five lease amendments to provide tenant improvements at properties in Arizona, California, Massachusetts, and Pennsylvania. As of Feb. 26, Innovative Industrial Properties owns 51 properties totaling 3.2 million square feet with a weighted average lease term of 15.6 years.
Expanding profit margins
Innovative Industrial Properties' stellar revenue growth has helped the company increase profit margins as well. Its EBITDA (earnings before interest, taxes, depreciation, and amortization) has risen from $0.81 million in 2017 to $33.5 million in 2019, a staggering growth of 543% annually.
Analysts expect the company to increase EBITDA to $103 million in 2020 and $161 million in 2021. This means Innovative Industrial Properties's EBITDA margin is forecast to grow from 12.6% in 2017 to a mammoth 78% in 2020 and 89% in 2021.
In the fourth quarter, Innovative Industrial Properties reported a net income of $9.6 million or $0.78 per diluted share, a rise of 293% year over year. Its adjusted funds from operations (AFFO) rose a stellar 211% to $14.3 million or $1.18 per diluted share in Q4.
AFFO is an important metric for REITs, as it provides an accurate picture of a company's financials. This is important because of one accounting figure (depreciation) which can distort an REIT's metrics.
Assets such as equipment and computers have a limited shelf life, so they depreciate over time. However, an apartment building or a REIT doesn't work quite the same; such a property might even appreciate in value over time, which makes the AFFO a more accurate way to measure profitability.
While most marijuana stocks are affected by mounting losses and precarious cash balances, it is refreshing to see Innovative Industrial Properties crushing market estimates and posting robust profit margins.
A juicy dividend yield
As a REIT, Innovative Industrial Properties has to distribute at least 90% of its taxable income to shareholders. The company most recently announced quarterly dividends of $1 per share, a growth of 186% year over year. Over the past three years, IIP has grown dividends by an annual rate of 93.75%.
This indicates the stock has a juicy forward dividend of 6.1% Innovative Industrial Properties is yielding an average of 13.3% on its capital investments. This means it will take the company less than six years to receive a complete payback on those investments.
An underserved market
Most cannabis companies are in dire need of cash, and that will be a big driver of Innovative Industrial Properties's sales over the next few quarters, as the company can easily replicate its sale-leaseback business model time and again in other states that have legalized medical marijuana.
Innovative Industrial Properties stock went public at a price of $20 per share in December 2016. It is trading at about $94, meaning it's gained 370% in just over three years. Long-term investors will continue to benefit, given ongoing funding regulations for pot companies -- not to mention Innovative Industrial Properties' stellar revenue growth, expanding bottom line, and tasty dividend yield.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Innovative Industrial Properties. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Canadian marijuana giants such as Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC) have been grappling with structural issues, including lower-than-expected demand, health concerns about vaping, massive losses, and much more. It is a marijuana-focused real-estate investment trust (REIT), and it has managed to escape the industrywide weakness thanks to its stable cash flow and a somewhat predictable business model. While most marijuana stocks are affected by mounting losses and precarious cash balances, it is refreshing to see Innovative Industrial Properties crushing market estimates and posting robust profit margins. | Canadian marijuana giants such as Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC) have been grappling with structural issues, including lower-than-expected demand, health concerns about vaping, massive losses, and much more. As of Feb. 26, Innovative Industrial Properties owns 51 properties totaling 3.2 million square feet with a weighted average lease term of 15.6 years. Expanding profit margins Innovative Industrial Properties' stellar revenue growth has helped the company increase profit margins as well. | Canadian marijuana giants such as Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC) have been grappling with structural issues, including lower-than-expected demand, health concerns about vaping, massive losses, and much more. Innovative Industrial Properties solves this problem by acquiring, owning, and managing specialized industrial properties and leasing them to licensed operators for regulated medical-use cannabis facilities. As of Feb. 26, Innovative Industrial Properties owns 51 properties totaling 3.2 million square feet with a weighted average lease term of 15.6 years. | Canadian marijuana giants such as Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC) have been grappling with structural issues, including lower-than-expected demand, health concerns about vaping, massive losses, and much more. Innovative Industrial Properties has managed to increase sales from $6.42 million in 2017 to $44.7 million in 2019. The company most recently announced quarterly dividends of $1 per share, a growth of 186% year over year. |
37602.0 | 2020-03-12 00:00:00 UTC | Aurora Cannabis Is Now a Penny Stock. Will It Recover? | ACB | https://www.nasdaq.com/articles/aurora-cannabis-is-now-a-penny-stock.-will-it-recover-2020-03-12 | nan | nan | Marijuana stocks have gone through a massive roller-coaster ride over the past couple of years. Go back to 2018, and it seemed that even the tiniest companies with ties to cannabis were soaring, even if their business models were unproven. Now, there's just as much pessimism as there was optimism back then, and even well-established leaders in the cannabis industry have felt the pain.
Aurora Cannabis (NYSE: ACB) has been one of the best-known marijuana stocks for a while, and it saw its fair share of success in recent years. As the bloom has come off the cannabis craze, however, Aurora has proven vulnerable to the industry's challenges. Earlier this week, Aurora's stock price sank below the $1 per share mark, making it a penny stock and bringing with it all the baggage that penny-stock status carries. With shares looking so cheap, though, some value-oriented marijuana investors have to wonder whether now might be the perfect time to bet on a big rebound for Aurora.
Image source: Getty Images.
The challenges that Aurora Cannabis faces
Unfortunately, there are a number of issues that Aurora Cannabis will have to address if it wants to mount a successful turnaround. Among them are the following:
Massive losses. Aurora posted a loss of 1.33 billion Canadian dollars in its fiscal second quarter, which ended Dec. 31. Much of that loss came from impairment charges against its assets, but even when you take those factors out, operating losses of almost CA$120 million showed that Aurora is still far from consistent profitability.
Significant debt. Aurora had more than CA$300 million in liabilities on its balance sheet related to current and long-term convertible debentures, and another CA$300 million tied to loans and other borrowing. With just CA$156 million in cash and equivalents, Aurora will continue to have challenges related to cash flow and maintaining its debt obligations.
Potential future dilution. Aurora already has a bad reputation for relying too much on secondary stock offerings to raise capital. If the company needs more cash and has to turn to the equity market for more financing, then selling more stock at current levels could make it a lot harder for current shareholders to regain their losses.
A possible NYSE delisting. In order to keep trading on the New York Stock Exchange, Aurora needs to avoid having its stock fall below the $1 per share level for a 30-day period. Aurora could always seek to do a reverse stock split to boost its share price and avoid delisting, but the stigma of reverse splits would be another black mark against the cannabis company.
Add to this factors like heavy competition in the marijuana industry, difficulties in growing the retail market to its full potential, and the uncertainty of legalization efforts in many major markets, and it's easy to see why Aurora has fallen so far.
What Aurora has to do to succeed
If Aurora Cannabis wants to prove bullish shareholders right, it'll need to reverse a lot of the difficulties it's seen recently. That includes doing the following:
Restarting many of the core projects that it temporarily halted recently, including construction at its Alberta Aurora Sun complex.
Finding ways to jump start its expansion plans in international markets.
Hiring a strong replacement for retiring CEO Terry Booth.
Containing costs while still leaving room for internal investment in key initiatives.
Coming up with a long-term strategy for entering the U.S. market more aggressively.
That's a tall order for the cannabis company to achieve right now. Given the market's focus on the Covid-19 outbreak, it'll be tough for Aurora to get the attention it would need to make a more positive impression with the financial community.
At this point, Aurora Cannabis has a tough road ahead of it. If it can get its house in order, then it might not be doomed to penny-stock status. If not, though, it'll probably take a reverse split to get the marijuana stock's price back above the $1 per share mark.
10 stocks we like better than Aurora Cannabis Inc.
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Aurora Cannabis Inc. wasn't one of them! That's right -- they think these 10 stocks are even better buys.
See the 10 stocks
*Stock Advisor returns as of December 1, 2019
Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Aurora Cannabis (NYSE: ACB) has been one of the best-known marijuana stocks for a while, and it saw its fair share of success in recent years. With shares looking so cheap, though, some value-oriented marijuana investors have to wonder whether now might be the perfect time to bet on a big rebound for Aurora. Given the market's focus on the Covid-19 outbreak, it'll be tough for Aurora to get the attention it would need to make a more positive impression with the financial community. | Aurora Cannabis (NYSE: ACB) has been one of the best-known marijuana stocks for a while, and it saw its fair share of success in recent years. If the company needs more cash and has to turn to the equity market for more financing, then selling more stock at current levels could make it a lot harder for current shareholders to regain their losses. Aurora could always seek to do a reverse stock split to boost its share price and avoid delisting, but the stigma of reverse splits would be another black mark against the cannabis company. | Aurora Cannabis (NYSE: ACB) has been one of the best-known marijuana stocks for a while, and it saw its fair share of success in recent years. Earlier this week, Aurora's stock price sank below the $1 per share mark, making it a penny stock and bringing with it all the baggage that penny-stock status carries. In order to keep trading on the New York Stock Exchange, Aurora needs to avoid having its stock fall below the $1 per share level for a 30-day period. | Aurora Cannabis (NYSE: ACB) has been one of the best-known marijuana stocks for a while, and it saw its fair share of success in recent years. If not, though, it'll probably take a reverse split to get the marijuana stock's price back above the $1 per share mark. 10 stocks we like better than Aurora Cannabis Inc. |
37603.0 | 2020-03-12 00:00:00 UTC | U.S. or Canadian Pot Stocks: The Better Buy Is...? | ACB | https://www.nasdaq.com/articles/u.s.-or-canadian-pot-stocks%3A-the-better-buy-is...-2020-03-12 | nan | nan | Over the next decade, cannabis is expected to be one of the fastest-growing industries. After more than tripling worldwide sales to $10.9 billion between 2014 and 2018, Wall Street is looking for the marijuana industry to generate a minimum of $50 billion in global annual sales by 2030. This offers plenty of long-term upside for the industry, as well as opportunistic pot stock investors.
The big question is, should investors consider putting their money to work in Canadian pot stocks, which are operating in the only recreationally legal developed country at the moment, or U.S. pot stocks, which are operating in the largest weed market in the world by annual sales?
While there is a clear-cut answer, one thing is for certain: Both U.S. and Canadian pot stocks are set for serious growing pains.
Image source: Getty Images.
No matter the choice, growing pains are a given
To our north, Canadian marijuana stocks have been stymied by regulatory problems. Health Canada, which oversees the Canadian weed industry, has been slow to review cultivation and sales license applications, and was responsible for delaying the launch of high-margin derivatives by two months. Derivatives, such as edibles, infused beverages, vapes, topicals, and concentrates, finally began hitting dispensary shelves in Canada in mid-December.
Provincial holdups have also been a problem. Ontario, the most-populous province in Canada, had been working with a lottery system for assigning dispensary licenses until the end of 2019. As of the one-year anniversary of adult-use sales commencing (Oct. 17, 2019), only 24 retail stores have been opened in a province that could probably support around 1,000 dispensaries. This has led to supply bottlenecks in perhaps the most lucrative province of Canada.
The end result for Canadian pot stocks has been scaled back production and some serious belt-tightening. For example, Aurora Cannabis (NYSE: ACB) announced in November that it would halt construction on two of its largest grow farms, and then, in January, put a 1-million-square-foot greenhouse up for sale that it had originally planned to retrofit for cannabis production. Meanwhile, Canopy Growth (NYSE: CGC) recently announced plans to close approximately 3 million square feet of licensed production capacity in British Columbia, and hold off on opening its 350,000-square-foot Niagara on the Lake facility in Ontario. All told, Aurora Cannabis reduced its peak production by close to two-thirds, while Canopy Growth may have slashed its peak output potential by up to 45%. Aurora and Canopy also each let go of 500 employees.
Image source: Getty Images.
On the U.S. side of the equation, high tax rates on legal cannabis and licensing delays are taking their toll, with California providing the perfect example.
California is expected to be the largest pot market in the world by annual sales. However, the Golden State is taxing the daylights out of its consumers. Aside from already high state and local taxes, California tacks on an excise tax and a wholesale tax. This makes it virtually impossible for legal producers to compete with black-market product.
We're also witnessing licensing delays in California. For instance, the Los Angeles City Council has challenged the awarding of 100 dispensary licenses within the city. The Council claims that some applicants may have had early access to the online process and wants to redo the awards. With many jurisdictions also denying retailers a presence, California has far too few dispensaries for a state its size. This, too, gives black-market operators a chance to thrive.
It should also be noted that financing remains a concern in the U.S. and Canada. In the U.S., where marijuana remains federally illegal, banks and credit unions remain shy about assisting marijuana businesses with basic banking services. Meanwhile, Canadian banks have cracked down on their lending standards to cannabis companies given the deterioration in the industry's fundamentals in recent months.
Image source: Getty Images.
U.S. or Canadian pot stocks? The better buy is...
While there are a slew of short-term problems for the marijuana industry, the long-term outlook remains bright, especially for U.S. pot stocks, which look to have a much clearer path to success.
As noted, U.S. cannabis stocks are operating in a much larger market than Canada. With the understanding that analyst estimates are really all over the place, most analysts are counting on Canada to generate in the neighborhood of $5 billion in sales by 2024. By comparison, U.S. pot sales could soar to $30 billion by 2024, according to the State of the Legal Cannabis Markets report in 2019 from Arcview Market Research and BDS Analytics.
The issues plaguing the U.S. market are also, arguably, more easily fixable that those in Canada. We've witnessed Canadian pot sales stagnate badly since August, while new state-level legalizations and organic growth continue to add nicely to the total revenue being generating from marijuana in the United States. Growing pains will continue for all North American pot stocks, but the ramp-up in sales and the push toward profitability will be considerably easier for U.S. cannabis stocks than their Canadian counterparts.
So, what U.S. pot stocks look intriguing? Among vertically integrated multistate operators (MSO), Trulieve Cannabis (OTC: TCNNF) is raising some eyebrows. Whereas most MSOs have chosen to operate in as many legalized states as possible, 45 of 47 operational dispensaries for Trulieve are located in medical marijuana-legal Florida. By focusing nearly all of its attention on the Sunshine State, Trulieve has successfully built up its brand with relatively minimal recurring marketing expenses. The company currently controls the lion's share of the medical pot market in Florida, and has been generating the mot operating income (without the help of one-time benefits or fair-value adjustments) of any cannabis stock... period!
Image source: Getty Images.
Another way to play the budding U.S. pot industry would be with real estate investment trust (REIT) Innovative Industrial Properties (NYSE: IIPR). With access to financing somewhat challenging, Innovative Industrial Properties has stepped in as a sale-leaseback agreement provider. In return for buying growing and processing assets from MSOs and providing them with cash, Innovative Industrial lands longtime tenants. IIP now has 51 owned assets with a weighted-average lease length of 15.6 years and an average return on invested capital of 13.3%. IIP is going to get its money back in a little over five years, with everything else being gravy.
If you're torn as to where to put your money to work within the cannabis space, the United States is where you should be focusing your attention.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Sean Williams has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Innovative Industrial Properties. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | For example, Aurora Cannabis (NYSE: ACB) announced in November that it would halt construction on two of its largest grow farms, and then, in January, put a 1-million-square-foot greenhouse up for sale that it had originally planned to retrofit for cannabis production. Meanwhile, Canopy Growth (NYSE: CGC) recently announced plans to close approximately 3 million square feet of licensed production capacity in British Columbia, and hold off on opening its 350,000-square-foot Niagara on the Lake facility in Ontario. We've witnessed Canadian pot sales stagnate badly since August, while new state-level legalizations and organic growth continue to add nicely to the total revenue being generating from marijuana in the United States. | For example, Aurora Cannabis (NYSE: ACB) announced in November that it would halt construction on two of its largest grow farms, and then, in January, put a 1-million-square-foot greenhouse up for sale that it had originally planned to retrofit for cannabis production. The big question is, should investors consider putting their money to work in Canadian pot stocks, which are operating in the only recreationally legal developed country at the moment, or U.S. pot stocks, which are operating in the largest weed market in the world by annual sales? Meanwhile, Canopy Growth (NYSE: CGC) recently announced plans to close approximately 3 million square feet of licensed production capacity in British Columbia, and hold off on opening its 350,000-square-foot Niagara on the Lake facility in Ontario. | For example, Aurora Cannabis (NYSE: ACB) announced in November that it would halt construction on two of its largest grow farms, and then, in January, put a 1-million-square-foot greenhouse up for sale that it had originally planned to retrofit for cannabis production. The big question is, should investors consider putting their money to work in Canadian pot stocks, which are operating in the only recreationally legal developed country at the moment, or U.S. pot stocks, which are operating in the largest weed market in the world by annual sales? Growing pains will continue for all North American pot stocks, but the ramp-up in sales and the push toward profitability will be considerably easier for U.S. cannabis stocks than their Canadian counterparts. | For example, Aurora Cannabis (NYSE: ACB) announced in November that it would halt construction on two of its largest grow farms, and then, in January, put a 1-million-square-foot greenhouse up for sale that it had originally planned to retrofit for cannabis production. The big question is, should investors consider putting their money to work in Canadian pot stocks, which are operating in the only recreationally legal developed country at the moment, or U.S. pot stocks, which are operating in the largest weed market in the world by annual sales? U.S. or Canadian pot stocks? |
37604.0 | 2020-03-10 00:00:00 UTC | Why Aurora Cannabis Stock Is Bouncing Back Today | ACB | https://www.nasdaq.com/articles/why-aurora-cannabis-stock-is-bouncing-back-today-2020-03-10 | nan | nan | What happened
Shares of Aurora Cannabis (NYSE: ACB) were up 3.4% as of 11:26 a.m. EDT on Tuesday after rising as much as 12.6% earlier in the day. The Canadian cannabis producer didn't have any news of its own. Instead, today's move is part of an overall rebound for the stock market after Monday's massive sell-off.
So what
Aurora's bounce isn't surprising. The market meltdown Monday dragged down most marijuana stocks. But these stocks aren't affected all that much by the underlying reasons behind that meltdown, namely the coronavirus outbreak and plunging oil prices. It makes perfect sense that investors would realize the panic was overdone.
Image source: Getty Images.
That being said, Aurora hasn't recovered all of its decline from Monday. There's still a lot of uncertainty about what might happen next with the global economy and the stock market. It's understandable that investors might remain skittish about the stocks of unprofitable companies in an early stage industry that faces several headwinds.
Aurora Cannabis fits hand-in-glove in that category. The company continues to lose boatloads of money. The cannabis industry is still only in its very early stages. And the industry faces continued headwinds, notably the slow rollout of retail cannabis stores in Canada.
Now what
Expect Aurora Cannabis stock to remain highly volatile at least over the near term and quite possibly for a much longer period. The most important thing for investors to watch is the company's next quarterly update, which will probably be in May. That will be the first glimpse into how Aurora is performing in the Cannabis 2.0 market and will partly reflect the company's cost-cutting moves.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | What happened Shares of Aurora Cannabis (NYSE: ACB) were up 3.4% as of 11:26 a.m. EDT on Tuesday after rising as much as 12.6% earlier in the day. It's understandable that investors might remain skittish about the stocks of unprofitable companies in an early stage industry that faces several headwinds. Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks. | What happened Shares of Aurora Cannabis (NYSE: ACB) were up 3.4% as of 11:26 a.m. EDT on Tuesday after rising as much as 12.6% earlier in the day. It's understandable that investors might remain skittish about the stocks of unprofitable companies in an early stage industry that faces several headwinds. And the industry faces continued headwinds, notably the slow rollout of retail cannabis stores in Canada. | What happened Shares of Aurora Cannabis (NYSE: ACB) were up 3.4% as of 11:26 a.m. EDT on Tuesday after rising as much as 12.6% earlier in the day. It's understandable that investors might remain skittish about the stocks of unprofitable companies in an early stage industry that faces several headwinds. That will be the first glimpse into how Aurora is performing in the Cannabis 2.0 market and will partly reflect the company's cost-cutting moves. | What happened Shares of Aurora Cannabis (NYSE: ACB) were up 3.4% as of 11:26 a.m. EDT on Tuesday after rising as much as 12.6% earlier in the day. Instead, today's move is part of an overall rebound for the stock market after Monday's massive sell-off. The market meltdown Monday dragged down most marijuana stocks. |
37605.0 | 2020-03-10 00:00:00 UTC | There Were Once 20 Pot Stocks With a $1 Billion Valuation or Higher. Only 8 Remain. | ACB | https://www.nasdaq.com/articles/there-were-once-20-pot-stocks-with-a-%241-billion-valuation-or-higher.-only-8-remain.-2020 | nan | nan | Marijuana is expected to be one of the fastest-growing industries on the planet over the next decade. But that hasn't stopped the still-nascent industry from encountering a slew of growing pains.
To our north, Canada has contended with a bevy of regulatory-induced supply issues. Some provinces have dealt with shortages, whereas other regions have seen bottlenecks. In Ontario, for instance, a mere 24 dispensaries were open for business as of the one-year anniversary of the commencement of adult-use sales. This has allowed black-market producers to thrive.
Meanwhile, cannabis companies in the U.S. have struggled to access nondilutive forms of financing and have been unable to compete with illicit growers on price in core markets that are overtaxing legal cannabis.
Image source: Getty Images.
The end result is that pot stock valuations have plummeted across the board. In fact, whereas there were once 20 cannabis separate cannabis stock that boasted a market cap of at least $1 billion, there are now only eight remaining, some of which are barely hanging on.
Many popular cannabis stocks -- Aphria, OrganiGram Holdings, MedMen Enterprises, Acreage Holdings, Charlotte's Web, Cresco Labs, CannTrust, HEXO, Harvest Health & Recreation, Sundial Growers, and Green Organic Dutchman -- were all once giants, but are now notably below the $1 billion market cap threshold. Trulieve Cannabis also misses the cut by a few million dollars.
What you see below are the eight last remaining members of marijuana's billion-dollar club.
1. Canopy Growth: $5.34 billion
Canopy Growth (NYSE: CGC) is still, far and away, the largest marijuana stock, but its fall from grace has been notable. Once a nearly $17 billion company, Canopy Growth is within a stone's throw of touching levels not seen since 2017.
While the company does still have an enviable $2.27 billion Canadian in cash, cash equivalents, and marketable securities, there's no sweeping under the rug that this cash pile has been more than halved over the past year as operating losses (and share-based compensation) have piled up. Canopy Growth recently announced an aggressive plan to shutter around 3.3 million square feet of licensed production space and lay off 500 workers, but it remains to be seen if that'll stop the bleeding.
Image source: GW Pharmaceuticals.
2. GW Pharmaceuticals: $3 billion
Even though management dislikes when their company is lumped in with "cannabis stocks," cannabinoid-based drug developer GW Pharmaceuticals (NASDAQ: GWPH) has certainly held up pretty well. In November 2018, GW Pharmaceuticals launched Epidiolex, a CBD-based oral therapy, to treat two rare types of childhood-onset epilepsy. Early uptake and insurer coverage of the drug has been impressive. But the real test for the company will come from Zogenix, which may have a competing therapy on pharmacy shelves sooner than later.
3. Curaleaf Holdings: $2.25 billion
Among U.S. multistate operators (MSOs), Curaleaf Holdings (OTC: CURLF) is king with a $2.25 billion market cap. Following its announcement last week that it would acquire edibles manufacturer BlueKudu in Colorado, Curaleaf will have a presence in 20 states on a pro forma basis, which ties Acreage Holdings for the broadest U.S. presence.
In addition, once the purchase of privately held MSO Grassroots closes, Curaleaf will hold approximately 130 retail licenses and be operating close to 75 dispensaries. Both would likely be top marks among U.S. MSOs. Currently on track to be the first pot stock to reach $1 billion in annual sales, there's good reason for Curaleaf to be the most valuable MSO.
Image source: Getty Images.
4. Cronos Group: $2.03 billion
With regard to Cronos Group's (NASDAQ: CRON) $2 billion market cap, I only have two words: cash talks. Having closed a $1.8 billion equity investment from tobacco giant Altria Group in March 2019, Cronos still had in the neighborhood of $1.48 billion in cash, cash equivalents, and marketable securities in its coffers as of the end of September. This huge cash balance has helped somewhat buoy Cronos' valuation and mask the fact that its cultivation and derivative production has largely been a disappointment in the early going. Cronos Group is going to need vape-health concerns and supply issues from China to subside if it's going to rebound anytime soon.
5. Innovative Industrial Properties: $1.6 billion
Marijuana real estate investment trust (REIT) Innovative Industrial Properties (NYSE: IIPR) is easily the most impressive pot stock at the moment. Focused on acquiring medical cannabis growing and processing sites, then leasing them out for extended periods of time, Innovative Industrial Properties' business model yields highly predictable cash flow with minimal ongoing expenses.
Currently, IIP owns 51 properties with a weighted-average lease length of 15.6 years and an average yield on its $680.7 million invested/pledged capital of 13.3%. This means it'll net a complete payback on its invested capital in just over five years, all while returning more than 4% to shareholders annually via a budding dividend.
Image source: Getty Images.
6. Aurora Cannabis: $1.37 billion
Investing isn't a popularity contest, as millennial investors have found out with Aurora Cannabis (NYSE: ACB). Once a nearly $9 billion company, the most-held stock on investing app Robinhood has been tumbling precipitously for a year. Facing a potential cash crunch and weaker-than-expected demand domestically and abroad, Aurora Cannabis has halted construction on two of its largest grow farms, and recently put a 1-million-square-foot greenhouse up for sale. I estimate this will cut Aurora's peak production potential by up to two-thirds. Aurora Cannabis also shed 500 jobs and restructured its debt covenants, which is a sign that this company is far from financially sound.
7. Green Thumb Industries: $1.35 billion
Although it trails Curaleaf pretty significantly in market cap, Green Thumb Industries (OTC: GTBIF) is another impressive MSO that should soon be thriving in the United States. Acquisitions have allowed Green Thumb to have a significant presence in Illinois and Nevada, which are both expected to be markets that generate $1 billion-plus in annual weed sales by 2024. Green Thumb's 96 retail licenses rank among the top five for MSOs, and its presence in 12 states is primarily focused on core (i.e., billion-dollar potential) markets.
8. Tilray $1.04 billion
Last, but not least, there's the struggling Tilray (NASDAQ: TLRY), which is barely clinging onto its billion-dollar status after a very weak fourth-quarter report. For the quarter, total cannabis revenue shrank 20% from the sequential third quarter, while cash, cash equivalents, and short-term investments were down to $96.8 million from $517.6 million in the year-ago quarter. Tilray's management made the surprising move to de-emphasize Canada in favor of Europe and the U.S. last March, but it's meant an uptick in costs to get all the required infrastructure in place as it makes this long-term strategic shift. I wouldn't be surprised to see Tilray fall off this list very soon.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Sean Williams owns shares of CannTrust Holdings Inc. The Motley Fool owns shares of and recommends Charlottes Web Holdings, Cresco Labs Inc., Green Thumb Industries, Innovative Industrial Properties, and OrganiGram Holdings. The Motley Fool recommends CannTrust Holdings Inc, and HEXO. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Aurora Cannabis: $1.37 billion Investing isn't a popularity contest, as millennial investors have found out with Aurora Cannabis (NYSE: ACB). Focused on acquiring medical cannabis growing and processing sites, then leasing them out for extended periods of time, Innovative Industrial Properties' business model yields highly predictable cash flow with minimal ongoing expenses. Facing a potential cash crunch and weaker-than-expected demand domestically and abroad, Aurora Cannabis has halted construction on two of its largest grow farms, and recently put a 1-million-square-foot greenhouse up for sale. | Aurora Cannabis: $1.37 billion Investing isn't a popularity contest, as millennial investors have found out with Aurora Cannabis (NYSE: ACB). Many popular cannabis stocks -- Aphria, OrganiGram Holdings, MedMen Enterprises, Acreage Holdings, Charlotte's Web, Cresco Labs, CannTrust, HEXO, Harvest Health & Recreation, Sundial Growers, and Green Organic Dutchman -- were all once giants, but are now notably below the $1 billion market cap threshold. Green Thumb Industries: $1.35 billion Although it trails Curaleaf pretty significantly in market cap, Green Thumb Industries (OTC: GTBIF) is another impressive MSO that should soon be thriving in the United States. | Aurora Cannabis: $1.37 billion Investing isn't a popularity contest, as millennial investors have found out with Aurora Cannabis (NYSE: ACB). Many popular cannabis stocks -- Aphria, OrganiGram Holdings, MedMen Enterprises, Acreage Holdings, Charlotte's Web, Cresco Labs, CannTrust, HEXO, Harvest Health & Recreation, Sundial Growers, and Green Organic Dutchman -- were all once giants, but are now notably below the $1 billion market cap threshold. Having closed a $1.8 billion equity investment from tobacco giant Altria Group in March 2019, Cronos still had in the neighborhood of $1.48 billion in cash, cash equivalents, and marketable securities in its coffers as of the end of September. | Aurora Cannabis: $1.37 billion Investing isn't a popularity contest, as millennial investors have found out with Aurora Cannabis (NYSE: ACB). Curaleaf Holdings: $2.25 billion Among U.S. multistate operators (MSOs), Curaleaf Holdings (OTC: CURLF) is king with a $2.25 billion market cap. I wouldn't be surprised to see Tilray fall off this list very soon. |
37606.0 | 2020-03-09 00:00:00 UTC | 3 Stocks I'd Avoid for the Rest of 2020 | ACB | https://www.nasdaq.com/articles/3-stocks-id-avoid-for-the-rest-of-2020-2020-03-09 | nan | nan | The global spread of the novel coronavirus has shaken U.S. stock markets to their core. The nearly 10-year-long bull market briefly entered bear market territory at one point last week. What's more, this marketwide weakness appears poised to continue for a while longer because of the potential impact on corporate earnings in the months ahead. Investors, therefore, will definitely want to pick their equities with an extra amount of care and forethought for the remainder of 2020.
I plan on avoiding three particular healthcare stocks on the heels of this outbreak. The three names I've crossed off my buy list are Aurora Cannabis (NYSE: ACB), HEXO (NYSE: HEXO), and Inovio Pharmaceuticals (NASDAQ: INO). Here's why.
Image Source: Getty Images.
Aurora Cannabis: No bottom in sight
Aurora Cannabis was once the industry's crown jewel. The company had one of the most diverse businesses, a vast international footprint, a top-flight production capacity, and the backing of thousands of enthusiastic retail investors. Since hitting this high-water mark roughly a year ago, however, Aurora has had to slash expenses, idle key growth facilities, and change its brain trust. Even then, the company still hasn't solved its two most fundamental problems: the ongoing structural deficiences in the Canadian legal cannabis market and its long-term financial viability. But the worst could be yet to come.
After taking a 45.8% hit to its share price during just the first nine weeks of 2020, Aurora's stock now sits at a worrisome $1.17. The big deal is that Aurora's stock is inching ever closer to a delisting notice. Complicating matters further, the company may have to continue selling stock to raise capital, which is far from ideal given its current share price. In short, Aurora appears headed for a reverse split, perhaps before midyear.
On the bright side, the company does have an interesting mix of assets that could be used to mount a comeback. So a reverse split shouldn't be viewed as a stepping stone toward bankruptcy in this case. That being said, Aurora is going to have to pay for the sins of its prior management team at some point, and it will probably have to do so when the U.S. stock markets are in a rather bad mood.
HEXO: On the outside looking in
Quebec-based grower HEXO has shed 80% of its value over the past 12 months. Even so, it could be about to fall even further, for a couple of reasons. The first major headwind is the simple fact that HEXO doesn't have a great competitive position within the Canadian cannabis market.
Despite acquiring Newstrike Brands and pairing up with Molson Coors Brewing to develop cannabis-infused beverages, the company is projected to be cash flow negative for the next two years at a minimum. The harsh truth is that there are far too many mouths to feed in the Candian cannabis market, and HEXO doesn't have the cash runway to hang with its bigger competitors.
Second, HEXO is also bumping up against the minimum bid requirement for the New York Stock Exchange (NYSE). With its shares now at a $1.09, HEXO may soon have to decide whether to delist from the NYSE or execute a reverse split to meet the minimum bid requirement of $1 per share. In short, there's no compelling reason to think this struggling cannabis stock can turn things around anytime soon.
Inovio: Too much hype
Inovio Pharmaceuticals, a DNA-based vaccine developer, has seen its stock go parabolic over the past few weeks in response to the coronavirus outbreak. The brief backstory is that Inovio announced that it developed a vaccine candidate, dubbed INO-4800, against the virus in just three hours and that human trials should begin shortly.
As this virus has fanned out to almost every continent and killed almost 4,000 people, there is a lot of excitement about a possible vaccine for obvious reasons. Still, Inovio's skyrocketing share price is undoubtedly based on nothing more than pure speculation. That's important to understand, because it means that Inovio's shares could give back all of these stately gains in the blink of an eye.
Now, Inovio's shares may continue ripping higher in the days and weeks ahead. I don't doubt that's possible for one second, because of the growing fear that this virus may evolve into a seasonal threat. But the company's $1.42 billion market cap is hard to justify nonetheless. Inovio has never won a regulatory approval for any of its vaccine candidates, and this latest infectious disease outbreak will more than likely evaporate before the company ever gets INO-4800 into a pivotal trial. Put simply, Inovio is essentially a day trader vehicle as things stand now, which isn't an attractive set up for the buy-and-hold crowd.
10 stocks we like better than Inovio Pharmaceuticals
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Inovio Pharmaceuticals wasn't one of them! That's right -- they think these 10 stocks are even better buys.
See the 10 stocks
*Stock Advisor returns as of December 1, 2019
George Budwell has no position in any of the stocks mentioned. The Motley Fool recommends HEXO. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | The three names I've crossed off my buy list are Aurora Cannabis (NYSE: ACB), HEXO (NYSE: HEXO), and Inovio Pharmaceuticals (NASDAQ: INO). Since hitting this high-water mark roughly a year ago, however, Aurora has had to slash expenses, idle key growth facilities, and change its brain trust. Even then, the company still hasn't solved its two most fundamental problems: the ongoing structural deficiences in the Canadian legal cannabis market and its long-term financial viability. | The three names I've crossed off my buy list are Aurora Cannabis (NYSE: ACB), HEXO (NYSE: HEXO), and Inovio Pharmaceuticals (NASDAQ: INO). In short, Aurora appears headed for a reverse split, perhaps before midyear. With its shares now at a $1.09, HEXO may soon have to decide whether to delist from the NYSE or execute a reverse split to meet the minimum bid requirement of $1 per share. | The three names I've crossed off my buy list are Aurora Cannabis (NYSE: ACB), HEXO (NYSE: HEXO), and Inovio Pharmaceuticals (NASDAQ: INO). Inovio: Too much hype Inovio Pharmaceuticals, a DNA-based vaccine developer, has seen its stock go parabolic over the past few weeks in response to the coronavirus outbreak. See the 10 stocks *Stock Advisor returns as of December 1, 2019 George Budwell has no position in any of the stocks mentioned. | The three names I've crossed off my buy list are Aurora Cannabis (NYSE: ACB), HEXO (NYSE: HEXO), and Inovio Pharmaceuticals (NASDAQ: INO). Inovio: Too much hype Inovio Pharmaceuticals, a DNA-based vaccine developer, has seen its stock go parabolic over the past few weeks in response to the coronavirus outbreak. Now, Inovio's shares may continue ripping higher in the days and weeks ahead. |
37607.0 | 2020-03-09 00:00:00 UTC | This Pot Stock Looks to Be the Only Clear Winner in Canada | ACB | https://www.nasdaq.com/articles/this-pot-stock-looks-to-be-the-only-clear-winner-in-canada-2020-03-09 | nan | nan | At this time last year, marijuana stocks were the hottest thing since sliced bread. At the end of the first quarter of 2019, more than a dozen cannabis stocks wound up rising by at least 70% in a three-month stretch, fueled by Canada's imminent release of derivative products and an expected rapid ramp-up in weed sales. Unfortunately, none of these expectations became reality.
Instead of delivering exponential growth, Canadian pot growers have seen their sales growth slow to a crawl, with regulatory concerns taking most of the blame. Health Canada wound up delaying the release of high-margin derivatives, such as edibles, vapes, and infused beverages, until mid-December, while Ontario, Canada's most-populous province, had been working with a lottery system to assign dispensary licenses until the end of 2019. The result was that only 24 retail stores were open as of Oct. 17, 2019, the one-year anniversary of recreational weed sales commencing.
This amount of bad news can only add up for so long before individual pot stocks feel the pain -- and in recent months, they've certainly been pummeled.
Image source: Getty Images.
Canadian cannabis growers have been nothing short of a disaster
For instance, the most popular pot stock in the world, Aurora Cannabis (NYSE: ACB), announced in November that it was halting construction on two of its largest projects (Aurora Sun in Alberta and Aurora Nordic 2 in Denmark) to conserve capital. A few months later, Aurora put the 1 million-square-foot Exeter greenhouse up for sale, which has yet to be retrofit for marijuana production. All told, this took more than 400,000 in peak annual output off the table. As the icing on the cake, Aurora Cannabis laid off 500 workers in an effort to conserve capital and move toward positive adjusted EBITDA, which is a new requirement of its debt covenant.
Canopy Growth (NYSE: CGC), the largest marijuana stock in the world by market cap, became the latest casualty. Last week, Canopy announced that it would close its Aldergrove and Delta cultivation farms in British Columbia, and would not open its 350,000-square-foot Niagara on the Lake, ON, campus later this year as it had originally planned. This removes up to 45% of Canopy Growth's licensed production capacity. Similar to Aurora, Canopy is also letting 500 of its employees go.
Cannabis bottle-rocket Tilray (NASDAQ: TLRY), which soared to a valuation of $26 billion two months after its initial public offering in July 2018, is also feeling the pain, with its market cap now barely clinging to $1 billion. Tilray's fourth-quarter report featured a laundry list of impairment charges (to be fair, Canopy and Aurora have also registered huge impairment charges), including a $68 million inventory writedown. Inclusive of all costs, Tilray lost more than $301 million in 2019 on an operating basis.
No matter where investors look (HEXO, CannTrust, and so on), Canadian growers are an absolute dumpster fire.
Well, all of them except for one.
Image source: Getty Images.
This looks to be the only true winner in the Canadian marijuana space
With the understanding that there's still a lot to be decided in the Canadian pot-growing space, the only grower that's showing any traits that resemble a long-term winner is New Brunswick-based OrganiGram Holdings (NASDAQ: OGI).
OrganiGram is the only major grower (i.e., a producer capable of at least 100,000 kilos of annual output if fully building out their cultivation assets) that's located in an eastern Atlantic province, and that has just a single campus. Being located in eastern Canada is advantageous because cannabis-use rates among adults are significantly higher in these provinces, relative to Canada's national average. Even though eastern Atlantic provinces aren't nearly as populated as say Ontario, Quebec, and British Columbia, it gives OrganiGram a nice base of consumers in its own backyard. But don't worry, it's also one of five Canadian growers with licenses to sell pot in all 10 provinces.
Meanwhile, operating only one campus affords OrganiGram the luxury of easily being able to reduce supply chain costs and output to match the prevailing market conditions. That's not easy to do for growers like Aurora Cannabis and Canopy Growth, which count 15 and 11 separate cultivation facilities. Having one campus where growing, processing, and innovation are ongoing makes for a very efficient company.
Speaking of efficiency, another thing that makes the Moncton, NB, campus special is that OrganiGram is utilizing a three-tiered growing system. This is to say that not only is OrganiGram growing cannabis horizontally in its licensed production space, but it's also making use of its vertical space within its greenhouses. In less than 500,000 square feet of cultivation space, OrganiGram could, in theory, produce as much as 113,000 kilos per year. At its peak, OrganiGram may be capable of 230 grams of yield per square foot, which is likely two to three times higher than its competitors.
Image source: Getty Images.
OrganiGram also made prudent investments in high-margin derivatives. A $15 million Canadian investment in a fully automated line of equipment will allow the company to produce 4 million kilos of infused chocolates per year. It'll also be introducing a powder in the first-half of 2020 that can be added to beverages of consumers' choice to speed up the process by which cannabinoids take effect. OrganiGram is one of four growers chosen to be a supplier for PAX Labs' Era vape device, as well.
To continue adding to the list of positives, OrganiGram wasn't lured in by the willy nilly expansion that's plagued the likes of Aurora Cannabis, Canopy Growth, and Tilray. As such, its balance sheet isn't weighed down by goodwill and other impairment charges. Although OrganiGram has turned to share offerings to raise capital from time to time, it looks to have sufficient capital to execute on its long-term strategy and won't be destroying shareholder value via writedowns.
As one last bit of evidence that OrganiGram is going to be the one true winner among Canadian pot growers, it's the only one that's produced a no-nonsense quarterly profit to date. During its fiscal third quarter, OrganiGram's sales, minus its cost of goods sold and operating expenses, yielded an operating profit of almost CA$1.2 million. Sure, we've witnessed some Canadian pot stocks generate a "profit," but not without the help of fair-value adjustments, asset sales, or derivative liability revaluations. OrganiGram is the only company that's generated a real operating profit, thus far.
If you're looking for the clearest long-term winner in the Canadian marijuana space, it's OrganiGram Holdings.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Sean Williams owns shares of CannTrust Holdings Inc. The Motley Fool owns shares of and recommends OrganiGram Holdings. The Motley Fool recommends CannTrust Holdings Inc and HEXO. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Canadian cannabis growers have been nothing short of a disaster For instance, the most popular pot stock in the world, Aurora Cannabis (NYSE: ACB), announced in November that it was halting construction on two of its largest projects (Aurora Sun in Alberta and Aurora Nordic 2 in Denmark) to conserve capital. At the end of the first quarter of 2019, more than a dozen cannabis stocks wound up rising by at least 70% in a three-month stretch, fueled by Canada's imminent release of derivative products and an expected rapid ramp-up in weed sales. Last week, Canopy announced that it would close its Aldergrove and Delta cultivation farms in British Columbia, and would not open its 350,000-square-foot Niagara on the Lake, ON, campus later this year as it had originally planned. | Canadian cannabis growers have been nothing short of a disaster For instance, the most popular pot stock in the world, Aurora Cannabis (NYSE: ACB), announced in November that it was halting construction on two of its largest projects (Aurora Sun in Alberta and Aurora Nordic 2 in Denmark) to conserve capital. Canopy Growth (NYSE: CGC), the largest marijuana stock in the world by market cap, became the latest casualty. OrganiGram is the only major grower (i.e., a producer capable of at least 100,000 kilos of annual output if fully building out their cultivation assets) that's located in an eastern Atlantic province, and that has just a single campus. | Canadian cannabis growers have been nothing short of a disaster For instance, the most popular pot stock in the world, Aurora Cannabis (NYSE: ACB), announced in November that it was halting construction on two of its largest projects (Aurora Sun in Alberta and Aurora Nordic 2 in Denmark) to conserve capital. This looks to be the only true winner in the Canadian marijuana space With the understanding that there's still a lot to be decided in the Canadian pot-growing space, the only grower that's showing any traits that resemble a long-term winner is New Brunswick-based OrganiGram Holdings (NASDAQ: OGI). To continue adding to the list of positives, OrganiGram wasn't lured in by the willy nilly expansion that's plagued the likes of Aurora Cannabis, Canopy Growth, and Tilray. | Canadian cannabis growers have been nothing short of a disaster For instance, the most popular pot stock in the world, Aurora Cannabis (NYSE: ACB), announced in November that it was halting construction on two of its largest projects (Aurora Sun in Alberta and Aurora Nordic 2 in Denmark) to conserve capital. At the end of the first quarter of 2019, more than a dozen cannabis stocks wound up rising by at least 70% in a three-month stretch, fueled by Canada's imminent release of derivative products and an expected rapid ramp-up in weed sales. OrganiGram is the only major grower (i.e., a producer capable of at least 100,000 kilos of annual output if fully building out their cultivation assets) that's located in an eastern Atlantic province, and that has just a single campus. |
37608.0 | 2020-03-09 00:00:00 UTC | This Could Be a Game Changer for the Cannabis Industry in Canada | ACB | https://www.nasdaq.com/articles/this-could-be-a-game-changer-for-the-cannabis-industry-in-canada-2020-03-09 | nan | nan | The cannabis industry in Canada isn't coming off a terribly strong year in 2019. It generated sales of 1.2 billion Canadian dollars during the year, well short of expectations. In 2018, Deloitte projected that the industry's sales for 2019 would be as much as CA$4.3 billion. It's nowhere near that number even though in the latter half of 2019, there was progress; December was a record month with CA$146.2 million in revenue. However, that's still only an annual run rate of CA$1.75 billion.
While the numbers are still underwhelming, there could be some big changes coming that could make the pot industry in Canada much, much stronger in the years to come.
Ontario to consider making lounges legal
In February, Canada's largest province said that it would go through a consultation process to review the possibility of legalizing not just lounges but also cannabis consumption in public places like outdoor festivals and concerts. Giving cannabis consumers places besides their homes to partake can help accelerate sales growth for the industry by adding a social component to the mix that could lead to more revenue, particularly at events.
However, the province's Attorney General, Doug Downey, is still in the early stages of this process, telling BNN Bloomberg in an interview: "We want to hear what Ontarians have to say on lounges, cafes, that kind of thing. It's not really predetermined that we'll make any decisions at all but we want to hear from the public." Downey did concede that more stores are needed in the province, which has been a complaint of cannabis producer Aurora Cannabis (NYSE: ACB) in the past, stating that a poor retail rollout contributed to the company failing to meet targets, including a positive EBITDA (earnings before interest, taxes, depreciation, and amortization) number.
Image source: Getty Images.
Adding more locations and perhaps even lounges could help make the industry much stronger by giving consumers more places to buy and consume marijuana. In Alberta, the City of Edmonton has looked into the possibility of making lounges legal as well, but there's still been no confirmation of whether that will end up happening.
Edible products require places to consume cannabis publicly
On Oct. 17, 2019, edible cannabis products officially became legal in Canada (even though they weren't available on store shelves until at least two months after that), and the segment will help add to the country's total cannabis sales in 2020. In particular, beverages are an area companies like Canopy Growth (NYSE: CGC) and HEXO (NYSE: HEXO) have focused on, signing deals with alcohol companies to work on cannabis-infused beverages. Canopy's partnered with Constellation Brands (NYSE: STZ), while HEXO has been working with Molson Coors Canada.
In 2019, Deloitte estimated that of the potential CA$2.7 billion edible and infused cannabis market in Canada, approximately CA$529 million, or about one-fifth, will come from cannabis-infused beverages. Having a strong retail market and lounges will certainly make it possible to help reach those goals, and perhaps even exceed them, by giving consumers places to consume beverages socially. Buying cannabis-infused drinks and then having to consume them at home rather than in a bar might be a hard sell to consumers who normally drink at lounges and bars with their friends. That's where the possibility for lounges can open more doors for the industry and help companies like HEXO and Canopy Growth have much stronger performances in 2020 and beyond.
What does this mean for investors?
For pot stocks to be good buys, companies must meet expectations and achieve strong sales numbers. Legal lounges could help make that possible, making cannabis companies much more appealing investments due to the heightened sales potential. But until that happens, there might still be too much risk and uncertainty to invest in Canadian marijuana companies.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
David Jagielski has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Constellation Brands. The Motley Fool recommends HEXO. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Downey did concede that more stores are needed in the province, which has been a complaint of cannabis producer Aurora Cannabis (NYSE: ACB) in the past, stating that a poor retail rollout contributed to the company failing to meet targets, including a positive EBITDA (earnings before interest, taxes, depreciation, and amortization) number. Giving cannabis consumers places besides their homes to partake can help accelerate sales growth for the industry by adding a social component to the mix that could lead to more revenue, particularly at events. However, the province's Attorney General, Doug Downey, is still in the early stages of this process, telling BNN Bloomberg in an interview: "We want to hear what Ontarians have to say on lounges, cafes, that kind of thing. | Downey did concede that more stores are needed in the province, which has been a complaint of cannabis producer Aurora Cannabis (NYSE: ACB) in the past, stating that a poor retail rollout contributed to the company failing to meet targets, including a positive EBITDA (earnings before interest, taxes, depreciation, and amortization) number. Adding more locations and perhaps even lounges could help make the industry much stronger by giving consumers more places to buy and consume marijuana. Edible products require places to consume cannabis publicly On Oct. 17, 2019, edible cannabis products officially became legal in Canada (even though they weren't available on store shelves until at least two months after that), and the segment will help add to the country's total cannabis sales in 2020. | Downey did concede that more stores are needed in the province, which has been a complaint of cannabis producer Aurora Cannabis (NYSE: ACB) in the past, stating that a poor retail rollout contributed to the company failing to meet targets, including a positive EBITDA (earnings before interest, taxes, depreciation, and amortization) number. Ontario to consider making lounges legal In February, Canada's largest province said that it would go through a consultation process to review the possibility of legalizing not just lounges but also cannabis consumption in public places like outdoor festivals and concerts. Edible products require places to consume cannabis publicly On Oct. 17, 2019, edible cannabis products officially became legal in Canada (even though they weren't available on store shelves until at least two months after that), and the segment will help add to the country's total cannabis sales in 2020. | Downey did concede that more stores are needed in the province, which has been a complaint of cannabis producer Aurora Cannabis (NYSE: ACB) in the past, stating that a poor retail rollout contributed to the company failing to meet targets, including a positive EBITDA (earnings before interest, taxes, depreciation, and amortization) number. Ontario to consider making lounges legal In February, Canada's largest province said that it would go through a consultation process to review the possibility of legalizing not just lounges but also cannabis consumption in public places like outdoor festivals and concerts. In 2019, Deloitte estimated that of the potential CA$2.7 billion edible and infused cannabis market in Canada, approximately CA$529 million, or about one-fifth, will come from cannabis-infused beverages. |
37609.0 | 2020-03-09 00:00:00 UTC | Why Top Marijuana Stocks Are Sinking Today | ACB | https://www.nasdaq.com/articles/why-top-marijuana-stocks-are-sinking-today-2020-03-09 | nan | nan | What happened
Shares of top Canadian marijuana stocks were sinking Monday morning in the wake of a massive overall stock market sell-off fueled by continued coronavirus worries and plunging oil prices. Aurora Cannabis (NYSE: ACB) and Tilray (NASDAQ: TLRY) stocks were hit the hardest, with shares tumbling 7.7% and 8.3%, respectively, as of 10:38 a.m. EDT. Shares of Canopy Growth (NYSE: CGC) were falling 6.5% lower. Cronos Group (NASDAQ: CRON) and OrganiGram Holdings (NASDAQ: OGI) stocks were down 4.7% and 3.6%, respectively.
So what
Do the coronavirus outbreak and lower oil prices really hurt the business prospects for the leading Canadian cannabis producers? Probably not very much. It's possible that some of the companies that buy products such as vape devices that are made in China could be negatively impacted if Chinese manufacturing is disrupted. On the other hand, lower oil prices should also lead to lower shipping costs for cannabis companies.
Image source: Getty Images.
However, fear is in the air with the stock market in general. None of the top Canadian cannabis producers are profitable yet. They're all in an early stage industry that continues to experience some headwinds. It's not surprising that investors are bailing out of marijuana stocks since the cannabis industry itself is more speculative than most other industries.
It's also not surprising that Aurora and Tilray are getting slammed the most. Neither company has a large partner with an equity stake like Canopy and Cronos do. OrganiGram doesn't have a big partner, but it's in a stronger financial position than most of its peers thanks to management's fiscal discipline.
Now what
Perhaps the best thing for long-term investors to do is take a deep breath and sit back. Today's sell-off doesn't change the fundamental growth opportunities for any of the top Canadian cannabis producers.
There are some positive developments for each of these companies. Ontario is issuing new retail cannabis licenses beginning this month, a move that should boost retail sales for all of the leading cannabis producers this year. The Cannabis 2.0 market in Canada is just getting going. Medical cannabis markets in Europe and elsewhere continue to expand.
Of course, there are still challenges -- especially for some of the companies. Aurora, in particular, could have to raise more cash in the not-too-distant future. Not every marijuana stock is a bargain buy even after the recent carnage.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Keith Speights has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends OrganiGram Holdings. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Aurora Cannabis (NYSE: ACB) and Tilray (NASDAQ: TLRY) stocks were hit the hardest, with shares tumbling 7.7% and 8.3%, respectively, as of 10:38 a.m. EDT. So what Do the coronavirus outbreak and lower oil prices really hurt the business prospects for the leading Canadian cannabis producers? Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks. | Aurora Cannabis (NYSE: ACB) and Tilray (NASDAQ: TLRY) stocks were hit the hardest, with shares tumbling 7.7% and 8.3%, respectively, as of 10:38 a.m. EDT. What happened Shares of top Canadian marijuana stocks were sinking Monday morning in the wake of a massive overall stock market sell-off fueled by continued coronavirus worries and plunging oil prices. None of the top Canadian cannabis producers are profitable yet. | Aurora Cannabis (NYSE: ACB) and Tilray (NASDAQ: TLRY) stocks were hit the hardest, with shares tumbling 7.7% and 8.3%, respectively, as of 10:38 a.m. EDT. What happened Shares of top Canadian marijuana stocks were sinking Monday morning in the wake of a massive overall stock market sell-off fueled by continued coronavirus worries and plunging oil prices. It's not surprising that investors are bailing out of marijuana stocks since the cannabis industry itself is more speculative than most other industries. | Aurora Cannabis (NYSE: ACB) and Tilray (NASDAQ: TLRY) stocks were hit the hardest, with shares tumbling 7.7% and 8.3%, respectively, as of 10:38 a.m. EDT. What happened Shares of top Canadian marijuana stocks were sinking Monday morning in the wake of a massive overall stock market sell-off fueled by continued coronavirus worries and plunging oil prices. There are some positive developments for each of these companies. |
37610.0 | 2020-03-08 00:00:00 UTC | Better Buy: Aurora Cannabis vs. Constellation Brands | ACB | https://www.nasdaq.com/articles/better-buy%3A-aurora-cannabis-vs.-constellation-brands-2020-03-08 | nan | nan | For a short period, Aurora Cannabis (NYSE: ACB) reigned as the cannabis producer with the largest market cap. After a huge plunge in its stock price over the past year, the company now ranks only in third place. And you could say that its position should be even lower. Constellation Brands (NYSE: STZ) owns 37% of Canopy Growth (NYSE: CGC), making the alcoholic beverage maker's stake in Canopy bigger than Aurora's market cap.
Aurora and Constellation represent two very different ways to invest in the cannabis industry. Which is the better pick for long-term investors? Here's how the two companies compare.
Image source: Getty Images.
The case for Aurora Cannabis
To be sure, Aurora faces its fair share of challenges. The company isn't profitable or anywhere close to it. Aurora has a boatload of debt. Its cash is dwindling. But the company is taking steps to address these issues.
Perhaps most importantly, Aurora is cutting back in a major way on its lavish spending of the past. The company slashed close to 500 jobs in early February, including around one-fourth of all corporate positions. It's delaying completion of construction at two facilities, moves that will save close to $190 million Canadian. Aurora restructured its secured credit facilities, with the inclusion of a commitment to achieve positive earnings before interest, taxes, depreciation, and amortization (EBITDA) thresholds beginning in fiscal 2021 Q1.
Aurora is also now looking for a new CEO, after founder and longtime CEO Terry Booth stepped down last month. Canopy Growth enjoyed a nice bounce after hiring a CEO with solid consumer packaged goods (CPG) industry experience. Aurora is likely to try to find a CPG veteran of its own to lead the company -- and perhaps help land a big partner from the CPG industry.
While Aurora has a lot of work to do, it also has some strengths from which to build upon. The company's products claim the second highest market share in the Canadian adult-use recreational marijuana market. Aurora also remains one of the leaders in the important German medical cannabis market and has established operations in other key international markets.
The company's production capacity also ranks at the top of the Canadian cannabis industry. Aurora's cost structure, meanwhile, is one of the lowest among its peers thanks to the use of advanced technology in its cultivation facilities.
Analysts project that the Canadian legal cannabis market will top $5 billion by 2024. If Aurora can claim 20% of that market, which seems quite possible, the company could generate annual sales of $1 billion annually in Canada alone. With Aurora's market cap currently only around $1.6 billion, the stock could have a lot of room to run.
The case for Constellation Brands
The opportunities for Aurora Cannabis carry over to Constellation Brands, too, thanks to Constellation's ownership interest in Canopy Growth. Constellation first bought a 9.9% stake in Canopy Growth in 2017. It followed up in 2018 with a $4 billion investment.
But while Aurora's biggest prospects are in Canada and in Europe, Constellation and Canopy are already in the U.S. Canopy used some of the cash it received from Constellation to establish a beachhead in the U.S. hemp CBD market, launching its first products earlier this year.
Canopy Growth is also positioned to quickly enter the U.S. marijuana market if laws are changed in the future to make cannabis legal at the federal level. Again using some of Constellation's money, Canopy struck a deal last year to acquire U.S.-based Acreage Holdings if federal marijuana laws are revised.
Constellation's core focus, though, is on alcoholic beverages. The company absolutely dominates the U.S. premium beer market with Corona, Modelo, and Pacifico. While other beermakers continue to struggle, Constellation's sales are growing.
Expect even more growth in the future. Constellation continues to take the pulse of consumers and respond to their preferences. An example of this is the company's foray into hard seltzers, a category that's becoming increasingly popular with consumers. Constellation plans to launch a Corona-branded seltzer this year and recently acquired a minority ownership interest in Press Premium Alcohol Seltzer.
The main weak spot with Constellation's core business right now is its wine and spirits brands. However, the company is selling off several of its lower-priced brands to focus on premium products. This strategy has worked well for Constellation with beers and seems to be a smart approach that could pay off over the long run.
Better buy
This isn't a difficult choice, in my view. Constellation Brands is profitable. It's the undisputed premium beer leader in the United States. It has its foot in the door if the global cannabis market skyrockets thanks to its stake in Canopy Growth. Heck, Constellation even pays a modest dividend to boot.
Aurora Cannabis could very well be a big winner -- over time. For now, though, the company and the stock continue to struggle. Marijuana stocks, in general, are likely to be highly volatile. Aurora's challenges could make it even more susceptible to big swings.
Constellation's beers provide stability that Aurora simply doesn't have. I think that makes it the better buy for now.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Keith Speights has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Constellation Brands. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | For a short period, Aurora Cannabis (NYSE: ACB) reigned as the cannabis producer with the largest market cap. Aurora restructured its secured credit facilities, with the inclusion of a commitment to achieve positive earnings before interest, taxes, depreciation, and amortization (EBITDA) thresholds beginning in fiscal 2021 Q1. Canopy Growth enjoyed a nice bounce after hiring a CEO with solid consumer packaged goods (CPG) industry experience. | For a short period, Aurora Cannabis (NYSE: ACB) reigned as the cannabis producer with the largest market cap. Constellation Brands (NYSE: STZ) owns 37% of Canopy Growth (NYSE: CGC), making the alcoholic beverage maker's stake in Canopy bigger than Aurora's market cap. The company's products claim the second highest market share in the Canadian adult-use recreational marijuana market. | For a short period, Aurora Cannabis (NYSE: ACB) reigned as the cannabis producer with the largest market cap. Constellation Brands (NYSE: STZ) owns 37% of Canopy Growth (NYSE: CGC), making the alcoholic beverage maker's stake in Canopy bigger than Aurora's market cap. The case for Constellation Brands The opportunities for Aurora Cannabis carry over to Constellation Brands, too, thanks to Constellation's ownership interest in Canopy Growth. | For a short period, Aurora Cannabis (NYSE: ACB) reigned as the cannabis producer with the largest market cap. The company's products claim the second highest market share in the Canadian adult-use recreational marijuana market. Canopy Growth is also positioned to quickly enter the U.S. marijuana market if laws are changed in the future to make cannabis legal at the federal level. |
37611.0 | 2020-03-06 00:00:00 UTC | Why These Canadian Marijuana Stocks Plunged Today | ACB | https://www.nasdaq.com/articles/why-these-canadian-marijuana-stocks-plunged-today-2020-03-06 | nan | nan | What happened
Several Canadian marijuana stocks plunged on Friday as worries about the novel coronavirus, COVID-19, caused the major market indexes to fall. Shares of the biggest Canadian cannabis producer, Canopy Growth (NYSE: CGC), were down by 10.5% as of 3:02 p.m. EST. Shares of Aurora Cannabis (NYSE: ACB) were sinking by 11.5%. Village Farms (NASDAQ: VFF) and Emerald Health Therapeutics (OTC: EMHTF) stocks were falling by 11.2% and 11.6%, respectively.
So what
What does the coronavirus outbreak and the spread of COVID-19, the disease caused by the novel coronavirus, have to do with marijuana stocks? Not very much.
Some companies that sell vape products manufactured in China could be impacted by disruptions to the country's economy. It's also possible that retail cannabis sales could be negatively affected if consumers choose to stay home due to fears about being infected by the coronavirus.
Image source: Getty Images.
Mainly, though, what we're seeing is investors' fear. They're concerned that the coronavirus outbreak could lead to an economic recession, so they're moving their money to cash and other assets that are viewed as safer than stocks.
Canopy Growth, Aurora, Emerald Health, Village Farms, and other Canadian pot stocks are being hit especially hard because they're not consistently profitable yet. These companies also face industry headwinds, including a slow expansion of retail cannabis stores in Ontario.
Now what
There's no way to know how long the overall stock market downturn will continue to drag down marijuana stocks. For investors who remain confident about the long-term prospects for the global cannabis industry, today's sell-off could be a buying opportunity.
But even if coronavirus fears wane, some marijuana stocks are better picks than others. The stocks of companies with stronger financial positions should be less risky than those of companies that could quickly run out of cash.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Shares of Aurora Cannabis (NYSE: ACB) were sinking by 11.5%. What happened Several Canadian marijuana stocks plunged on Friday as worries about the novel coronavirus, COVID-19, caused the major market indexes to fall. They're concerned that the coronavirus outbreak could lead to an economic recession, so they're moving their money to cash and other assets that are viewed as safer than stocks. | Shares of Aurora Cannabis (NYSE: ACB) were sinking by 11.5%. Shares of the biggest Canadian cannabis producer, Canopy Growth (NYSE: CGC), were down by 10.5% as of 3:02 p.m. EST. Village Farms (NASDAQ: VFF) and Emerald Health Therapeutics (OTC: EMHTF) stocks were falling by 11.2% and 11.6%, respectively. | Shares of Aurora Cannabis (NYSE: ACB) were sinking by 11.5%. So what What does the coronavirus outbreak and the spread of COVID-19, the disease caused by the novel coronavirus, have to do with marijuana stocks? Now what There's no way to know how long the overall stock market downturn will continue to drag down marijuana stocks. | Shares of Aurora Cannabis (NYSE: ACB) were sinking by 11.5%. What happened Several Canadian marijuana stocks plunged on Friday as worries about the novel coronavirus, COVID-19, caused the major market indexes to fall. Canopy Growth, Aurora, Emerald Health, Village Farms, and other Canadian pot stocks are being hit especially hard because they're not consistently profitable yet. |
37612.0 | 2020-03-06 00:00:00 UTC | Things Are About to Get Worse for Aurora Cannabis | ACB | https://www.nasdaq.com/articles/things-are-about-to-get-worse-for-aurora-cannabis-2020-03-06 | nan | nan | To say that things haven't gone cannabis investors' way over the past year would be a brutal understatement. Following a blazing hot start to 2019, which saw more than a dozen marijuana stocks increase in value by at least 70%, most have now been stuck in an 11-month (and counting) downtrend.
The finger of blame has been pointed at supply issues in Canada, with Health Canada and provincial-level regulators creating everything from shortages to bottlenecks in key regions. Blame can also be assigned to regulators in recreationally legalized states for overtaxing cannabis and slowing down the process by which retail licenses are issued. The end result was that illicit producers have thrived, even with legal-channel weed hitting the marketplace.
Image source: Getty Images.
One pot stock that's taken it on the chin particularly hard is Aurora Cannabis (NYSE: ACB). If you follow marijuana stocks, Aurora is a name that's impossible to escape. It's an absolute favorite of millennial investors and was, at one time, expected to lead Canada in terms of peak annual output. But since hitting its 2019 closing high of $9.96 on March 19, Aurora's stock is down 86% through March 2, 2020.
Things are probably going to get worse in the short term for Aurora Cannabis
Aurora stock is now going for a mere $1.36 per share, and some investors may think it's a bargain. After all, the company is still expected to be one of the leading producers of marijuana throughout Canada and has a presence in 24 countries outside of its home market.
But believing that a low share price is enough justification to buy into Aurora Cannabis could prove dangerous. Chances are that things are going to get worse for the company before they have a chance to get better.
On a more immediate level, investors should be worried about the company's consistently shrinking share price. Being listed on the New York Stock Exchange (NYSE) has afforded Aurora improved volume-based liquidity, increased Wall Street coverage, and undoubtedly better investor visibility than if it were trading on the over-the-counter exchange. However, the NYSE has a share price minimum of $1 that's required for continued listing. Aurora Cannabis isn't there yet, but amid the strongest point rally in the history of the Dow Jones Industrial Average, on Monday, March 2, Aurora's stock hit a new 52-week low of $1.31.
Image source: Getty Images.
If Aurora's shares were to dip below $1 and stay there for a period of 30 days, the company almost certainly would draw a delisting notice from the NYSE. The company would have remediation pathways available, such as delaying delisting and hoping its stock regains a $1 minimum share price. Then again, "hope" isn't a valid long-term strategy.
There's also the possibility of a reverse stock split, which would reduce the number of shares outstanding (currently 1.17 billion) and pump up the company's share price. Unfortunately, reverse stock splits are typically viewed as a sign of weakness and may lead to further downside.
The intermediate forecast and long-term outlook aren't looking too hot, either
Even if Aurora Cannabis somehow manages to skirt a delisting notice from the NYSE, its balance sheet remains an utter mess that's not conducive to growth or market share expansion.
On one hand, Aurora Cannabis ended its fiscal second quarter (ended Dec. 31, 2019) with $156.3 million Canadian in cash and CA$26.1 million in marketable securities. This might sound like a healthy capital balance but it's nowhere near sufficient given the company's own expectations of CA$373.6 million in liabilities over the next 12 months and close to CA$1.3 billion in liabilities over the next four to five years.
With pretty much all avenues to traditional funding closed off and no equity deal signed, Aurora's only means of raising capital continues to be to sell its own stock. After ballooning its outstanding share count by 1.15 billion since June 30, 2014, it's no wonder shareholders have taken it on the chin.
Image source: Getty Images.
I'd also suggest taking issue with the company's CA$4.67 billion in total assets. A figure like this would make it appear that Aurora's valuation is exceptionally cheap -- its market cap as of Monday, March 2, was $1.6 billion (CA$2.11 billion). But it overlooks that this company has grossly overpaid for each and every one of its more than one dozen acquisitions. Even after writing down CA$762.2 million in goodwill during the fiscal second quarter, the company is still lugging around CA$2.41 billion in goodwill and CA$503.5 million in intangible assets. Combined, goodwill and intangible assets account for a staggering 62% of total assets.
In my view, there's zero doubt that Aurora is going to have to address its acquisition of MedReleaf and write down a significant portion of the CA$2.64 billion purchase price. With the Exeter greenhouse on the sale block, this mammoth purchase will ultimately have yielded only 35,000 kilos of annual production capacity and a few unique pot brands. Entire licensed producers with 50,000 kilos of annual production capacity can currently be acquired for less than CA$100 million, making a writedown a virtual given in my book.
While I understand the psychological factor that Aurora's low share price might appear enticing, its $1.6 billion valuation is far from being a good deal. There are serious long-term financing concerns, a high probability of future writedowns, and now the very real possibility of delisting if its share price continues to fall. It remains an easily avoidable marijuana stock.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Sean Williams has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | One pot stock that's taken it on the chin particularly hard is Aurora Cannabis (NYSE: ACB). The intermediate forecast and long-term outlook aren't looking too hot, either Even if Aurora Cannabis somehow manages to skirt a delisting notice from the NYSE, its balance sheet remains an utter mess that's not conducive to growth or market share expansion. With pretty much all avenues to traditional funding closed off and no equity deal signed, Aurora's only means of raising capital continues to be to sell its own stock. | One pot stock that's taken it on the chin particularly hard is Aurora Cannabis (NYSE: ACB). Aurora Cannabis isn't there yet, but amid the strongest point rally in the history of the Dow Jones Industrial Average, on Monday, March 2, Aurora's stock hit a new 52-week low of $1.31. On one hand, Aurora Cannabis ended its fiscal second quarter (ended Dec. 31, 2019) with $156.3 million Canadian in cash and CA$26.1 million in marketable securities. | One pot stock that's taken it on the chin particularly hard is Aurora Cannabis (NYSE: ACB). Things are probably going to get worse in the short term for Aurora Cannabis Aurora stock is now going for a mere $1.36 per share, and some investors may think it's a bargain. There's also the possibility of a reverse stock split, which would reduce the number of shares outstanding (currently 1.17 billion) and pump up the company's share price. | One pot stock that's taken it on the chin particularly hard is Aurora Cannabis (NYSE: ACB). Things are probably going to get worse in the short term for Aurora Cannabis Aurora stock is now going for a mere $1.36 per share, and some investors may think it's a bargain. However, the NYSE has a share price minimum of $1 that's required for continued listing. |
37613.0 | 2020-03-05 00:00:00 UTC | How Aurora Stock Is Continuing Its Excruciating Slide | ACB | https://www.nasdaq.com/articles/how-aurora-stock-is-continuing-its-excruciating-slide-2020-03-05 | nan | nan | At several points over the past two years, it looked as though Aurora Cannabis (NYSE:) was going to make investors rich. Aurora stock posted triple digit gains in a matter of weeks on more than one occasion. However, that sentiment seems quaint at this point.
Source: ElRoi / Shutterstock.com
As February wound down, Cowen became the latest investment firm to â noting a âÂÂshortage of cannabis stores and pricing pressure due to excess supply and thriving black market sales impact the sector.â At its latest close of $1.38, Aurora stock is down 38% so far in 2020.
Over the past 12 months, that performance is even worse. ACB has lost about 81% since this time last year, and 86% since shares approached the $10 level last March.
That said, does the spectacular dive in Aurora stock mean it is a buying opportunity? Ultimately, that depends on your faith that North American recreational cannabis markets are going to take off.
A Sputtering Recreational Cannabis Market
The first year of recreational marijuana legalization in Canada kicked off a frenzy of investment in cannabis companies. When the Canadian government passed legislation that would legalize recreational marijuana in the country within a year, Aurora stock went on a three-month run that saw it gain around 385%. However, the reality was underwhelming.
Production ramp up issues, a lack of retail outlets, readily available and cheaper black-market pot and apparent disinterest from consumers resulted in a year of disappointment for investors.
Cannabis 2.0 is now underway in Canada, adding cannabis extracts, beverages and edibles to the mix. But while the number of retail outlets to sell recreational marijuana and related products are increasing, this next phase of recreational cannabis sales is .
In the U.S., the cannabis market has been estimated . However, that assumes recreational marijuana and cannabis extracts are legalized at the federal level, something that continues to remain elusive.
So collectively, the recreational cannabis market seems to be up in the air for a few reasons.
Are Any Cannabis Stocks Performing Well?
The question needs to be asked: Is ACB the only cannabis stock thatâÂÂs performing so poorly? Or are the factors that have hammered the Canadian marijuana producer endemic to the industry? Well, letâÂÂs look closer.
Canopy Growth (NYSE:) has shown signs of life, including a 10% surge in February after a better than expected third-quarter earnings report. But, that gain was short-lived. And over the past 12 months, CGC stock is down 62%.
What about Cronos Group (NASDAQ:)? Despite a push into international markets, CRON stock is off by 73% over the past year. Aphria (NYSE:APHA), another Canadian producer and another of the worldâÂÂs largest cannabis producers, has shed 67% of its value over this period. Moreover, an investment in Tilray (NASDAQ:) is currently worth 84% less than it was at this time last year.
Overall, Cannabis 2.0 in Canada and a push to nationally legalize CBD in the U.S. have failed to provide a hoped-for boost for these stocks. Cannabis companies continue to operate at a loss, while oversupply remains a big issue. The past year has seen , a PR nightmare over vaping deaths, costly expansions and a growing liquidity crisis. The recreational marijuana industry remains in a rut, with few producers not feeling the pain, and investors are understandably wary.
Bottom Line on Aurora Stock
Investment analysts àthese days. Those tracked by the Wall Street Journal now have it as a consensus âÂÂhold.â For the past several months, it had been rated a âÂÂbuy,â but faith the company would put together a turnaround has faded.ÃÂ
A year of consistent decline resulting in an 81% loss in value for Aurora stock will do that.
About the only thing going for Aurora Cannabis at this point is that itâÂÂs cheap. So when the primary reasons to consider an investment are hope that demand will suddenly materialize for its product â and that itâÂÂs cheap âÂÂàis that a good decision? That may be exciting to some, but for most investors, Aurora stock remains something to avoid.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | ACB has lost about 81% since this time last year, and 86% since shares approached the $10 level last March. The question needs to be asked: Is ACB the only cannabis stock thatâÂÂs performing so poorly? When the Canadian government passed legislation that would legalize recreational marijuana in the country within a year, Aurora stock went on a three-month run that saw it gain around 385%. | ACB has lost about 81% since this time last year, and 86% since shares approached the $10 level last March. The question needs to be asked: Is ACB the only cannabis stock thatâÂÂs performing so poorly? A Sputtering Recreational Cannabis Market The first year of recreational marijuana legalization in Canada kicked off a frenzy of investment in cannabis companies. | ACB has lost about 81% since this time last year, and 86% since shares approached the $10 level last March. The question needs to be asked: Is ACB the only cannabis stock thatâÂÂs performing so poorly? Source: ElRoi / Shutterstock.com As February wound down, Cowen became the latest investment firm to â noting a âÂÂshortage of cannabis stores and pricing pressure due to excess supply and thriving black market sales impact the sector.â At its latest close of $1.38, Aurora stock is down 38% so far in 2020. | ACB has lost about 81% since this time last year, and 86% since shares approached the $10 level last March. The question needs to be asked: Is ACB the only cannabis stock thatâÂÂs performing so poorly? A Sputtering Recreational Cannabis Market The first year of recreational marijuana legalization in Canada kicked off a frenzy of investment in cannabis companies. |
37614.0 | 2020-03-04 00:00:00 UTC | Approaching $1, Aurora Cannabis Stock Is Not for the Faint of Heart | ACB | https://www.nasdaq.com/articles/approaching-%241-aurora-cannabis-stock-is-not-for-the-faint-of-heart-2020-03-04 | nan | nan | Aurora Cannabis (NYSE:) continues its downtrend and traded recently at a 52-week low. The companyâÂÂs second-quarter 2020 results did little to inspire investors. As markets continue to correct with heavy selling pressure, Aurora stock may visit the $1 level soon.
Source: ElRoi / Shutterstock.com
Aurora of 66.6 million CAD, which excluded provisions of 10.6 million CAD. Still, net cannabis revenue is in line with its recent guidance. Interim CEO Michael Singer acknowledged growth in its core medical and consumer business is simply modest. The successful launch of Cannabis 2.0 products across Canada is the only bright spot in the quarter.
The bad news for investors holding Aurora stock is that the hype in the sector is gone. Markets are preoccupied with spreading worldwide. The global economic slowdown will force investors to recalibrate their valuation for speculative investments in the cannabis sector.
So, this suggests that the slight production cost per gram of 88 cents CAD against the average net selling price of medical cannabis stabilizing at 7.99 CAD is a small improvement.
Growth Catalysts Ahead
Previously, Aurora touted its focus on Cannabis 2.0 would drive growth. But on its conference call, the company said that 2.0 would develop slowly. It said that the good it is âÂÂmanaging the business accordingly and [the company feels] very confident about our prospects.âÂÂ
AuroraâÂÂs measured approach in the 2.0 launch lowers operational execution risks. Yet the bigger question is the run rate for edibles. Gummy demand is unknown and needs strong consumer interest to excite Aurora investors into holding shares. The company âÂÂthe gummies, they are selling out as soon as we can get them to the provinces, provinces are ordering in a very, letâÂÂs say a prudent way I think. TheyâÂÂd rather stock out as opposed to being overstocked.âÂÂ
If consumer interest improves, Aurora has the capacity to ramp up output if needed. Management may reasonably achieve 20% of its sales coming from 2.0 products in the next quarter.
Investors are not buying into the promised growth catalysts ahead. International medical sales fell from 5 million CAD to just 1.8 million CAD in Q2. Aurora blamed a permitting issue hurting its sales in Europe. For example, growth in Germany will grow slower than expected. Still, its recent European Union Good Manufacturing Practice certification at its Aurora River facility will have a run rate of nearly 30,000 kilograms a year.
Cost Reductions
Aurora cut staff and halted capital projects to slow its cash burn rate. Investors may assume it cut IT, human resources and marketing staff to adjust for the lower demand. It will continue to evaluate the Canadian cannabis in medical and consumer markets.
The company did not give a clear indication of when it will report positive earnings before interest, taxes, depreciation and amortization (EBITDA). But as opportunities emerge and the company grows its revenue, it will balance the costs accordingly.
My Valuation on Aurora Stock
There are 17 analysts who have a price target on Aurora Cannabis stock, and they have an average . Conversely, Simply Wall St cautioned that the company has less than one year of cash remaining. Based on its future cash flow, the stock is undervalued by 7.7% and has a fair value of $1.45.
If investors assume the following metrics in a 5-year discounted cash flow revenue exit model, then the stockâÂÂs fair value is $1.76.
Metrics Range Conclusion Discount Rate 13.5%-14.5% 14.% Terminal Revenue Multiple 12x-15x 13x Fair Value $1.54-$2.16 $1.76 Upside 15.2%-60.9% 31.1%
Aurora stock is still a high-risk speculation despite already falling sharply in the last year. Those betting on growth in the cannabis space should proceed with caution.
Chris Lau is a contributing author for InvestorPlace.com and numerous other financial sites. Chris has over 20 years of investing experience in the stock market and runs the Do-It-Yourself Value Investing Marketplace on Seeking Alpha. He shares his stock picks so readers get original insight that helps improve investment returns.ÃÂ As of this writing, Chris did not hold a position in any of the aforementioned securities.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Still, its recent European Union Good Manufacturing Practice certification at its Aurora River facility will have a run rate of nearly 30,000 kilograms a year. Metrics Range Conclusion Discount Rate 13.5%-14.5% 14.% Terminal Revenue Multiple 12x-15x 13x Fair Value $1.54-$2.16 $1.76 Upside 15.2%-60.9% 31.1% Aurora stock is still a high-risk speculation despite already falling sharply in the last year. He shares his stock picks so readers get original insight that helps improve investment returns.àAs of this writing, Chris did not hold a position in any of the aforementioned securities. | The bad news for investors holding Aurora stock is that the hype in the sector is gone. So, this suggests that the slight production cost per gram of 88 cents CAD against the average net selling price of medical cannabis stabilizing at 7.99 CAD is a small improvement. If investors assume the following metrics in a 5-year discounted cash flow revenue exit model, then the stockâÂÂs fair value is $1.76. | Growth Catalysts Ahead Previously, Aurora touted its focus on Cannabis 2.0 would drive growth. My Valuation on Aurora Stock There are 17 analysts who have a price target on Aurora Cannabis stock, and they have an average . Metrics Range Conclusion Discount Rate 13.5%-14.5% 14.% Terminal Revenue Multiple 12x-15x 13x Fair Value $1.54-$2.16 $1.76 Upside 15.2%-60.9% 31.1% Aurora stock is still a high-risk speculation despite already falling sharply in the last year. | Growth Catalysts Ahead Previously, Aurora touted its focus on Cannabis 2.0 would drive growth. It will continue to evaluate the Canadian cannabis in medical and consumer markets. My Valuation on Aurora Stock There are 17 analysts who have a price target on Aurora Cannabis stock, and they have an average . |
37615.0 | 2020-03-04 00:00:00 UTC | Will Aurora Cannabis (ACB) Have to Give Up Control to Reverse Its Fortunes? | ACB | https://www.nasdaq.com/articles/will-aurora-cannabis-acb-have-to-give-up-control-to-reverse-its-fortunes-2020-03-04 | nan | nan | One of the things that has attracted me to Aurora Cannabis (ACB) for some time has been its decision to forego giving up control of the company as Canopy Growth (CGC) has done, which eventually resulted in Constellation Brands taking control of Canopy, while changing its business model.
With Aurora under pressure because of the problems associated with the Canadian cannabis market, especially the snails pace of awarding licensing and opening retail outlets, resulting in too much supply because Aurora and others had based production capacity built-out, to a major degree, on hundreds more stores being opened by now.
In this article we'll look at whether or not Aurora should, or will be forced to, give up control of the company in order to support long-term operations and growth, or even if it will be able to attract a suitor now that the Canadian cannabis market has temporarily collapsed.
Understanding the Canadian problem
It's obvious as to the basic failure of the Canadian governments in regard to the licensing process and the serious lack of retail cannabis stores to sell product in. What isn't understood as much are the various elements of the business and market and how they've been impacted by this.
For example, the black market continues to flourish and defend its lower prices because in the major Ontario and Quebec markets they have almost no competition from the legal cannabis market. Because companies have limitations associated with the inability to scale because of so few stores, they can't compete on price with illegal producers and sellers.
Another factor is it limits the potential to attract many new customers that may want to give cannabis a try for the first time. It also undermines the potential of derivatives because of the lack of retail outlets.
Can or will Aurora seek out an investment partner
Watching the terrible impact of Canopy Growth's under performance on the earnings of Constellation Brands, it's going to be difficult for Aurora to attract a large suitor if that's what it decides to do.
On the other hand, the plummet in the valuation of the company makes it much less expensive to take a significant position in, if a company wants to enter the cannabis sector with one of the largest producers in the world as its partner.
I think a major problem here is that those that have been impressed with Aurora, have been so because of its independence and willingness to take risks. If it changes direction and gets a cash infusion in exchange for basically losing control of the company, it will no longer be as attractive over the long haul, once the cannabis market reverses direction.
At the same time, it will need more capital going forward, so it will have to decide what direction it wants to take to cover its expenses as it and the cannabis market go through growing pains.
As mentioned earlier, the company isn't near as attractive as it was about a year ago, and it's questionable whether or not it can attract a company that wants to invest in it.
For that reason, making a deal with a distribution partner or partners may be a better route to take as long as it can raise additional capital.
Conclusion
Personally, I think Aurora Cannabis can continue to go it alone if it chooses to, although it will require it to find ways to improve its balance sheet.
The other challenge is the lack of progress in Canada has created an issue concerning what I call demand discovery, by which I mean there is no way of knowing the size of the legal cannabis market demand in Canada until hundreds of more cannabis stores and dispensaries are operational; that makes it hard to plan for future production capacity management.
As with all the cannabis producers located in Canada, Aurora Cannabis has an important piece of the business puzzle outside of its control, and based upon past performance of the various Canadian governments, this isn't inspirational for near-term prospects for the company.
Aurora still has among the best cost per gram and has been able to be among the top five recreational sellers in Canada based upon price. It also has a strong presence in international markets that it has just started to tap the potential growth in.
The key will be securing more operating capital in order for the market to work out the challenges the company now faces. If it manages to do that, it's still my favorite for long-term performance in the sector.
To find good ideas for cannabis stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | One of the things that has attracted me to Aurora Cannabis (ACB) for some time has been its decision to forego giving up control of the company as Canopy Growth (CGC) has done, which eventually resulted in Constellation Brands taking control of Canopy, while changing its business model. In this article we'll look at whether or not Aurora should, or will be forced to, give up control of the company in order to support long-term operations and growth, or even if it will be able to attract a suitor now that the Canadian cannabis market has temporarily collapsed. At the same time, it will need more capital going forward, so it will have to decide what direction it wants to take to cover its expenses as it and the cannabis market go through growing pains. | One of the things that has attracted me to Aurora Cannabis (ACB) for some time has been its decision to forego giving up control of the company as Canopy Growth (CGC) has done, which eventually resulted in Constellation Brands taking control of Canopy, while changing its business model. With Aurora under pressure because of the problems associated with the Canadian cannabis market, especially the snails pace of awarding licensing and opening retail outlets, resulting in too much supply because Aurora and others had based production capacity built-out, to a major degree, on hundreds more stores being opened by now. The other challenge is the lack of progress in Canada has created an issue concerning what I call demand discovery, by which I mean there is no way of knowing the size of the legal cannabis market demand in Canada until hundreds of more cannabis stores and dispensaries are operational; that makes it hard to plan for future production capacity management. | One of the things that has attracted me to Aurora Cannabis (ACB) for some time has been its decision to forego giving up control of the company as Canopy Growth (CGC) has done, which eventually resulted in Constellation Brands taking control of Canopy, while changing its business model. With Aurora under pressure because of the problems associated with the Canadian cannabis market, especially the snails pace of awarding licensing and opening retail outlets, resulting in too much supply because Aurora and others had based production capacity built-out, to a major degree, on hundreds more stores being opened by now. In this article we'll look at whether or not Aurora should, or will be forced to, give up control of the company in order to support long-term operations and growth, or even if it will be able to attract a suitor now that the Canadian cannabis market has temporarily collapsed. | One of the things that has attracted me to Aurora Cannabis (ACB) for some time has been its decision to forego giving up control of the company as Canopy Growth (CGC) has done, which eventually resulted in Constellation Brands taking control of Canopy, while changing its business model. In this article we'll look at whether or not Aurora should, or will be forced to, give up control of the company in order to support long-term operations and growth, or even if it will be able to attract a suitor now that the Canadian cannabis market has temporarily collapsed. Another factor is it limits the potential to attract many new customers that may want to give cannabis a try for the first time. |
37616.0 | 2020-03-04 00:00:00 UTC | 2 Reasons Marijuana Stocks Are Suffering From the Coronavirus Outbreak | ACB | https://www.nasdaq.com/articles/2-reasons-marijuana-stocks-are-suffering-from-the-coronavirus-outbreak-2020-03-04 | nan | nan | Most marijuana stocks have taken a beating in recent weeks. The Horizons Marijuana Life Sciences Index ETF (OTC: HMLSF), which includes over 50 top pot stocks in its holdings, is down more than 20% from its peak in January.
This dismal performance isn't only a result of continued challenges in the Canadian adult-use recreational marijuana market. There's another factor behind marijuana stocks' latest downturn -- the coronavirus outbreak. Why would the spread of a new virus cause problems for pot stocks? Here are two key reasons.
Image source: Getty Images.
1. An ebbing tide lowers all boats
You've probably heard the old saying that "a rising tide lifts all boats." Well, an ebbing tide lowers all boats, too -- or at least most of them. I know I'm mixing metaphors here, but it's difficult for any stock to swim upstream when the overall market is tanking. This is especially the case for any stocks that were relatively weak in the first place.
Make no mistake, marijuana stocks were weak even before the initial cases of the coronavirus-caused COVID-19 disease made headlines. The lack of enough retail cannabis stores in Ontario continues to weigh on growth for Canadian cannabis producers. Most of the companies remain unprofitable. Some, particularly Aurora Cannabis, have significant debt loads.
But it's not just Canadian cannabis companies that face significant problems. The health scares related to vaping have caused shares of some U.S.-based marijuana stocks to fall. KushCo Holdings (OTC: KSHB), for example, derived 61% of its total revenue in fiscal 2020 Q1 from vape products. The concerns about vaping were taking a big toll on the stock well before the coronavirus epidemic raised its ugly head.
This preexisting weakness made marijuana stocks especially vulnerable when the broader market nosedived. It's not surprising that the Horizons Marijuana Life Sciences Index ETF fell more than twice as much as the S&P 500 index.
2. Products made in China aren't being made in China
The coronavirus outbreak started in China and has affected the country more significantly than anywhere else. With the Chinese government taking aggressive actions to control the spread of the virus, the manufacturing activity in China has been negatively affected.
How does this affect marijuana stocks? Many cannabis vaporizers are made in China. Other products used by companies in the cannabis industry, including product packaging and specialty equipment, are also made in the Asian country. Because of worries about the coronavirus, some of these products made in China aren't being made in China at the same levels as before.
The stocks most affected by this Chinese manufacturing disruption are those of companies with the most dependency on vape-related sales. Since the Canadian market for vape products only launched recently, it's U.S. cannabis stocks that have been hit the worst.
KushCo especially stands out. Its shares are down more than 30% year to date, a much greater loss than the Horizons marijuana ETF. Before the coronavirus panic set in, KushCo stock was actually up more than 20%.
A notable exception
There are always exceptions to the rule. Not every marijuana stock has been hurt by the coronavirus threat. Innovative Industrial Properties (NYSE: IIPR) stands out as a notable exception. The company's shares have risen so far in 2020 even with the overall market sinking on coronavirus worries.
It helps that Innovative Industrial Properties doesn't sell any products made in China. Actually, IIP doesn't sell any cannabis products. The company ranks as the largest real estate investment trust (REIT) focused on the medical cannabis industry.
Also, IIP's revenue stream isn't affected by consumers staying home because they're afraid of being infected by the coronavirus. It makes money from long-term leases to medical cannabis operators. This revenue flows in month after month regardless of what's going on at the macroeconomic level.
During times of uncertainty, stocks like Innovative Industrial Properties are good ones for investors to turn to. They're largely insulated from many of the kinds of issues that can cause other stocks to decline. If you're looking for a coronavirus safe haven, this marijuana stock appears to be a good option.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Keith Speights has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Innovative Industrial Properties. The Motley Fool recommends KushCo Holdings. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | The Horizons Marijuana Life Sciences Index ETF (OTC: HMLSF), which includes over 50 top pot stocks in its holdings, is down more than 20% from its peak in January. With the Chinese government taking aggressive actions to control the spread of the virus, the manufacturing activity in China has been negatively affected. Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks. | The Horizons Marijuana Life Sciences Index ETF (OTC: HMLSF), which includes over 50 top pot stocks in its holdings, is down more than 20% from its peak in January. It's not surprising that the Horizons Marijuana Life Sciences Index ETF fell more than twice as much as the S&P 500 index. Products made in China aren't being made in China The coronavirus outbreak started in China and has affected the country more significantly than anywhere else. | Products made in China aren't being made in China The coronavirus outbreak started in China and has affected the country more significantly than anywhere else. Because of worries about the coronavirus, some of these products made in China aren't being made in China at the same levels as before. Here's The Marijuana Stock You've Been Waiting For A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom. | Products made in China aren't being made in China The coronavirus outbreak started in China and has affected the country more significantly than anywhere else. How does this affect marijuana stocks? Because of worries about the coronavirus, some of these products made in China aren't being made in China at the same levels as before. |
37617.0 | 2020-03-04 00:00:00 UTC | Why Aphria, Aurora Cannabis, and Cronos Group Sank in February | ACB | https://www.nasdaq.com/articles/why-aphria-aurora-cannabis-and-cronos-group-sank-in-february-2020-03-04 | nan | nan | What happened
Canadian marijuana stocks had a terrible February. High-profile names like Aphria (NYSE: APHA), Aurora Cannabis (NYSE: ACB), and Cronos Group (NASDAQ: CRON) each lost a staggering amount of value last month. Aphria's shares dropped by 21.5%, Aurora's stock dipped by 29.1%, and Cronos' equity slipped by 18.5%, according to data from S&P Global Market Intelligence.
While the broader markets also performed rather poorly in February, Aphria, Aurora, and Cronos all posted losses that were far larger than the major indexes last month. In fact, these three pot stocks were some of the worst performers in the entire healthcare sector in February.
Image source: Getty Images.
So what
What sent investors running for the exits? The big concern is that the COVID-19 illness will disrupt global supply chains for a long time. China, after all, makes a disproportionate amount of the world's consumer packaged goods these days. So a lengthy pause in China's manufacturing output could have a profound impact on the legal marijuana industry.
Turning to the specifics, most of these legal marijuana companies depend on Chinese manufacturers for key components for their vape pens. That's potentially bad news for companies like Aphria, Aurora, and Cronos. All of these names are counting on high-margin products like vapes to boost sales in the latter half of the year. To be fair, none of these companies have announced a delay in Cannabis 2.0 product launches dues to kinks in the global supply chain. But the market is clearly worried about this issue.
Now what
Is Aphria, Aurora, or Cronos worth buying after last month's hair-raising dip? Aphria might be a decent pickup at these levels. The company has consistently been one of the cheapest names in the space, and it is among the few that have been repeatedly profitable within the past year. Aurora, on the other hand, is facing a long list of problems right now. Thus Aurora is probably best viewed as nothing more than a watch list candidate at the moment.
Finally, Cronos' stock is definitely a tough call. The company has the backing of a major Fortune 500 partner in Altria, but it's also having problems getting its financial statements filed on time. That's a worrying sign, and investors might want to sidestep this Canadian pot stock for the time being as well. There are far more compelling growth plays to buy right now.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
George Budwell owns shares of Aphria Inc. and Cronos Group Inc. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | High-profile names like Aphria (NYSE: APHA), Aurora Cannabis (NYSE: ACB), and Cronos Group (NASDAQ: CRON) each lost a staggering amount of value last month. Aphria's shares dropped by 21.5%, Aurora's stock dipped by 29.1%, and Cronos' equity slipped by 18.5%, according to data from S&P Global Market Intelligence. While the broader markets also performed rather poorly in February, Aphria, Aurora, and Cronos all posted losses that were far larger than the major indexes last month. | High-profile names like Aphria (NYSE: APHA), Aurora Cannabis (NYSE: ACB), and Cronos Group (NASDAQ: CRON) each lost a staggering amount of value last month. Aphria's shares dropped by 21.5%, Aurora's stock dipped by 29.1%, and Cronos' equity slipped by 18.5%, according to data from S&P Global Market Intelligence. The big concern is that the COVID-19 illness will disrupt global supply chains for a long time. | High-profile names like Aphria (NYSE: APHA), Aurora Cannabis (NYSE: ACB), and Cronos Group (NASDAQ: CRON) each lost a staggering amount of value last month. Aphria's shares dropped by 21.5%, Aurora's stock dipped by 29.1%, and Cronos' equity slipped by 18.5%, according to data from S&P Global Market Intelligence. Here's The Marijuana Stock You've Been Waiting For A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom. | High-profile names like Aphria (NYSE: APHA), Aurora Cannabis (NYSE: ACB), and Cronos Group (NASDAQ: CRON) each lost a staggering amount of value last month. Aurora, on the other hand, is facing a long list of problems right now. That's a worrying sign, and investors might want to sidestep this Canadian pot stock for the time being as well. |
37618.0 | 2020-03-04 00:00:00 UTC | This Plunge in Aphria Stock Doesn’t Make Sense | ACB | https://www.nasdaq.com/articles/this-plunge-in-aphria-stock-doesnt-make-sense-2020-03-04 | nan | nan | In less than six weeks, Aphria (NYSE:) stock has lost nearly 40% of its value. From a broad perspective, the selling in Aphria stock might make some sense.
Click to Enlarge Source: Shutterstock
After all, U.S. stocks on the whole have plunged ever since the coronavirus from China began to spread in late January. Cannabis plays like APHA have been particularly hard hit. The ETFMG Alternative Harvest ETF (NYSEARCA:) hit an all-time low just last week, and is off 17% year-to-date.
Investors could point to AphriaâÂÂs second-quarter earnings as a catalyst. In that release, the company . A lowered outlook in a challenged sector often leads to a selloff. AphriaâÂÂs debt, incurred in acquiring businesses in Europe and South America, may have added to the pressure.
But looking more closely at Aphria stock, the simple explanations donâÂÂt hold up. At the least, they donâÂÂt explain the size of the decline in such a short period of time. And so, it simply seems like APHA stock has fallen too far â and should be in store for a nice bounce when and if markets, and the sector, can recover.
Markets Plunge
ThereâÂÂs been something close to panic selling in U.S. stocks since late January, and particularly in the last few sessions. The S&P 500 lost 11% of its value last week alone, since the beginning of the financial crisis in 2008.
As in 2008, thereâÂÂs been a âÂÂflight to safety.â The yield on the 10-year Treasury bond of 1.036% overnight. And cannabis stocks, quite obviously, are not safe investments.
In that kind of environment, some level of selling in Aphria stock is to be expected. But, again, itâÂÂs the pace of the selling that is a surprise, particularly relative to other investments.
The 39% decline in APHA since Jan. 23 dwarfs the 7% fall in the S&P 500. The MJ ETF admittedly is down 17% â but thatâÂÂs still less than half as far as Aphria stock has fallen.
In a sinking market, it makes sense that APHA too would sink. But itâÂÂs much less clear why the stock would underperform other cannabis names. In that context, MondayâÂÂs trading is even stranger. The S&P 500 closed up 4.6%. The MJ ETF gained 2.2%. Yet APHA closed down another 4%.
APHA Underperforms
To be sure, IâÂÂm likely a bit biased: IâÂÂve called Aphria stock , even as IâÂÂve also written that the sector as a whole could see more selling. But that potential bias aside, the relative weakness in APHA still is somewhat surprising.
WhatâÂÂs particularly noteworthy is that APHA has done worse than even Aurora Cannabis (NYSE:). Whatever an investor thinks of ACB stock â and IâÂÂm not optimistic â thereâÂÂs little question that itâÂÂs the highest-risk of the major cannabis stocks. That company has significant , while its plunging stock price pressures its ability to raise additional capital.
Yet while APHA has dropped 39% since late January, ACB has dropped just 34% (it, too, rallied on Monday). That stretch includes an from Aurora, which featured nearly 1 billion CAD in non-cash write-offs. That report looked even worse in contrast with an impressive quarter from fellow major Canopy Growth (NYSE:), who increased sales in a tough environment.
ThereâÂÂs really no reason why Aphria stock should have underperformed Aurora. Aphria has incurred quite a bit of debt â but it has a greater amount of cash. With the company already delivering EBITDA (earnings before interest, taxes, depreciation and amortization) profitability, its cash burn should be manageable.
Aurora has a material risk of going bankrupt in the coming years. In a panic-selling environment, investors usually run from those types of names. Aphria has a much more modest risk but investors have been sprinting away even faster.
Did Earnings Undercut Aphria Stock?
ItâÂÂs possible that JanuaryâÂÂs earnings report has had an impact on Aphria stock. But if so, that impact was delayed.
APHA stock did decline 8.4% after the release and the guidance cut. But that decline came on Jan.14, and came the day after the stock rose 10% ahead of earnings. By Jan. 23, Aphria stock had easily regained post-earnings losses. It clearly was headed in the right direction, having gained over 10% year-to-date.
And itâÂÂs not as if the earnings report was a disaster. The lowered outlook was not much of a surprise in an industry struggling with regulatory backlogs which have slowed the rollout of âÂÂâ products. Aphria still is guiding for EBITDA profitability and strong revenue growth this year. Its opportunities are delayed, not lost.
Meanwhile, the news since earnings actually seems relatively positive for Aphria.
Good News Since
At the end of January, Aphria closed with an unnamed investor. That investor paid 7.12 CAD (at the time, $5.38) per unit, which included one share and one-half of a warrant at 9.26 CAD ($7.00).
A estimates the value of that warrant at about $1.38 â meaning the investor paid, net, about $4 per share for APHA stock. That stock trades at $3.50 barely a month later.
In other words, investors can buy APHA now at a cheaper price than an experienced investor with deep knowledge of the business did just five weeks ago. And the offering added more cash to AphriaâÂÂs balance sheet, allowing it to spend on marketing and research and development, repay debt, or look to acquire additional assets on the cheap from struggling rivals.
That cash should be in good hands. It was announced along with Q2 earnings that well-regarded chief executive officer Irwin Simon is joining the company on a permanent basis after holding his title on an interim basis. As rivals like Canopy and Aurora look to firm up their own top spots, Aphria has a proven executive â Simon previously ran Hain Celestial (NASDAQ:) â as its CEO.
Meanwhile, results should improve going forward. One of the reasons cited for the guidance cut on the second-quarterearnings callwas a in the province of Alberta. The province reportedly is planning to lift that ban shortly.
An Unjustified Sell-Off?
And so, this fade in Aphria stock simply seems to have gone too far. To be sure, that doesnâÂÂt necessarily mean APHA is a buying opportunity.
After all, itâÂÂs possible markets can fall further, with MondayâÂÂs 4%-plus gains in major indices appearing like a âÂÂdead cat bounceâ given TuesdayâÂÂs steep declines. Cannabis stocks remain falling knives: many investors have thought APHA and other plays were âÂÂtoo cheapâ at many points over the past year. Nearly all are in the red.
But the decline in APHA only firms my conviction that itâÂÂs the best play in the sector, however that sector performs in the near term. And even for investors (myself included) still somewhat skeptical toward the industry, thereâÂÂs a strong case.
The company has good management. Its branded products are , according to at least one analyst. ThereâÂÂs plenty of cash on the balance sheet to ride out recent volatility in the market and in the industry.
On a relative basis, meanwhile, this selloff has gone too far. If the sector keeps dropping, perhaps that only means Aphria stock doesnâÂÂt do quite as poorly as other cannabis stocks. But at the very least, investors should believe that APHAâÂÂs underperformance has to come to an end.
Vince Martin has covered the financial industry for close to a decade for InvestorPlace.com and other outlets. He has no positions in any securities mentioned.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Whatever an investor thinks of ACB stock â and IâÂÂm not optimistic â thereâÂÂs little question that itâÂÂs the highest-risk of the major cannabis stocks. Yet while APHA has dropped 39% since late January, ACB has dropped just 34% (it, too, rallied on Monday). That report looked even worse in contrast with an impressive quarter from fellow major Canopy Growth (NYSE:), who increased sales in a tough environment. | Yet while APHA has dropped 39% since late January, ACB has dropped just 34% (it, too, rallied on Monday). Whatever an investor thinks of ACB stock â and IâÂÂm not optimistic â thereâÂÂs little question that itâÂÂs the highest-risk of the major cannabis stocks. In less than six weeks, Aphria (NYSE:) stock has lost nearly 40% of its value. | Whatever an investor thinks of ACB stock â and IâÂÂm not optimistic â thereâÂÂs little question that itâÂÂs the highest-risk of the major cannabis stocks. Yet while APHA has dropped 39% since late January, ACB has dropped just 34% (it, too, rallied on Monday). APHA Underperforms To be sure, IâÂÂm likely a bit biased: IâÂÂve called Aphria stock , even as IâÂÂve also written that the sector as a whole could see more selling. | Whatever an investor thinks of ACB stock â and IâÂÂm not optimistic â thereâÂÂs little question that itâÂÂs the highest-risk of the major cannabis stocks. Yet while APHA has dropped 39% since late January, ACB has dropped just 34% (it, too, rallied on Monday). Yet APHA closed down another 4%. |
37619.0 | 2020-03-03 00:00:00 UTC | 3 Top Marijuana Stocks to Watch in March | ACB | https://www.nasdaq.com/articles/3-top-marijuana-stocks-to-watch-in-march-2020-03-03 | nan | nan | Pot stocks are in a precarious place at the moment. Despite nearly nine straight months of staggering losses in 2019, the space has continued to break down at a worrying pace in 2020. Every single major Canadian marijuana company, in fact, has lost at least 10% of its value this year, with several companies posting losses of greater than 30% only two months into the new year. While some of this industrywide weakness can be attributed to the marketwide coronavirus sell-off, the vast majority of it is due to the confluence of anemic sales, deteriorating balance sheets, poor internal controls, a thriving black market, and regulatory bottlenecks.
With the legal marijuana space in full-scale retreat, bargain hunters might be tempted to nibble at some of these beaten-down equities right now. Before doing so, though, it might be a smart idea to simply watch a few of the industry's bellwether names during this turbulent period. Which marijuana stocks could be key indicators of where the industry is headed as a whole for the remainder of 2020 and beyond? Aurora Cannabis (NYSE: ACB), Cronos Group (NASDAQ: CRON), and Tilray (NASDAQ: TLRY) are three of the most important marijuana stocks to keep tabs on this month. Here's why.
Image source: Getty Images.
Aurora Cannabis: An ominous milestone is close at hand
Not long ago, Aurora appeared to have the inside track toward becoming one of the few giants of the nascent legal marijuana industry. Then everything fell apart. The company's overly aggressive acquisition strategy -- designed to give it a competitive advantage over the broader field -- has stressed its balance sheet to the max. And even though the company has been slashing costs and changing up its leadership team of late, the fact of the matter is that Aurora may soon face a serious liquidity crisis. What's more, Aurora won't be able to simply tap the public markets to get out of this financial jam.
That brings us to the main reason to watch this struggling pot company this month. With a share price of $1.36 at current levels, Aurora is now painfully close to the minimum bid requirement for the New York Stock Exchange ($1 per share). So, in light of the company's clear need to raise cash and seemingly limited options to do so, a reverse split appears almost inevitable at this point. In fact, a reverse split, followed by a hefty capital raise, is probably the smart move from a longevity standpoint. Aurora has the pieces to become a cannabis titan, but first, it needs to survive this rather brutal period.
Cronos Group: A crisis in confidence
Cronos Group is drawing the ire of shareholders right now over its inability to file the required financial statements for fiscal 2019 on time. Yesterday, the company announced that an ongoing review revealed some issues regarding accounting practices and revenue recognition related to the bulk purchases of resin and sales of products through the "wholesale channel." Cronos said that it plans to complete the 10-K filing within the 15-day extension period under Rule 12b-25.
Postponing the release of a regulatory filing isn't the end of the world, but this latest accounting snafu couldn't have come at a worse time for Cronos. The crux of the situation is that numerous pot companies have had a litany of problems with basic record-keeping. If the industry wants to be taken seriously by investors, it needs to become markedly more professional on the accounting front. Filing financial statements on time, without major errors, is a basic requirement for companies listed on major U.S. stock exchanges. So Cronos needs to get this right and do so in a hurry; otherwise investors may lose confidence in management.
Tilray: Where are the profits?
Tilray released its fourth-quarter and 2019 full-year results after the closing bell Monday. Unfortunately, there weren't a whole lot of positives in this latest financial report. While Tilray was quick to point out that annual revenue rose by a stately 287% to $167.0 million for the full year, the company still lost a staggering $321.2 million in fiscal year 2019.
That kind of cash burn rate is simply unsustainable. So to address this touchstone issue, Tilray recently reduced its workforce by 10% and initiated a cost-saving restructuring process. Even so, Tilray may nevertheless face a cash crunch of its own within the next 12 to 24 months.
All told, Tilray clearly needs to boost sales in a big way and drastically reduce costs over the course of 2020. If the company can't fix these fundamental problems, it may soon be relegated to second-class status within the emerging legal marijuana industry.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
George Budwell owns shares of Cronos Group Inc. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Aurora Cannabis (NYSE: ACB), Cronos Group (NASDAQ: CRON), and Tilray (NASDAQ: TLRY) are three of the most important marijuana stocks to keep tabs on this month. While some of this industrywide weakness can be attributed to the marketwide coronavirus sell-off, the vast majority of it is due to the confluence of anemic sales, deteriorating balance sheets, poor internal controls, a thriving black market, and regulatory bottlenecks. Yesterday, the company announced that an ongoing review revealed some issues regarding accounting practices and revenue recognition related to the bulk purchases of resin and sales of products through the "wholesale channel." | Aurora Cannabis (NYSE: ACB), Cronos Group (NASDAQ: CRON), and Tilray (NASDAQ: TLRY) are three of the most important marijuana stocks to keep tabs on this month. Every single major Canadian marijuana company, in fact, has lost at least 10% of its value this year, with several companies posting losses of greater than 30% only two months into the new year. Filing financial statements on time, without major errors, is a basic requirement for companies listed on major U.S. stock exchanges. | Aurora Cannabis (NYSE: ACB), Cronos Group (NASDAQ: CRON), and Tilray (NASDAQ: TLRY) are three of the most important marijuana stocks to keep tabs on this month. Every single major Canadian marijuana company, in fact, has lost at least 10% of its value this year, with several companies posting losses of greater than 30% only two months into the new year. Here's The Marijuana Stock You've Been Waiting For A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom. | Aurora Cannabis (NYSE: ACB), Cronos Group (NASDAQ: CRON), and Tilray (NASDAQ: TLRY) are three of the most important marijuana stocks to keep tabs on this month. Every single major Canadian marijuana company, in fact, has lost at least 10% of its value this year, with several companies posting losses of greater than 30% only two months into the new year. Even so, Tilray may nevertheless face a cash crunch of its own within the next 12 to 24 months. |
37620.0 | 2020-03-03 00:00:00 UTC | 2 High-Growth Cannabis Stocks at Rock-Bottom Prices | ACB | https://www.nasdaq.com/articles/2-high-growth-cannabis-stocks-at-rock-bottom-prices-2020-03-03 | nan | nan | Over the past 12 months, cannabis stocks have seen significant losses. With many of the largest names in the industry reporting significant quarterly losses and failing to become profitable, it's not surprising that some investors have become reticent about investing in the marijuana industry at this time. On top of downward pressure on the sector, the broader market has fallen substantially as a result of coronavirus fears.
While there are many overvalued pot stocks that aren't worth buying right now, there are also a few companies that are remarkably undervalued. In fact, not only do these same undervalued companies often have tremendous growth potential, but some of them are even reporting a profit!
Here are a couple of cannabis companies that fit this description and investors should consider investing in them.
Image source: Getty Images.
1. Aphria
Aphria (NYSE: APHA) is one of the cheapest large-cap pot stocks on the market right now. While other companies, such as Aurora Cannabis, Tilray, and Canopy Growth all trade at price-to-sales (P/S) ratios of 6.6, 10.2, and 22.4 respectively, Aphria trades at a measly 2.7 times its sales.
Most of the time when a company is trading at an incredibly cheap valuation, there's a good reason behind it. Whether that be a poor financial quarter or some other news development, it's not normal for a perfectly sound company to be trading much cheaper than its competition.
Aphria's case is interesting. Ever since the company's management got caught up in a major scandal surrounding its Latin American acquisitions in December 2018, investor trust in the company evaporated. Despite undergoing major changes to its leadership team, Aphria's reputation has remained tarnished since the incident.
This is unfortunate, as Aphria has proven to be one of the only profitable pot stocks on the market, with the company reporting a positive net income more than once in 2019. Although its recent fiscal second-quarter 2020 results (leading up to Nov. 30) saw a net loss of CA$7.9 million, over a six-month period, Aphria is still in the green with a net income of CA$9.0 million.
When looking deeper at Aphria's revenue figures, its Canadian pot business isn't the main source of the company's sales. Instead, Aphria owns a German distribution subsidiary called CC Pharma, which brought in around CA$86.4 million in revenue in comparison to the CA$39.7 million seen in Canada.
NAME MARKET CAP TOTAL QUARTERLY REVENUE QUARTERLY CANADIAN REVENUE QUARTERLY CC PHARMA REVENUE QUARTERLY NET INCOME (LOSS) PRICE- TO- SALES RATIO (P/S)
Aphria $1.29 billion $126.1 million $39.7 million $86.4 million ($7.9 million) 2.7
Data source: YCharts, Aphria. All figures in CA$0.
While sales for CC Pharma have been strong, all signs suggest that they are only going to increase from here on out. Aphria is the only cannabis company licensed to grow all three approved strains of medical marijuana in Germany, having received a fifth cultivation license in the country in May 2019. The company also announced in January 2020 that it received a certification to ship medical cannabis across the EU as well.
Overall, prospects for Aphria remain very positive. With plenty of growth potential, a track record of profitability, and trading at a rock-bottom valuation, there's a very compelling case to be made for Aphria as an investment opportunity right now.
2. Village Farms International
Village Farms International (NASDAQ: VFF) is a small-cap cannabis producer with an interesting history. The company first started off as a vegetable grower, but as Village Farms struggled with the low margins and growth potential that's often the case with the produce market, the company transitioned to growing marijuana instead.
Village Farms entered into a joint venture with Emerald Health Therapeutics (OTC: EMHTF) in 2017 to create a low-cost, highly efficient cultivation operation known as Pure Sunfarms. The resulting agreement, combining Village Farms' expertise with Emerald Health's financing, has created an extraordinarily cost-efficient grow operation.
Image source: Getty Images.
This efficiency has borne fruit in the company's financial statements, with Village Farms managing to report a profit for three out of the past four quarters. While its most recent third-quarter 2019 results showed a surprising net loss of $5.1 million, the rest of 2019 raked in $12.5 million in net profit.
Considering how rare it is for a pot stock to be profitable, it's a major feather in Village Farms' cap that it's been able to do so for the most part. Despite this, the company is trading at an incredibly cheap valuation, just 1.3 times its P/S ratio.
The answer might not be Village Farms' fault as much as it is due to its partner's problems. Emerald Health appears to be struggling to raise cash to fund its operations as well as its share of the Pure Sunfarms joint venture. In October, Emerald Health announced it was laying off a third of its workforce to cut costs.
In addition, it appears that Emerald Health's financial woes resulted in the company failing to purchase 40% of Pure Sunfarms production as per the joint venture agreement. In response, Village Farms international has expressed interest in buying out at least a portion of Emerald Health's share in Pure Sunfarms. This seems like a good move for Village Farms, especially since it seems like its association with the apparently struggling Emerald Health is what's dragging down its valuation at the moment.
Despite this issue, Village Farms itself is in a strong position to continue growing. Just recently, the company announced that it has begun supplying Alberta, Canada's second-largest cannabis market, with marijuana. Given how small Village Farms is -- its market cap is just $280 million -- this deal could be a major revenue source for the company.
While small-cap pot stocks tend to be riskier, Village Farms' impressive track record of profitability alongside its dirt-cheap valuation makes it a compelling stock to buy today.
10 stocks we like better than Village Farms International Inc
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Village Farms International Inc wasn't one of them! That's right -- they think these 10 stocks are even better buys.
See the 10 stocks
*Stock Advisor returns as of December 1, 2019
Mark Prvulovic has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | With plenty of growth potential, a track record of profitability, and trading at a rock-bottom valuation, there's a very compelling case to be made for Aphria as an investment opportunity right now. Village Farms entered into a joint venture with Emerald Health Therapeutics (OTC: EMHTF) in 2017 to create a low-cost, highly efficient cultivation operation known as Pure Sunfarms. In addition, it appears that Emerald Health's financial woes resulted in the company failing to purchase 40% of Pure Sunfarms production as per the joint venture agreement. | With many of the largest names in the industry reporting significant quarterly losses and failing to become profitable, it's not surprising that some investors have become reticent about investing in the marijuana industry at this time. This is unfortunate, as Aphria has proven to be one of the only profitable pot stocks on the market, with the company reporting a positive net income more than once in 2019. Village Farms International Village Farms International (NASDAQ: VFF) is a small-cap cannabis producer with an interesting history. | This is unfortunate, as Aphria has proven to be one of the only profitable pot stocks on the market, with the company reporting a positive net income more than once in 2019. The company first started off as a vegetable grower, but as Village Farms struggled with the low margins and growth potential that's often the case with the produce market, the company transitioned to growing marijuana instead. While small-cap pot stocks tend to be riskier, Village Farms' impressive track record of profitability alongside its dirt-cheap valuation makes it a compelling stock to buy today. | This is unfortunate, as Aphria has proven to be one of the only profitable pot stocks on the market, with the company reporting a positive net income more than once in 2019. This efficiency has borne fruit in the company's financial statements, with Village Farms managing to report a profit for three out of the past four quarters. In response, Village Farms international has expressed interest in buying out at least a portion of Emerald Health's share in Pure Sunfarms. |
37621.0 | 2020-03-02 00:00:00 UTC | Canopy Growth Partners With Univo Pharmaceuticals to Sell Cannabis in Israel | ACB | https://www.nasdaq.com/articles/canopy-growth-partners-with-univo-pharmaceuticals-to-sell-cannabis-in-israel-2020-03-02 | nan | nan | Israeli-based Univo Pharmaceuticals announced this week that it had signed a memorandum of understanding with cannabis producer Canopy Growth (NYSE: CGC) that would see the two companies work together on the sale, production, and marketing of medical marijuana in Israel.
Univo will initially import 470 kilograms of dry cannabis from the Canadian producer, which it will also use to manufacture cannabis products that will be sold under a joint brand and logo.
At a later stage in the agreement, and once it's legal to do so, Canopy Growth will use Univo's location in Ashkelon, Israel, to manufacture and process cannabis products for export to Europe.
In January, Israeli producer Canndoc imported the country's first-ever commercial medical cannabis shipment from a production plant in Portgual owned by another Canadian-based producer, Tilray (NASDAQ: TLRY).
Image source: Getty Images.
Canopy Growth remains one of the industry's top pot stocks
When Canopy Growth released its quarterly results on Feb. 14, it proved to investors that it was still among the best in the industry. With sales growth of 49% from the prior-year quarter and 62% improvement from the prior period, the company thoroughly beat analysts' consensus expectations.
That was a stark contrast to one of its main rivals, Aurora Cannabis (NYSE: ACB), which disappointed its investors with falling sales in its most recent results, and said that it expects "modest to no growth" in its next quarter.
Both cannabis companies have undergone changes in leadership over the past year, and with Canopy Growth now under the direction of Constellation Brands' (NYSE: STZ) former CFO David Klein, the company is committed to strengthening its bottom line. It has reported losses in four consecutive quarters.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
David Jagielski has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Constellation Brands. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | That was a stark contrast to one of its main rivals, Aurora Cannabis (NYSE: ACB), which disappointed its investors with falling sales in its most recent results, and said that it expects "modest to no growth" in its next quarter. Israeli-based Univo Pharmaceuticals announced this week that it had signed a memorandum of understanding with cannabis producer Canopy Growth (NYSE: CGC) that would see the two companies work together on the sale, production, and marketing of medical marijuana in Israel. At a later stage in the agreement, and once it's legal to do so, Canopy Growth will use Univo's location in Ashkelon, Israel, to manufacture and process cannabis products for export to Europe. | That was a stark contrast to one of its main rivals, Aurora Cannabis (NYSE: ACB), which disappointed its investors with falling sales in its most recent results, and said that it expects "modest to no growth" in its next quarter. Israeli-based Univo Pharmaceuticals announced this week that it had signed a memorandum of understanding with cannabis producer Canopy Growth (NYSE: CGC) that would see the two companies work together on the sale, production, and marketing of medical marijuana in Israel. At a later stage in the agreement, and once it's legal to do so, Canopy Growth will use Univo's location in Ashkelon, Israel, to manufacture and process cannabis products for export to Europe. | That was a stark contrast to one of its main rivals, Aurora Cannabis (NYSE: ACB), which disappointed its investors with falling sales in its most recent results, and said that it expects "modest to no growth" in its next quarter. Israeli-based Univo Pharmaceuticals announced this week that it had signed a memorandum of understanding with cannabis producer Canopy Growth (NYSE: CGC) that would see the two companies work together on the sale, production, and marketing of medical marijuana in Israel. Canopy Growth remains one of the industry's top pot stocks When Canopy Growth released its quarterly results on Feb. 14, it proved to investors that it was still among the best in the industry. | That was a stark contrast to one of its main rivals, Aurora Cannabis (NYSE: ACB), which disappointed its investors with falling sales in its most recent results, and said that it expects "modest to no growth" in its next quarter. Israeli-based Univo Pharmaceuticals announced this week that it had signed a memorandum of understanding with cannabis producer Canopy Growth (NYSE: CGC) that would see the two companies work together on the sale, production, and marketing of medical marijuana in Israel. And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution. |
37622.0 | 2020-03-02 00:00:00 UTC | 3 Marijuana Stocks to Avoid Like the Plague in March | ACB | https://www.nasdaq.com/articles/3-marijuana-stocks-to-avoid-like-the-plague-in-march-2020-03-02 | nan | nan | Following a stunning first quarter of 2019, which saw more than a dozen popular cannabis stocks rally by at least 70%, the past 11 months have been nothing short of a train wreck for the green rush. Supply issues (both shortages and bottlenecks) have plagued the adult-use legal Canadian market, while wide price gaps between legal and illicit weed have led to struggles for vertically integrated multistate operators in the United States.
Then again, there's little doubt that the legal pot industry could be a long-term moneymaker for investors. There are tens of billions of dollars being conducted annually in the black market, meaning there's plenty of potential to gradually transition these users to legal channels over time.
But let's be clear -- there will be losers within this industry. As we move headlong into March and also contend with the first stock market correction in two years, here are three marijuana stocks you'd be wise to avoid like the plague.
Image source: Getty Images.
Aurora Cannabis
First up is the most popular marijuana stock in the world (at least among millennial investors), Aurora Cannabis (NYSE: ACB). Aurora Cannabis was expected to be Canada's leading producer and has a broader international presence than any other pot stock. However, all of these perceived-to-be attractive traits have been overshadowed by a cadre of operational issues and a truly ugly balance sheet.
As noted, supply issues throughout Canada have been a big issue. In response, Aurora Cannabis wound up announcing the halting of construction at two of its largest cultivation farms in November (Aurora Sun in Alberta and Aurora Nordic 2 in Denmark). More recently, the company also announced that it'd be putting its 1 million-square-foot Exeter greenhouse up for sale for a mere $17 million Canadian. This vegetable-growing greenhouse, which hasn't been retrofit, could produce as much as 105,000 kilos of weed per year at its peak. Altogether, Aurora has reduced its peak annual output by well over 400,000 kilos.
The bigger issue here might just be the company's balance sheet. On one hand, Aurora's aggressive acquisition strategy led the company to grossly overpay for its more than one dozen purchases since Aug. 2016. Even with a CA$762.2 million goodwill writedown in the fiscal second quarter, the company still boasts more than CA$2.4 billion in goodwill, which accounts for 52% of Aurora's total assets. There's a very good possibility of additional writedowns down the line.
On the other hand, Aurora's lack of cash is a very big concern. The company's management discussion & analysis filing with SEDAR showed CA$156.3 million in cash and cash equivalents, CA$26.1 million in marketable securities, and the expectation of CA$373.6 million in liabilities over the next 12 months. There's the real chance that, even after adjusting the covenants tied to its secured debt, Aurora may not be able to meet all of its obligations. As such, it remains a pot stock to avoid like the plague in March (and for the foreseeable future).
Image source: Getty Images.
Tilray
You're probably going to notice a decisive theme with this list: keep your distance from most Canadian licensed producers. Next up is British Columbia-based Tilray (NASDAQ: TLRY).
Similar to Aurora Cannabis, Tilray has been seriously backpedaling as Canada's legal marketplace has struggled to move product from growers to retailers. Early last month, Tilray announced that it was laying off 140 of its employees, or about 10% of its workforce, as part of a restructuring to reduce its expenses. I would expect this serious belt-tightening to continue throughout 2020.
Tilray is also facing a potential cash crunch. Between the beginning of 2019 and the end of September, Tilray's cash, cash equivalents, and short-term investments fell from $517.6 million (Tilray reports in U.S. dollars) to a mere $122.4 million. Although a good chunk of this reduction was tied to the purchase of hemp foods company Manitoba Harvest, Tilray has also logged an $83.7 million operating loss through nine months of 2019. Things are certainly not expected to improve anytime soon, meaning Tilray may need to rely on share issuances or convertible debentures to obtain funding.
It's also noteworthy that Tilray's push into the U.S. hasn't gone anywhere near as planned. The purchase of Manitoba Harvest, which gave Tilray access to approximately 16,000 retail doors throughout North America, was expected to be an avenue for Tilray to distribute cannabidiol (CBD) products. However, CBD sales have disappointed in the U.S., especially with the U.S. Food and Drug Administration casting doubt on CBD's safety last year. It's for all these reasons that Tilray should be avoided in March.
Image source: Getty Images.
HEXO
Last, but not least, investors would be smart to avoid Quebec-based grower HEXO (NYSE: HEXO) like the plague this month.
Like its peers, HEXO has been a busy bee in the cost-cutting department. To account for supply bottlenecks in Ontario and a resilient black market, HEXO announced 200 job cuts and has chosen to idle the Niagara facility (acquired with the Newstrike Brands purchase) as well as 200,000 square feet of its flagship Gatineau campus. In total, I believe HEXO's peak output has been reduced by around a third, which is concerning considering that HEXO's management believes it needs 20% market share throughout the country to become profitable.
HEXO is also facing some serious cash concerns. The company has raised approximately CA$100 million from a combination of stock offerings and a convertible debenture in recent months, but this doesn't look as if it'll be enough to cover ongoing operating expenses or cover debt payments when they become due.
As the icing on the cake, HEXO's share price fell to within $0.11 of the $1 minimum share price required for continued listing on the New York Stock Exchange (NYSE) this past Thursday, Feb. 27. Although a reverse stock split is an option for continued listing, it's looking increasingly likely that HEXO's stay on the iconic NYSE may be short-lived.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Sean Williams has no position in any of the stocks mentioned. The Motley Fool recommends HEXO. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Aurora Cannabis First up is the most popular marijuana stock in the world (at least among millennial investors), Aurora Cannabis (NYSE: ACB). There are tens of billions of dollars being conducted annually in the black market, meaning there's plenty of potential to gradually transition these users to legal channels over time. Although a good chunk of this reduction was tied to the purchase of hemp foods company Manitoba Harvest, Tilray has also logged an $83.7 million operating loss through nine months of 2019. | Aurora Cannabis First up is the most popular marijuana stock in the world (at least among millennial investors), Aurora Cannabis (NYSE: ACB). Supply issues (both shortages and bottlenecks) have plagued the adult-use legal Canadian market, while wide price gaps between legal and illicit weed have led to struggles for vertically integrated multistate operators in the United States. The company's management discussion & analysis filing with SEDAR showed CA$156.3 million in cash and cash equivalents, CA$26.1 million in marketable securities, and the expectation of CA$373.6 million in liabilities over the next 12 months. | Aurora Cannabis First up is the most popular marijuana stock in the world (at least among millennial investors), Aurora Cannabis (NYSE: ACB). The company's management discussion & analysis filing with SEDAR showed CA$156.3 million in cash and cash equivalents, CA$26.1 million in marketable securities, and the expectation of CA$373.6 million in liabilities over the next 12 months. Between the beginning of 2019 and the end of September, Tilray's cash, cash equivalents, and short-term investments fell from $517.6 million (Tilray reports in U.S. dollars) to a mere $122.4 million. | Aurora Cannabis First up is the most popular marijuana stock in the world (at least among millennial investors), Aurora Cannabis (NYSE: ACB). Last, but not least, investors would be smart to avoid Quebec-based grower HEXO (NYSE: HEXO) like the plague this month. Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018. |
37623.0 | 2020-03-01 00:00:00 UTC | Better Buy: OrganiGram Holdings vs. Aurora Cannabis | ACB | https://www.nasdaq.com/articles/better-buy%3A-organigram-holdings-vs.-aurora-cannabis-2020-03-01 | nan | nan | Really bad and downright horrible. That's the best way to sum up the stock performances for OrganiGram Holdings (NASDAQ: OGI) and Aurora Cannabis (NYSE: ACB) over the pst 12 months. Shares of aOrganiGram are down more than 60% during the period, while Aurora stock has plunged more than 80%.
But better days could be in store for both of these Canadian cannabis producers. Which stock is the better pick for patient investors?
Image source: Getty Images.
The case for OrganiGram
You can find a lot to like about OrganiGram merely by looking at its fiscal 2020 first-quarter results announced in January. While many of its peers have provided disappointing quarterly updates, OrganiGram handily beat expectations.
The company's revenue continues to soar thanks to OrganiGram's strong presence in the Canadian adult-use recreational marijuana and medical cannabis markets. OrganiGram appears to have moved past issues with product returns related to lower-than-expected demand for THC oils last year.
Probably the biggest advantage that OrganiGram has over its peers right now is that it's already generating positive adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). The company did have one blip in Q4 where its adjusted EBITDA was negative, but it's delivered positive numbers in other recent quarters. An important key behind OrganiGram's ability to achieve positive adjusted EBITDA is its low cultivation costs.
OrganiGram isn't too far away from being profitable on a consistent basis. Its net loss in Q1 was only $0.9 million in Canadian dollars. The company's fiscal discipline combined with increasing revenue should put OrganiGram operating in the black far sooner than most of its rivals.
The company also has a couple of tailwinds that should fuel higher revenue. Ontario is starting to issue more licenses to retail cannabis stores. The Cannabis 2.0 cannabis derivatives market is slowly picking up steam.
In addition, OrganGram's shares currently trade at less than six times trailing-12-month sales. That's cheap compared to most Canadian marijuana stocks.
The case for Aurora Cannabis
Unfortunately, there wasn't a lot to like with Aurora Cannabis' latest quarterly update. However, there are reasons to be more optimistic about the company's future prospects.
For one thing, Aurora has taken steps to control its spending. The company is pushing back on finishing construction at two of its facilities, moves that will save roughly CA$190 million. It cut close to 500 positions. These actions will help shore up Aurora's bottom line. As part of a restructuring of its secured credit facilities, Aurora also is now committed to hitting positive EBITDA thresholds beginning in fiscal 2021 Q1.
Aurora is also looking for a new CEO after founder and longtime CEO Terry Booth stepped down. Hiring the right person for the job could boost investors' confidence in the company.
Cantor Fitzgerald analyst Pablo Zuanic thinks that a strong new CEO combined with finding a partner from outside the cannabis industry could be huge catalysts for Aurora. The company could be making progress on the second item. Aurora recently added two new directors to its board, both of whom have great connections in the consumer packaged goods (CPG) industry.
Meanwhile, Aurora has several competitive strengths. Like OrganiGram, the company claims a low cost structure that enables it to achieve solid gross margins. Aurora's production capacity ranks at the top of the industry.
The company retains the second-highest market share in the Canadian recreational marijuana market. It's also a leader in Germany's medical cannabis market.
Better buy
I favor looking at the long-term prospects for any industry and for any stock. My view is that the cannabis industry should continue to expand dramatically in the future despite the significant challenges. That bodes well for both OrganiGram and Aurora.
But we can't sweep current problems under the rug. The reality is that Aurora faces some big issues, primarily including its lack of profitability, major debt load, and dwindling cash stockpile. OrganiGram is in better shape in all of these areas. I think OrganiGram is hands-down the better stock right now.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Keith Speights has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends OrganiGram Holdings. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | That's the best way to sum up the stock performances for OrganiGram Holdings (NASDAQ: OGI) and Aurora Cannabis (NYSE: ACB) over the pst 12 months. The company's revenue continues to soar thanks to OrganiGram's strong presence in the Canadian adult-use recreational marijuana and medical cannabis markets. Cantor Fitzgerald analyst Pablo Zuanic thinks that a strong new CEO combined with finding a partner from outside the cannabis industry could be huge catalysts for Aurora. | That's the best way to sum up the stock performances for OrganiGram Holdings (NASDAQ: OGI) and Aurora Cannabis (NYSE: ACB) over the pst 12 months. The company's revenue continues to soar thanks to OrganiGram's strong presence in the Canadian adult-use recreational marijuana and medical cannabis markets. An important key behind OrganiGram's ability to achieve positive adjusted EBITDA is its low cultivation costs. | That's the best way to sum up the stock performances for OrganiGram Holdings (NASDAQ: OGI) and Aurora Cannabis (NYSE: ACB) over the pst 12 months. The company's revenue continues to soar thanks to OrganiGram's strong presence in the Canadian adult-use recreational marijuana and medical cannabis markets. The case for Aurora Cannabis Unfortunately, there wasn't a lot to like with Aurora Cannabis' latest quarterly update. | That's the best way to sum up the stock performances for OrganiGram Holdings (NASDAQ: OGI) and Aurora Cannabis (NYSE: ACB) over the pst 12 months. The company's revenue continues to soar thanks to OrganiGram's strong presence in the Canadian adult-use recreational marijuana and medical cannabis markets. The case for Aurora Cannabis Unfortunately, there wasn't a lot to like with Aurora Cannabis' latest quarterly update. |
37624.0 | 2020-02-28 00:00:00 UTC | Wall Street Is Totally Out of Touch With Reality When It Comes to Canada's Pot Industry | ACB | https://www.nasdaq.com/articles/wall-street-is-totally-out-of-touch-with-reality-when-it-comes-to-canadas-pot-industry | nan | nan | In case you missed it, there was a pretty big cannabis industry story mixed in with the "beating" the stock market took to begin the week.
On Monday, Feb. 24, analyst Vivien Azer at Cowen Group (NASDAQ: COWN) released a research note that detailed her firm's downgrade of a trio of marijuana stocks. If the name rings a bell, it's because Azer was the first analyst on Wall Street to offer broad coverage of the cannabis industry.
Image source: Getty Images.
The most popular pot stock, Aurora Cannabis (NYSE: ACB), was downgraded to market perform from outperform, with its target price slashed to $2.50 Canadian ($1.88) from CA$6. Both Tilray and Sundial Growers faced a similar fate, with downgrades to market perform from outperform. Tilray's price target wound up being halved to $20 from $40, with Sundial's price target beaten down to $1.50 from $10.
"Headwinds that have plagued the industry (pricing, stores, inventory) do not appear to be fading as anticipated, while 2.0 [a reference to Cannabis 2.0 derivatives] is likely not the elixir that the market was hoping for. Canopy Growth remains our only outperform rated stock among the Canadian LPs," said Azer.
But this wasn't the only surprise. Azer and her team also reduced their total market-sales forecast for Canada in 2020 to CA$3.5 billion ($2.63 billion), which is 32% lower than what Cowen Group had previously forecast for combined medical and adult-use sales in 2020. Azer and her team blamed this reduction on the slower-than-expected rollout of Cannabis 2.0 products, an influx of value-based brands, and shortages of edibles in some dispensaries.
While these rating, price-target, and total-sale adjustments could simply be chalked up to a bit of an industry shakeout, I believe it demonstrates that Wall Street --or at least some very prominent analysts covering the pot industry -- is completely out of touch with reality.
Image source: Getty Images.
Aurora Cannabis' struggles show how out of touch Wall Street is
Take, for example, Azer's assessment of Aurora Cannabis. Aurora has been on a seemingly slippery slope for months. In November, the company announced plans to halt construction at two of its largest cultivation farms and recently announced its intent to sell the Exeter greenhouse for a meager CA$17 million. With just six grow rooms being utilized from Aurora Sun (one of the two facilities where remaining construction was halted), Aurora's peak annual output has been cut by what I suspect is more than 400,000 kilos.
Then, 18 days prior to Azer's downgrade, Aurora Cannabis unleashed a mammoth corporate update that included the resignation of longtime CEO Terry Booth, updated debt covenants, a reduced credit line, and the understanding that it would be taking a mammoth writedown in the fiscal second quarter. One week later, on Feb. 13, Aurora would deliver its Q2 2020 results. The company lost CA$1.3 billion and saw its selling, general and administrative (SG&A) expenses rise to CA$99.9 million. As a refresher, management stated a week earlier that its goal will be to get SG&A down to CA$40 million to CA$45 million per quarter.
All the while, until Monday morning, Cowen Group and Azer held an outperform rating on the company. What once was a CA$14 price target (last March) and a CA$6 price target leading up to Monday has now been shaved to CA$2.50. It took a nearly 85% decline in Aurora's share price before Cowen no longer considered the company worthy of an outperform rating. That, folks, is out of touch with reality.
Image source: Getty Images.
Cowen's Canadian sales assessment is (still) likely way too high
Once again, it doesn't just stop with the way Cowen Group has analyzed individual pot stocks like Aurora Cannabis. Evidence that the firm remains out of touch with industry conditions is seen with its CA$3.5 billion sales forecast in 2020.
Retail sales data released by Statistics Canada last week showed that December sales in licensed cannabis stores totaled CA$146.25 million (that's about $110 million U.S.). While this represents an all-time high, it's been slow sledding, with monthly revenue up just 16% in licensed cannabis stores since August. At this type of growth rate, all-in weed sales are only on track for maybe CA$2 billion in 2020.
What's more, Cowen Group details all of the concerns currently facing the Canadian pot industry and then proceeds to gloss over them with a CA$3.5 billion sales projection for the year. The thing is, if consumers are targeting lower-cost value brands, then sales are likely going to come in below expectations as legal providers wage a pricing war with the black market. Likewise, if edibles are in short supply, then growers aren't realizing the amount of revenue they could on these high-margin derivatives.
But the biggest slap in the face might be the lack of credence given to Ontario's new licensing process. While this is going to be a positive over the long run for Canada's most populous province, there aren't any quick remedies that will lead to an uptick in sales. The first new dispensary licenses should begin being issued in April, with a steady uptick in retail stores during the latter half of the year.
In other words, CA$3.5 billion in sales doesn't look remotely achievable in 2020.
To be clear, I don't believe Cowen Group is the only Wall Street firm out of touch with what's really going on with the Canadian cannabis industry. But the tardiness of these downgrades, the magnitude of the price-target cuts, and the still-lofty sales forecast for our neighbor to the north made Cowen the perfect guinea pig to demonstrate how out of touch Wall Street really is.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Sean Williams has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | The most popular pot stock, Aurora Cannabis (NYSE: ACB), was downgraded to market perform from outperform, with its target price slashed to $2.50 Canadian ($1.88) from CA$6. On Monday, Feb. 24, analyst Vivien Azer at Cowen Group (NASDAQ: COWN) released a research note that detailed her firm's downgrade of a trio of marijuana stocks. But the tardiness of these downgrades, the magnitude of the price-target cuts, and the still-lofty sales forecast for our neighbor to the north made Cowen the perfect guinea pig to demonstrate how out of touch Wall Street really is. | The most popular pot stock, Aurora Cannabis (NYSE: ACB), was downgraded to market perform from outperform, with its target price slashed to $2.50 Canadian ($1.88) from CA$6. On Monday, Feb. 24, analyst Vivien Azer at Cowen Group (NASDAQ: COWN) released a research note that detailed her firm's downgrade of a trio of marijuana stocks. Retail sales data released by Statistics Canada last week showed that December sales in licensed cannabis stores totaled CA$146.25 million (that's about $110 million U.S.). | The most popular pot stock, Aurora Cannabis (NYSE: ACB), was downgraded to market perform from outperform, with its target price slashed to $2.50 Canadian ($1.88) from CA$6. Cowen's Canadian sales assessment is (still) likely way too high Once again, it doesn't just stop with the way Cowen Group has analyzed individual pot stocks like Aurora Cannabis. Retail sales data released by Statistics Canada last week showed that December sales in licensed cannabis stores totaled CA$146.25 million (that's about $110 million U.S.). | The most popular pot stock, Aurora Cannabis (NYSE: ACB), was downgraded to market perform from outperform, with its target price slashed to $2.50 Canadian ($1.88) from CA$6. Aurora Cannabis' struggles show how out of touch Wall Street is Take, for example, Azer's assessment of Aurora Cannabis. To be clear, I don't believe Cowen Group is the only Wall Street firm out of touch with what's really going on with the Canadian cannabis industry. |
37625.0 | 2020-02-27 00:00:00 UTC | Now’s the Time to Bite into OrganiGram Stock | ACB | https://www.nasdaq.com/articles/nows-the-time-to-bite-into-organigram-stock-2020-02-27 | nan | nan | ItâÂÂs approximately 168 miles door-to-door from my house in Halifax, Nova Scotia, to the headquarters of OrganiGram Holdings (NASDAQ:) in Moncton, New Brunswick. Best known for its Edison brand of cannabis, OrganiGram stock ought to be on the shopping list of every adventurous Maritimer, myself included.
Source: Shutterstock
Like most cannabis stocks, Canadian legalization has not been a slice of heavenâÂÂquite the opposite. In OrganiGramâÂÂs home province, the provincial government has decided to get out of cannabis retail after in the first six months of business.
Things have gotten better in recent months. In the final quarter of calendar 2019, Cannabis NB saw a 23.7% increase in cannabis sales over the previous year. However, it has received to privatize the provinceâÂÂs cannabis operations, including one from Canopy Growth (NYSE:) and another from Loblaw Companies (OTCMKTS:), CanadaâÂÂs largest grocery-store chain.
As a result, it appears as though the provincial government is going to carry out its privatization plans.
Cannabis 2.0 Will Help Organigram Stock Stand Out
However, as many experts have suggested, Cannabis 2.0 is likely to help ease the pain of these initial stumbles, and thatâÂÂs especially true at a well-run organization like OrganiGram.
In late December, OrganiGram (vape cartridges) to retailers. On Feb. 20, the company announced it had sent retailers its first shipment of Edison Vape pens and Edison Bytes edible chocolates.
OrganiGram invested 15 million CAD in a state-of-the-art production line to produce high-quality cannabis-infused chocolates and other edibles. ItâÂÂs no surprise, then, that the companyâÂÂs (Jeff Purcell) came from New Brunswick chocolate maker, Ganong Bros.
As OrganiGram continues to roll out its Cannabis 2.0 products and the number of retail doors across Canada grows, you can be sure itâÂÂs going to take a significant amount of the market.
ItâÂÂs one of many reasons that OrganiGram has moved up in my ranking of Canadian pot producers. At half the value where it was trading last September, OrganiGramâÂÂs business has gotten that much stronger over the past five months.
âÂÂWeâÂÂll really start to see over the what the sales are like [Cannabis 2.0] but if itâÂÂs anything like what theyâÂÂve done [OrganiGram] with their other products it should be fairly strong,â said StoneCastle Investment portfolio manager Bruce Campbell recently.
âÂÂItâÂÂs one that we do own and continue to hold. We think that there arenâÂÂt going to be that many players over the sector in, say, five years and we think this will be one of them, for sure.âÂÂ
Profitable Growth
My InvestorPlace colleague, Josh Enomoto, recently suggested that OrganiGram is one of the safer bets amongst cannabis stocks. He highlighted the fact that the companyâÂÂs were better than expected â revenue of 25.2 million CAD ($19.03 million), more than double the same period a year ago â and perhaps, more important, it beat the analyst estimate by 10.2 million CAD.
Two other points Josh mentioned about OrganiGram that stand out for me: It has just one cultivating and processing facility to keep costs from spiraling out of control â think Aurora Cannabis (NYSE:) â and its cost to produce a gram of dried flower is among the lowest in Canada at 61 cents CAD.
As for the bottom-line, analysts were expecting adjusted EBITDA of -1.4 million CAD in Q1 2020; it delivered 4.9 million CAD, 450% above the consensus.
If Organigram werenâÂÂt such an efficient operation, IâÂÂd be concerned that it only has and 30 million CAD available on its term loan. However, its financial discipline suggests it has plenty of cash flow to make its way to the next level of sales growth.
Is it a risky bet?
Well, youâÂÂre not getting shares in Berkshire Hathaway (NYSE:, NYSE:BRK.B), thatâÂÂs for sure. However, other than Canopy and Cronos Group (NASDAQ:), and perhaps Aphria (NYSE:), OrganiGram stock is one of the few Canadian cannabis stocks you should consider.
Will Ashworth has written about investments full-time since 2008. Publications where heâÂÂs appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | However, it has received to privatize the provinceâÂÂs cannabis operations, including one from Canopy Growth (NYSE:) and another from Loblaw Companies (OTCMKTS:), CanadaâÂÂs largest grocery-store chain. ItâÂÂs no surprise, then, that the companyâÂÂs (Jeff Purcell) came from New Brunswick chocolate maker, Ganong Bros. As OrganiGram continues to roll out its Cannabis 2.0 products and the number of retail doors across Canada grows, you can be sure itâÂÂs going to take a significant amount of the market. We think that there arenâÂÂt going to be that many players over the sector in, say, five years and we think this will be one of them, for sure.â Profitable Growth My InvestorPlace colleague, Josh Enomoto, recently suggested that OrganiGram is one of the safer bets amongst cannabis stocks. | However, it has received to privatize the provinceâÂÂs cannabis operations, including one from Canopy Growth (NYSE:) and another from Loblaw Companies (OTCMKTS:), CanadaâÂÂs largest grocery-store chain. OrganiGram invested 15 million CAD in a state-of-the-art production line to produce high-quality cannabis-infused chocolates and other edibles. We think that there arenâÂÂt going to be that many players over the sector in, say, five years and we think this will be one of them, for sure.â Profitable Growth My InvestorPlace colleague, Josh Enomoto, recently suggested that OrganiGram is one of the safer bets amongst cannabis stocks. | Cannabis 2.0 Will Help Organigram Stock Stand Out However, as many experts have suggested, Cannabis 2.0 is likely to help ease the pain of these initial stumbles, and thatâÂÂs especially true at a well-run organization like OrganiGram. We think that there arenâÂÂt going to be that many players over the sector in, say, five years and we think this will be one of them, for sure.â Profitable Growth My InvestorPlace colleague, Josh Enomoto, recently suggested that OrganiGram is one of the safer bets amongst cannabis stocks. Two other points Josh mentioned about OrganiGram that stand out for me: It has just one cultivating and processing facility to keep costs from spiraling out of control â think Aurora Cannabis (NYSE:) â and its cost to produce a gram of dried flower is among the lowest in Canada at 61 cents CAD. | OrganiGram invested 15 million CAD in a state-of-the-art production line to produce high-quality cannabis-infused chocolates and other edibles. We think that there arenâÂÂt going to be that many players over the sector in, say, five years and we think this will be one of them, for sure.â Profitable Growth My InvestorPlace colleague, Josh Enomoto, recently suggested that OrganiGram is one of the safer bets amongst cannabis stocks. However, other than Canopy and Cronos Group (NASDAQ:), and perhaps Aphria (NYSE:), OrganiGram stock is one of the few Canadian cannabis stocks you should consider. |
37626.0 | 2020-02-27 00:00:00 UTC | Downside Bets on These 3 Pot Stocks Rocketed Higher in January | ACB | https://www.nasdaq.com/articles/downside-bets-on-these-3-pot-stocks-rocketed-higher-in-january-2020-02-27 | nan | nan | As recently as last March, marijuana stocks were considered the greatest thing since sliced bread. During the first quarter, pot stocks wound up surging, with more than a dozen ending higher by at least 70%.
But the past 11 months have been highlighted by a precipitous decline in marijuana stock valuations. Canadian supply problems and high tax rates in core legalized U.S. states have wreaked havoc on the industry and caused Wall Street to reevaluate its expectations (and valuations) for cannabis stocks.
The hope has been that the changing of the calendar from 2019 to 2020 would allow the marijuana industry to begin the year with a clean slate, at least in the eyes of investors. But according to short-interest data between Dec. 31, 2019, and Jan. 31, 2020, pessimism still abounds in the cannabis space.
In the case of the following three pot stocks, the number of shares held short by pessimists all increased by a double-digit percentage in January.
Image source: Getty Images.
Aurora Cannabis
Perhaps it's no surprise that one of the most short-sold marijuana stocks is also one of the worst performing in the industry, Aurora Cannabis (NYSE: ACB). Despite its allure with millennial investors on the Robinhood investing app, the number of shares held by short-sellers surged from 171.2 million at the end of December to 191.7 million by the end of January. This works out to more than 16% of the company's total outstanding shares.
While it's impossible to know exactly when this short interest in Aurora skyrocketed in January, it does have all the makings of an excellent downside bet. For example, in early February, Aurora announced a number of corporate updates that signify just how much trouble the company is currently in.
Longtime CEO Terry Booth announced his retirement; Aurora indicated that it had adjusted the covenants tied to its secured debt; and the company announced plans to reduce its selling, general, and administrative (SG&A) expenses to between 40 million Canadian dollars ($30.07 million) and CA$45 million per quarter. For reference, SG&A was CA$99.9 million in Q2 2020. Aurora also wound up providing guidance for its fiscal second quarter, which would include huge writedowns.
On one hand, it's encouraging to see management recognizing and dealing with these problems that have been ignored for too long. On the other hand, Aurora Cannabis remains unprofitable, and its cash balance looks insufficient to cover an estimated CA$373.6 million in liabilities over the next 12 months, and nearly CA$1.3 billion over the next five years. Aurora, for its part, has halted construction on two large cultivation sites and plans to sell another major greenhouse to conserve capital. But the future remains decidedly uncertain for this popular marijuana stock.
Image source: Getty Images.
Tilray
Another pot stock that drew the ire of pessimists during January was British Columbia-based Tilray (NASDAQ: TLRY). The number of shares held short in Tilray skyrocketed from 7.6 million at the end of December to 10 million a month later.
One possible reason for the increased negativity could be the mid-January surge in Tilray's share price. Over a two-day stretch, the price rose by 40% despite the fact that nothing had materially changed with the company.
Speaking of what's materially important, Tilray's outlook has continued to deteriorate over the past year. Last March, CEO Brendan Kennedy announced that his company would focus future investments on the U.S. and Europe, which was an odd move to make with Canada's adult-use industry commencing sales six months prior. Having to ensure that all of the proper infrastructure is in place in these markets has increased near-term spending and stymied sales. As a result, Wall Street is looking for more than a $1-per-share loss from the company in 2020.
What's more, Tilray's push into the United States via its purchase of Manitoba Harvest may not pan out as planned. The deal was to provide Tilray with access to 16,000 retail doors throughout North America where cannabidiol (CBD) products could be sold. Unfortunately, the Food and Drug Administration's skeptical stance on CBD has substantially brought down growth projections for infused CBD products.
For the time being, this pessimism looks wholly warranted.
Image source: Getty Images.
CannTrust
Lastly, we've also seen short interest building in embattled pot stock CannTrust Holdings (NYSE: CTST). Between the end of 2019 and the end of January 2020, the number of shares held by short-sellers jumped from 11.5 million to 15 million.
Similar to Tilray, one possible reason for the increase in short interest was a significant rally in CannTrust's share price. Between Dec. 26 and Jan. 17, shares of the company rose by nearly 50%, which is a bit of a head-scratcher given CannTrust's numerous problems.
A more logical reason for pessimism to have built up is the loss of investor trust. As you may be aware, CannTrust announced in July that it had grown marijuana illicitly in five cultivation rooms at its flagship Niagara facility for a period of six months (October 2018 to March 2019). This led regulatory agency Health Canada to suspend the company's sales and cultivation licenses. Although CannTrust recently filed paperwork to reinstate its licenses at Niagara, it's far from a given.
Furthermore, CannTrust's share price is, once again, below $1 a share, and the company hasn't filed a quarterly report with the Securities and Exchange Commission since May 2019. A share price above $1 and regular income-statement filings are both required for continued listing on the New York Stock Exchange. This makes de-listing a very real possibility.
Though I do believe CannTrust can be a bad-news buy, I'm expecting things to get a bit worse before they get better.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Sean Williams owns shares of CannTrust Holdings Inc. The Motley Fool recommends CannTrust Holdings Inc. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Aurora Cannabis Perhaps it's no surprise that one of the most short-sold marijuana stocks is also one of the worst performing in the industry, Aurora Cannabis (NYSE: ACB). Canadian supply problems and high tax rates in core legalized U.S. states have wreaked havoc on the industry and caused Wall Street to reevaluate its expectations (and valuations) for cannabis stocks. Last March, CEO Brendan Kennedy announced that his company would focus future investments on the U.S. and Europe, which was an odd move to make with Canada's adult-use industry commencing sales six months prior. | Aurora Cannabis Perhaps it's no surprise that one of the most short-sold marijuana stocks is also one of the worst performing in the industry, Aurora Cannabis (NYSE: ACB). In the case of the following three pot stocks, the number of shares held short by pessimists all increased by a double-digit percentage in January. Despite its allure with millennial investors on the Robinhood investing app, the number of shares held by short-sellers surged from 171.2 million at the end of December to 191.7 million by the end of January. | Aurora Cannabis Perhaps it's no surprise that one of the most short-sold marijuana stocks is also one of the worst performing in the industry, Aurora Cannabis (NYSE: ACB). Longtime CEO Terry Booth announced his retirement; Aurora indicated that it had adjusted the covenants tied to its secured debt; and the company announced plans to reduce its selling, general, and administrative (SG&A) expenses to between 40 million Canadian dollars ($30.07 million) and CA$45 million per quarter. The number of shares held short in Tilray skyrocketed from 7.6 million at the end of December to 10 million a month later. | Aurora Cannabis Perhaps it's no surprise that one of the most short-sold marijuana stocks is also one of the worst performing in the industry, Aurora Cannabis (NYSE: ACB). Longtime CEO Terry Booth announced his retirement; Aurora indicated that it had adjusted the covenants tied to its secured debt; and the company announced plans to reduce its selling, general, and administrative (SG&A) expenses to between 40 million Canadian dollars ($30.07 million) and CA$45 million per quarter. One possible reason for the increased negativity could be the mid-January surge in Tilray's share price. |
37627.0 | 2020-02-26 00:00:00 UTC | Thanks for the Downgrade – Now I Can Recommend Aurora Stock | ACB | https://www.nasdaq.com/articles/thanks-for-the-downgrade-now-i-can-recommend-aurora-stock-2020-02-26 | nan | nan | As Aurora (NYSE:) stock hurtled towards the $1.55 price level at the start of this week, social media trading gurus are abuzz due to a prominent analystâÂÂs downgrade. Specifically, Cowen analyst Vivien Azer changed her rating on ACB from âÂÂoutperformâ to âÂÂmarket perform,â and the market responded by giving the shares a near-7% haircut.
Source: ElRoi / Shutterstock.com
Aurora stock wasnâÂÂt the only one to fall, as the entire cannabis sector was a horror show. CowenâÂÂs downgrade seemed especially untimely for ABC shareholders, though, as the price was already quite depressed.
Does all of this, then, mean itâÂÂs time to abandon ship and dump your Aurora shares?
Azer Takes Aim at Canadian Cannabis
Before assessing ACB stockâÂÂs prospects, letâÂÂs hone in on the analyst thatâÂÂs taking Aurora to task.
ItâÂÂs worth noting that Vivien Azer hasnâÂÂt always been bearish on cannabis companies, as back in January of 2019 Canadian marijuana sales would likely reach $3.1 billion CAD for the year. Evidently AzerâÂÂs expecting a moderate increase in marijuana sales going forward, as her projection for 2020 is $3.5 billion CAD.
Nonetheless, Azer sees a number of inopportune factors surrounding the broader cannabis market. One salient headwind, it seems, is a tendency for cannabis products to either be value-oriented (i.e., cheap so that it can compete with black market pot) or boutique-oriented (i.e., fancy and expensive). Thereby âÂÂcreating a bifurcation toward either value- or premium-priced flower with a glut of mid-priced inventory.âÂÂ
The Cowen analyst also cited the disappointment of CanadaâÂÂs introduction of cannabis âÂÂderivativesâ (edibles, beverages, vaping products, etc.), saying, âÂÂWhile industry challenges around doors and high quality flower supply are well understood, we now believe that the slower than expected rollout of cannabis 2.0 products will also prove as a headwind to revenues.âÂÂ
Seeing a Half-Full Glass
All in all, Azer the aforementioned issues facing the Canadian cannabis market âÂÂdo not appear to be fading as anticipatedâ and that the recent Cannabis 2.0 rollout is âÂÂlikely not the elixir that the market was hoping for.â From this standpoint, I can see why she would view the glass (or perhaps the bong in this case?) as half-empty.
Personally, IâÂÂd like to shake AzerâÂÂs hand for delivering us this extra-deep price dip in ACB stock. SheâÂÂs 100% justified in suggesting that Aurora âÂÂright-sizeâ the companyâÂÂs production capacity, which currently is estimated to be around 120,000 kilograms. In time, IâÂÂm confident that the company will adjust its supply to the demand; shareholders should understand that âÂÂright-sizingâ isnâÂÂt going to happen overnight.
I suppose I just see things differently than most folks, but I see ACB stock trading below $1.60 as a âÂÂglass half-fullâ moment. If someone had told me a year ago (when Aurora shares were nearly ten bucks apiece) that I could buy ACB at the current price, I would have been amazed and delighted.
Moreover, if the apparent catalysts are a cool-down of the Cannabis 2.0 hype (which, admittedly, was overblown last year) and a need to âÂÂright-sizeâ the supply to fit the demand, IâÂÂm okay with that. These are issues that donâÂÂt sound permanent to me, and non-permanent issues are âÂÂthe stuff that dreams are made ofâ for value investors (if youâÂÂll permit me to commandeer aàMaltese Falcon quote for my own insidious purposes).
The Takeaway on Aurora Stock
Misappropriated Bogie quotes notwithstanding, IâÂÂm prepared to counter CowenâÂÂs expert downgrade with a decidedly amateur Aurora stock upgrade. When the dust finally settles and the cannabis-derivatives supply-demand curve hopefully straightens out, Aurora shares could bounce back sharply â and you can send Cowen a heartfelt thank-you card for the deep, fleeting discount.
As of this writing, David Moadel did not hold a position in any of the aforementioned securities.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Specifically, Cowen analyst Vivien Azer changed her rating on ACB from âÂÂoutperformâ to âÂÂmarket perform,â and the market responded by giving the shares a near-7% haircut. Azer Takes Aim at Canadian Cannabis Before assessing ACB stockâÂÂs prospects, letâÂÂs hone in on the analyst thatâÂÂs taking Aurora to task. Personally, IâÂÂd like to shake AzerâÂÂs hand for delivering us this extra-deep price dip in ACB stock. | Specifically, Cowen analyst Vivien Azer changed her rating on ACB from âÂÂoutperformâ to âÂÂmarket perform,â and the market responded by giving the shares a near-7% haircut. Azer Takes Aim at Canadian Cannabis Before assessing ACB stockâÂÂs prospects, letâÂÂs hone in on the analyst thatâÂÂs taking Aurora to task. Personally, IâÂÂd like to shake AzerâÂÂs hand for delivering us this extra-deep price dip in ACB stock. | Azer Takes Aim at Canadian Cannabis Before assessing ACB stockâÂÂs prospects, letâÂÂs hone in on the analyst thatâÂÂs taking Aurora to task. Specifically, Cowen analyst Vivien Azer changed her rating on ACB from âÂÂoutperformâ to âÂÂmarket perform,â and the market responded by giving the shares a near-7% haircut. Personally, IâÂÂd like to shake AzerâÂÂs hand for delivering us this extra-deep price dip in ACB stock. | Specifically, Cowen analyst Vivien Azer changed her rating on ACB from âÂÂoutperformâ to âÂÂmarket perform,â and the market responded by giving the shares a near-7% haircut. Azer Takes Aim at Canadian Cannabis Before assessing ACB stockâÂÂs prospects, letâÂÂs hone in on the analyst thatâÂÂs taking Aurora to task. Personally, IâÂÂd like to shake AzerâÂÂs hand for delivering us this extra-deep price dip in ACB stock. |
37628.0 | 2020-02-26 00:00:00 UTC | It’s Probably Time to Consider Speculating on Aurora Stock | ACB | https://www.nasdaq.com/articles/its-probably-time-to-consider-speculating-on-aurora-stock-2020-02-26 | nan | nan | Lately some cannabis stocks are showing improvement like Canopy Growth (NYSE:) and Cronos Group (NASDAQ:). But these are really outliers. The market remains fairly rough right now. Just look at Aurora (NYSE:) stock. Since September, shares of Aurora stock have gone from $6.50 to $1.57.
Source: Shutterstock
Of course, a key reason for the grueling drop is that the Canadian market opportunity was overhyped.
Keep in mind that there have been nagging problems with the permit process to launch retail outlets. And in the meantime, black market activities have taken a toll. In other words, the Canadian authorities have proven to be far from proactive.
But the deterioration of Aurora stock has also been due to management issues. LetâÂÂs face it, the skillsets for the startup phase â which requires much risk-taking and innovationâ are usually not right for when a company starts to mature, and this is where Aurora is now. The company needs a CEO who has hands-on-experience with building strong infrastructures and how to scale products.
Interestingly enough, with CGC, weâÂÂve seen this type of leadership transition. The former CEO, Bruce Linton, was standout in aggressively building the company. But his largest investor, Constellation Brands (NYSE:), stepped in when he started to falter. The result was that STZâÂÂs executive vice president and chief financial officer David Klein was brought in.
So might we see something similar with Aurora? I think so, actually. Yes, the companyâÂÂs founder and CEO Terry Booth has departed and the interim replacement is Executive Chairman Michael Singer. For the most part, it does look like Aurora is looking for someone with a solid background in operations.
Yet Singer is not wasting any time making changes. In hisearnings call he was very clear in his goal is bringing fiscal discipline to the company. To this end, Singer has initiated layoffs and cost-cutting. The goal is to get to by $40 million to $45 million to reach EBITDA profitability by the fiscal fourth quarter of this year. He has also amended the credit facility to provide more flexibility.
Other Positives
To get Aurora back on track, there will certainly need to be more than just cost cutting. There will also need to be more growth on the top line.
And I think this could be the case for 2020. Part of this will likely come as the Canadian government allows more retail locations to emerge and cracks down on black market activities. There should also be less competition for Aurora as marginal operators shutdown.
Then there is the Cannabis 2.0 movement, which is the legalization of edibles and beverages in Canada. The market could easily be worth over $2 billion in the next couple years.
The good news for Aurora stock is that the company is positioned to benefit. HereâÂÂs what Singer said on the :
âÂÂWe began loading-in small volumes in Q2 2020 with positive market feedback from distributors and retail customers about our product quality. Those products include vapes, concentrates, gummies, chocolates, mints and cookies and they are available in markets across the country. We have selectively partnered with a variety of organizations, prioritized our resources and built the inventory to ensure that our consumers across Canada will have access to our high-quality derivative products.âÂÂ
Bottom Line on Aurora Stock
Besides Cannabis 2.0, there are other catalysts that should gin up buying for Aurora stock in the coming months.
For example, weâÂÂll likely see an announcement of a new CEO as well as improvement on the bottom line, and there is the possibility for a strategic alliance with a consumer products company. Keep in mind that Nelson Peltz, who is a renowned activist investor and has taken positions in companies like Procter & Gamble (NYSE:), Mondelez (NASDAQ:), and WendyâÂÂs (NASDAQ:), is a strategic advisor to Aurora. He could certainly be critical making key introductions.
So while the risks remain considerable, Aurora stock could be an interesting speculation.
Tom Taulli () is the author of various books on investing and technology, including Artificial Intelligence Basics, and All About Short Selling. He is also the founder of WebIPO, which was one of the first platforms for public offerings during the 1990s.ÃÂ As of this writing, he did not hold a position in any of the aforementioned securities.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | HereâÂÂs what Singer said on the : âÂÂWe began loading-in small volumes in Q2 2020 with positive market feedback from distributors and retail customers about our product quality. For example, weâÂÂll likely see an announcement of a new CEO as well as improvement on the bottom line, and there is the possibility for a strategic alliance with a consumer products company. Tom Taulli () is the author of various books on investing and technology, including Artificial Intelligence Basics, and All About Short Selling. | Just look at Aurora (NYSE:) stock. We have selectively partnered with a variety of organizations, prioritized our resources and built the inventory to ensure that our consumers across Canada will have access to our high-quality derivative products.â Bottom Line on Aurora Stock Besides Cannabis 2.0, there are other catalysts that should gin up buying for Aurora stock in the coming months. Keep in mind that Nelson Peltz, who is a renowned activist investor and has taken positions in companies like Procter & Gamble (NYSE:), Mondelez (NASDAQ:), and WendyâÂÂs (NASDAQ:), is a strategic advisor to Aurora. | The good news for Aurora stock is that the company is positioned to benefit. We have selectively partnered with a variety of organizations, prioritized our resources and built the inventory to ensure that our consumers across Canada will have access to our high-quality derivative products.â Bottom Line on Aurora Stock Besides Cannabis 2.0, there are other catalysts that should gin up buying for Aurora stock in the coming months. Keep in mind that Nelson Peltz, who is a renowned activist investor and has taken positions in companies like Procter & Gamble (NYSE:), Mondelez (NASDAQ:), and WendyâÂÂs (NASDAQ:), is a strategic advisor to Aurora. | Just look at Aurora (NYSE:) stock. Part of this will likely come as the Canadian government allows more retail locations to emerge and cracks down on black market activities. So while the risks remain considerable, Aurora stock could be an interesting speculation. |
37629.0 | 2020-02-26 00:00:00 UTC | Aurora Cannabis: Does This Signal a Long-Awaited Partnership Is Near? | ACB | https://www.nasdaq.com/articles/aurora-cannabis%3A-does-this-signal-a-long-awaited-partnership-is-near-2020-02-26 | nan | nan | Last year was supposed to when marijuana stocks put the pedal to the metal and proved to Wall Street that they were wholly deserving of their premium valuations. The stage certainly appeared set with Canada selling adult-use cannabis and on track to launch derivative pot products later in the year, and a number of U.S. states leaning in favor of legalization.
But when the curtain closed on 2019, it was a huge disappointment for most cannabis investors. Marijuana stocks ended the year mired in a nine-month downtrend that was sparked by supply issues in Canada and pricing struggles in key U.S. markets. Both factors allowed the black market to thrive and left pot stocks to fight among the scraps.
Image source: Getty Images.
Aurora Cannabis' failure to land a partnership in 2019 was a major disappointment
But these broad-based issues don't encompass everything that went wrong in 2019. For instance, cannabis partnerships didn't materialize as expected. Sure, Canopy Growth and Cronos Group snagged major equity investors, but Aurora Cannabis (NYSE: ACB), which was widely expected to land an equity investor or at worst a major derivative development partner, failed to do so.
Aurora's inability to land an equity investor was surprising on three fronts. First, the company hired billionaire activist investor Nelson Peltz as a strategic advisor in March 2019. Petlz's expertise as an activist investor has historically been among the food and beverage industry. This would seemingly make him the perfect individual to bridge the gap between cannabis and traditional consumer-packaged food and beverage companies.
Second, Aurora Cannabis was, until recently, widely considered to be the front-runner to lead in global weed production. The company's 15 cultivation farms were expected to combine for at least 625,000 kilos by the end of its fiscal 2020 (June 30, 2020), which would have been tops in the industry. Aurora also has a presence in 24 countries outside of Canada, which is tops among domestic producers.
Third, and finally, Aurora (supposedly) had discussions with major players in the food and beverage industry. In September 2018, it was reported that Coca-Cola (NYSE: KO) was in discussion with Aurora Cannabis about a potential tie-up, with the goal of creating a line of cannabidiol (CBD)-based beverages. CBD is the nonpsychoactive cannabinoid best known for its perceived medical benefits. Ultimately, though, Coca-Cola's interest in Aurora fizzled, with the two sides walking away without an equity investment or partnership. While it's unclear what caused Coca-Cola to walk away from the negotiating table, it proved highly disappointing for Aurora's shareholders who've seen this stock take an absolute beating for nearly a year.
Image source: Getty Images.
Does this board shake up suggest that a partnership is now a priority?
However, Aurora Cannabis' luck on the partnership front may soon change, as evidenced by its corporate shake up, announced in the first week of February.
The highlight of Aurora's overhaul was probably that longtime CEO Terry Booth stepped down from his lead position, or possibly that the company announced steep cost-reduction plans and new debt covenants. But buried among this plethora of news events was the announcement that the company would expand its board by bringing two new independent directors on board.
These two new directors, whose appointment investors probably glossed over, are certainly noteworthy for a few reasons. The first independent director, Lance Friedmann, has 25 combined years of experience working with Kraft Foods (now part of Kraft Heinz) and Mondelez International (NASDAQ: MDLZ). Mondelez just happens to be one of Nelson Peltz's largest holdings in his hedge fund, with Trian Fund Management owning 18.8 million shares, or 1.3% of Mondelez's outstanding shares.
The other newly appointed independent director, Michael Detlefsen, is a managing director of Pomegranate Capital Advisors. Pomegranate is "an active investor advisory firm with holdings in the branded consumer and business-to-business food sectors."
In other words, Aurora Cannabis now has two board members whose primary focus has been on food-based consumer-packaged goods (CPG), as well as Nelson Peltz as a strategic advisor, who's spent a lot of his time trying to influence the boards of food and beverage companies. It would appear that Aurora Cannabis is doing everything it can to be viewed as more appealing to food companies (hint, hint, Mondelez International), with the ultimate goal of securing an equity investment or partnership.
Image source: Getty Images.
Don't be surprised if prospective CPG partners remain leery
Unfortunately, even these new appointments may not guarantee that Aurora Cannabis lands its as-of-now elusive partner.
For one, brand-name food and beverage companies have probably seen what happened to Altria Group and Constellation Brands (NYSE: STZ) following their respective investments in Cronos Group and Canopy Growth. Both companies have seen the value of their investment decline, with Constellation taking it on the chin. You see, Canopy Growth's massive operating losses have adversely affected Constellation Brands' income statement and dragged down the Modelo and Corona beer maker's profits. This likely makes other CPG businesses gun-shy about partnerships in the still-nascent pot industry.
The other major problem here is that Aurora Cannabis is no shoo-in to survive over the long run. The company's most recent quarterly report shows $156.3 million Canadian in cash and cash equivalents, and CA$26.1 million in marketable securities. That compares with projected liabilities of CA$373.6 million over the next 12 months, and close to CA$1.3 billion over the next five years. A brand-name company that partners with Aurora could see their entire investment go up in smoke.
There's little doubt that Aurora Cannabis is angling for an equity investor or partner in the CPG space. But landing that partner will remain difficult.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Sean Williams has no position in any of the stocks mentioned. The Motley Fool recommends Constellation Brands. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Sure, Canopy Growth and Cronos Group snagged major equity investors, but Aurora Cannabis (NYSE: ACB), which was widely expected to land an equity investor or at worst a major derivative development partner, failed to do so. The stage certainly appeared set with Canada selling adult-use cannabis and on track to launch derivative pot products later in the year, and a number of U.S. states leaning in favor of legalization. The highlight of Aurora's overhaul was probably that longtime CEO Terry Booth stepped down from his lead position, or possibly that the company announced steep cost-reduction plans and new debt covenants. | Sure, Canopy Growth and Cronos Group snagged major equity investors, but Aurora Cannabis (NYSE: ACB), which was widely expected to land an equity investor or at worst a major derivative development partner, failed to do so. It would appear that Aurora Cannabis is doing everything it can to be viewed as more appealing to food companies (hint, hint, Mondelez International), with the ultimate goal of securing an equity investment or partnership. The company's most recent quarterly report shows $156.3 million Canadian in cash and cash equivalents, and CA$26.1 million in marketable securities. | Sure, Canopy Growth and Cronos Group snagged major equity investors, but Aurora Cannabis (NYSE: ACB), which was widely expected to land an equity investor or at worst a major derivative development partner, failed to do so. In other words, Aurora Cannabis now has two board members whose primary focus has been on food-based consumer-packaged goods (CPG), as well as Nelson Peltz as a strategic advisor, who's spent a lot of his time trying to influence the boards of food and beverage companies. It would appear that Aurora Cannabis is doing everything it can to be viewed as more appealing to food companies (hint, hint, Mondelez International), with the ultimate goal of securing an equity investment or partnership. | Sure, Canopy Growth and Cronos Group snagged major equity investors, but Aurora Cannabis (NYSE: ACB), which was widely expected to land an equity investor or at worst a major derivative development partner, failed to do so. Third, and finally, Aurora (supposedly) had discussions with major players in the food and beverage industry. Here's The Marijuana Stock You've Been Waiting For A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom. |
37630.0 | 2020-02-25 00:00:00 UTC | Interesting ACB Put And Call Options For April 17th | ACB | https://www.nasdaq.com/articles/interesting-acb-put-and-call-options-for-april-17th-2020-02-25 | nan | nan | Investors in Aurora Cannabis Inc (Symbol: ACB) saw new options begin trading this week, for the April 17th expiration. At Stock Options Channel, our YieldBoost formula has looked up and down the ACB options chain for the new April 17th contracts and identified one put and one call contract of particular interest.
The put contract at the $1.50 strike price has a current bid of 27 cents. If an investor was to sell-to-open that put contract, they are committing to purchase the stock at $1.50, but will also collect the premium, putting the cost basis of the shares at $1.23 (before broker commissions). To an investor already interested in purchasing shares of ACB, that could represent an attractive alternative to paying $1.52/share today.
Because the $1.50 strike represents an approximate 1% discount to the current trading price of the stock (in other words it is out-of-the-money by that percentage), there is also the possibility that the put contract would expire worthless. The current analytical data (including greeks and implied greeks) suggest the current odds of that happening are 62%. Stock Options Channel will track those odds over time to see how they change, publishing a chart of those numbers on our website under the contract detail page for this contract. Should the contract expire worthless, the premium would represent a 18.00% return on the cash commitment, or 126.45% annualized — at Stock Options Channel we call this the YieldBoost.
Below is a chart showing the trailing twelve month trading history for Aurora Cannabis Inc, and highlighting in green where the $1.50 strike is located relative to that history:
Turning to the calls side of the option chain, the call contract at the $2.00 strike price has a current bid of 10 cents. If an investor was to purchase shares of ACB stock at the current price level of $1.52/share, and then sell-to-open that call contract as a "covered call," they are committing to sell the stock at $2.00. Considering the call seller will also collect the premium, that would drive a total return (excluding dividends, if any) of 38.16% if the stock gets called away at the April 17th expiration (before broker commissions). Of course, a lot of upside could potentially be left on the table if ACB shares really soar, which is why looking at the trailing twelve month trading history for Aurora Cannabis Inc, as well as studying the business fundamentals becomes important. Below is a chart showing ACB's trailing twelve month trading history, with the $2.00 strike highlighted in red:
Considering the fact that the $2.00 strike represents an approximate 32% premium to the current trading price of the stock (in other words it is out-of-the-money by that percentage), there is also the possibility that the covered call contract would expire worthless, in which case the investor would keep both their shares of stock and the premium collected. The current analytical data (including greeks and implied greeks) suggest the current odds of that happening are 76%. On our website under the contract detail page for this contract, Stock Options Channel will track those odds over time to see how they change and publish a chart of those numbers (the trading history of the option contract will also be charted). Should the covered call contract expire worthless, the premium would represent a 6.58% boost of extra return to the investor, or 46.22% annualized, which we refer to as the YieldBoost.
The implied volatility in the put contract example is 138%, while the implied volatility in the call contract example is 102%.
Meanwhile, we calculate the actual trailing twelve month volatility (considering the last 252 trading day closing values as well as today's price of $1.52) to be 75%. For more put and call options contract ideas worth looking at, visit StockOptionsChannel.com.
Top YieldBoost Calls of the S&P 500 »
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Of course, a lot of upside could potentially be left on the table if ACB shares really soar, which is why looking at the trailing twelve month trading history for Aurora Cannabis Inc, as well as studying the business fundamentals becomes important. Below is a chart showing ACB's trailing twelve month trading history, with the $2.00 strike highlighted in red: Considering the fact that the $2.00 strike represents an approximate 32% premium to the current trading price of the stock (in other words it is out-of-the-money by that percentage), there is also the possibility that the covered call contract would expire worthless, in which case the investor would keep both their shares of stock and the premium collected. Investors in Aurora Cannabis Inc (Symbol: ACB) saw new options begin trading this week, for the April 17th expiration. | Below is a chart showing ACB's trailing twelve month trading history, with the $2.00 strike highlighted in red: Considering the fact that the $2.00 strike represents an approximate 32% premium to the current trading price of the stock (in other words it is out-of-the-money by that percentage), there is also the possibility that the covered call contract would expire worthless, in which case the investor would keep both their shares of stock and the premium collected. Investors in Aurora Cannabis Inc (Symbol: ACB) saw new options begin trading this week, for the April 17th expiration. At Stock Options Channel, our YieldBoost formula has looked up and down the ACB options chain for the new April 17th contracts and identified one put and one call contract of particular interest. | Below is a chart showing ACB's trailing twelve month trading history, with the $2.00 strike highlighted in red: Considering the fact that the $2.00 strike represents an approximate 32% premium to the current trading price of the stock (in other words it is out-of-the-money by that percentage), there is also the possibility that the covered call contract would expire worthless, in which case the investor would keep both their shares of stock and the premium collected. Investors in Aurora Cannabis Inc (Symbol: ACB) saw new options begin trading this week, for the April 17th expiration. At Stock Options Channel, our YieldBoost formula has looked up and down the ACB options chain for the new April 17th contracts and identified one put and one call contract of particular interest. | At Stock Options Channel, our YieldBoost formula has looked up and down the ACB options chain for the new April 17th contracts and identified one put and one call contract of particular interest. Below is a chart showing ACB's trailing twelve month trading history, with the $2.00 strike highlighted in red: Considering the fact that the $2.00 strike represents an approximate 32% premium to the current trading price of the stock (in other words it is out-of-the-money by that percentage), there is also the possibility that the covered call contract would expire worthless, in which case the investor would keep both their shares of stock and the premium collected. Investors in Aurora Cannabis Inc (Symbol: ACB) saw new options begin trading this week, for the April 17th expiration. |
37631.0 | 2020-02-25 00:00:00 UTC | Better Buy: Aphria vs. Constellation Brands | ACB | https://www.nasdaq.com/articles/better-buy%3A-aphria-vs.-constellation-brands-2020-02-25 | nan | nan | If you're an investor interested in profiting from the legal cannabis industry, you know there are many ways to gain exposure to this new, rapidly expanding space in your portfolio. You could buy shares of a cannabis producer like Aphria (NYSE: APHA) or invest in a company that owns a large stake in a pot company, like Constellation Brands (NYSE: STZ), which bought a $4 billion stake in Canopy Growth (NYSE: CGC) in 2018.
While Constellation Brands may be a relatively safer investment, given that it's primarily in the more stable and mature beer, wine and spirits business, Aphria has shown itself to be less risky than its cannabis-centric peers. It has reported a positive number on adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) for three straight quarters. With both companies posting positive results of late, it may not be easy determining which one is the better buy going forward. Let's take a closer look to see which stock has the edge today.
Has Constellation Brands solved its Canopy Growth problem?
Constellation Brands is best known for its Corona brand of beers but it has also made a sizable investment in cannabis producer Canopy Growth, so how the pot company is faring is a serious consideration for any investor considering buying shares of the brewer and importer.
The cannabis company's losses have been weighing on the beer maker's results over the past year. But with Canopy co-founder Bruce Linton leaving the top spot and Constellation Brands installing its former CFO, David Klein, at the helm, there are reasons for investors to hope the pot producer will soon be a much tighter ship.
Image source: Getty Images.
Canopy Growth is coming off a quarter in which it outperformed analyst expectations, posting an adjusted earnings before interest taxes depreciation and amortization (EBITDA) loss of 91.7 million Canadian dollars, compared to Wall Street's projections of an EBITDA loss of CA$110 million. Net revenue of CA$123.8 million was a 62% improvement over its second-quarter results when Canopy Growth generated CA$76.6 million in net sales and 49% better than its top line of CA$83 million in the prior-year quarter. The good news is that the company is doing a great job of growing sales, and if Klein can help improve its margins, there's hope that profitability may be in sight. But that doesn't mean the company's problems are all fixed yet.
And there's no denying that Constellation Brands needs Canopy Growth to do well in order to drive more sales growth for its top line: In its most recent quarterly results, released in January, Constellation's net sales rose by just 1.3%, from $1.97 billion to a shade below $2 billion. The trailing nine months weren't much better, with revenue up just 1.9% year over year.
It's been a rough ride for Constellation thus far as it incurred a $71.1 million loss related to its investment in Canopy Growth in Q3and that's actually an improvement from Q2 where it incurred a loss of $484 million due to the pot stock.
But Constellation knows this is a long-term investment and with the Canadian market looking stronger this year with more pot shops open, edibles now available for sale, and a new CEO in place for Canopy Growth who's focused on cost-cutting and producing a positive EBITDA figure, there's plenty of reason to be optimistic that Canopy Growth will continue to make strides toward breakeven in 2020.
Aphria is safe, but does it offer enough growth?
Aphria released its second-quarter report in January, and its bottom line landed in the red for the first time in three quarters with a net loss of CA$7.9 million. However, there were some important positives that investors could take away from the results.
First, its revenue was more than CA$120 million -- the third time in a row it has been above that number. That's more than rival Aurora Cannabis (NYSE: ACB) has earned in any quarter and prior to Q3, even Canopy Growth hadn't reached that threshold, either. While it hasn't delivered much growth quarter-over-quarter -- a situation that could be troubling to investors -- it's a good sign that it has been able to keep things stable.
One of the advantages for Aphria is that it has more diversification in its business. In its most recent earnings, the company generated CA$86 million in revenue from distribution sales, which mainly comes from CC Pharma, a pharmaceutical company based out of Germany that Aphria acquired in 2019 which distributes pharmaceutical products to 13,000 pharmacies across Europe. In total, Aphria has a footprint in 11 countries on five different continents, giving the company many opportunities for future growth. Aphria also has supply agreements with every province in Canada and is ready to take advantage of the hot new edibles market that's now open for business.
Sales growth is going to be important for Aphria this year as investors want to see stronger revenue numbers sooner rather than later. But the most recent report from Aurora Cannabis showed that Aphria's challenges aren't company-specific. When Aurora released its disappointing fiscal second-quarter results on Feb. 13, management said it expected to see "modest to no growth" for revenue in its third-quarter results.
That Aphria is generating similar sales numbers to its prior results may not be a horrible indicator for investors. The legal cannabis industry in Canada hasn't exactly been exploding, which can partly be traced to a relative scarcity of retail locations where marijuana and related products can be purchased. And as more pot shops get licensed and open their doors, revenue numbers could get a whole lot stronger for Aphria and its peers. And as long as Aphria can continue producing decent numbers, it will become a more attractive buy by default, especially as other pot stocks struggle to breakeven.
The edge goes to Constellation
Prior to Canopy Growth's most recent earnings release, Aphria likely would have been the better buy. But now that there's some positivity surrounding the industry leader -- and now that it has a new CEO looking to fine-tune operations -- there's reason to hope that things can get better soon for Canopy, and by extension Constellation Brands.
Although Canopy Growth has a tremendous growth opportunity on its own, there's also still significant risk because the cannabis industry has been very volatile. By investing in Constellation Brands, investors can benefit from the beer maker's stability while also taking advantage of the growth in the cannabis industry, effectively giving investors the best of both worlds. While Aphria is a cheaper buy, trading at just three times sales compared to 26 for Canopy, that could change in a hurry if it doesn't generate the same level of sales growth that Canopy is.
Constellation also has the advantage of being more financially sound than Aphria. While it needs Canopy Growth to inject some life into its top line, it still has a sound business that's generated more than $1.5 billion in free cash over the trailing 12 months. Aphria, meanwhile, burned through CA$269 million during its past four quarters. But with CA$497.7 million of cash and cash equivalents on its books as of Q3, the company still has plenty of cash in the bank to handle that burn rate.
Given its stronger financials, and with Canopy Growth performing better, Constellation Brands is the hands-down winner in this comparison.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
David Jagielski has no position in any of the stocks mentioned. The Motley Fool recommends Constellation Brands. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | That's more than rival Aurora Cannabis (NYSE: ACB) has earned in any quarter and prior to Q3, even Canopy Growth hadn't reached that threshold, either. While Constellation Brands may be a relatively safer investment, given that it's primarily in the more stable and mature beer, wine and spirits business, Aphria has shown itself to be less risky than its cannabis-centric peers. But with Canopy co-founder Bruce Linton leaving the top spot and Constellation Brands installing its former CFO, David Klein, at the helm, there are reasons for investors to hope the pot producer will soon be a much tighter ship. | That's more than rival Aurora Cannabis (NYSE: ACB) has earned in any quarter and prior to Q3, even Canopy Growth hadn't reached that threshold, either. Canopy Growth is coming off a quarter in which it outperformed analyst expectations, posting an adjusted earnings before interest taxes depreciation and amortization (EBITDA) loss of 91.7 million Canadian dollars, compared to Wall Street's projections of an EBITDA loss of CA$110 million. Net revenue of CA$123.8 million was a 62% improvement over its second-quarter results when Canopy Growth generated CA$76.6 million in net sales and 49% better than its top line of CA$83 million in the prior-year quarter. | That's more than rival Aurora Cannabis (NYSE: ACB) has earned in any quarter and prior to Q3, even Canopy Growth hadn't reached that threshold, either. You could buy shares of a cannabis producer like Aphria (NYSE: APHA) or invest in a company that owns a large stake in a pot company, like Constellation Brands (NYSE: STZ), which bought a $4 billion stake in Canopy Growth (NYSE: CGC) in 2018. And there's no denying that Constellation Brands needs Canopy Growth to do well in order to drive more sales growth for its top line: In its most recent quarterly results, released in January, Constellation's net sales rose by just 1.3%, from $1.97 billion to a shade below $2 billion. | That's more than rival Aurora Cannabis (NYSE: ACB) has earned in any quarter and prior to Q3, even Canopy Growth hadn't reached that threshold, either. Constellation Brands is best known for its Corona brand of beers but it has also made a sizable investment in cannabis producer Canopy Growth, so how the pot company is faring is a serious consideration for any investor considering buying shares of the brewer and importer. But Constellation knows this is a long-term investment and with the Canadian market looking stronger this year with more pot shops open, edibles now available for sale, and a new CEO in place for Canopy Growth who's focused on cost-cutting and producing a positive EBITDA figure, there's plenty of reason to be optimistic that Canopy Growth will continue to make strides toward breakeven in 2020. |
37632.0 | 2020-02-25 00:00:00 UTC | Aurora Cannabis: 3 Things That Actually Went Right in Its Latest Quarter | ACB | https://www.nasdaq.com/articles/aurora-cannabis%3A-3-things-that-actually-went-right-in-its-latest-quarter-2020-02-25 | nan | nan | Things haven't exactly gone as planned for marijuana stock investors. Following years of outperformance, pot stocks have predominantly face-planted since adult-use sales commenced in Canada in October 2018.
This underperformance has been particularly noticeable among Canadian marijuana stocks such as Aurora Cannabis (NYSE: ACB). Since mid-March of last year, the most popular pot stock has lost almost 85% of its value and around $7 billion in market cap. | This underperformance has been particularly noticeable among Canadian marijuana stocks such as Aurora Cannabis (NYSE: ACB). Following years of outperformance, pot stocks have predominantly face-planted since adult-use sales commenced in Canada in October 2018. Since mid-March of last year, the most popular pot stock has lost almost 85% of its value and around $7 billion in market cap. | This underperformance has been particularly noticeable among Canadian marijuana stocks such as Aurora Cannabis (NYSE: ACB). Things haven't exactly gone as planned for marijuana stock investors. Following years of outperformance, pot stocks have predominantly face-planted since adult-use sales commenced in Canada in October 2018. | This underperformance has been particularly noticeable among Canadian marijuana stocks such as Aurora Cannabis (NYSE: ACB). Following years of outperformance, pot stocks have predominantly face-planted since adult-use sales commenced in Canada in October 2018. Since mid-March of last year, the most popular pot stock has lost almost 85% of its value and around $7 billion in market cap. | This underperformance has been particularly noticeable among Canadian marijuana stocks such as Aurora Cannabis (NYSE: ACB). Things haven't exactly gone as planned for marijuana stock investors. Following years of outperformance, pot stocks have predominantly face-planted since adult-use sales commenced in Canada in October 2018. |
37633.0 | 2020-02-25 00:00:00 UTC | With CEO Ousted, What’s Next For Aurora Cannabis? | ACB | https://www.nasdaq.com/articles/with-ceo-ousted-whats-next-for-aurora-cannabis-2020-02-25 | nan | nan | Terry Booth Feb. 6 as CEO of Aurora Cannabis (NYSE:ACB) and Aurora stock fell 29% over several days of trading on the news. It has since recovered some of those losses, but remains well below $2.
Source: Jarretera / Shutterstock.com
It would be unfair to say the companyâÂÂs stock cratered solely because of BoothâÂÂs departure. The of its assets and the layoff of 500 employees also put investors in a selling mood.
It Will Be Hard to Find a Quality CEO
Like Bruce Linton at Canopy Growth (NYSE:), itâÂÂs never good when a person with such influence on a companyâÂÂs founding is shown the door, but if the company wants to pull itself out of the hole itâÂÂs dug for itself, the board had to go in another direction.
In January, I reflected on the idea of It wasnâÂÂt an original idea, mind you. It came from Cantor Fitzerald analyst Pablo Zuanic, who felt the Aurora management team had become bloated and needed a major shakeup, including the replacement of Booth.
I felt Booth could have stayed on as non-executive Chairman to help find his replacement. A less painful goodbye, if you will. The board, of which Booth remains, felt the band-aid had to come off quickly. Executive Chairman Michael Singer has taken over as interim CEO. It will be his job to find the right candidate, perhaps with the help of strategic advisor Nelson Peltz, and the board.
ThatâÂÂs not going to be easy.
MKM Partners analyst Bill Kirk, who has a and a $1.32 price target on Aurora stock, weighed in on the subject recently, saying âÂÂAurora will have a hard time attracting the talent necessary to instill investor confidence.âÂÂ
It isnâÂÂt hard to understand why.
Aurora finished Q2 2020 with through the first six months of the year, a 197 million CAD operating loss, 156.3 million CAD in cash, and debt of 273.3 million CAD. Aurora also has 271.1 million CAD in convertible debentures that pay 5.5% interest semi-annually.
Those arenâÂÂt the worst financials IâÂÂve ever seen from a company with a $2 billion market capitalization, but theyâÂÂre up there. Its current Altman Z-score is 0.55. Anything under 1.81 suggests that a company has a good chance of filing for bankruptcy within the next 24 months. Barring some miraculous turnaround in its revenue and operating losses, itâÂÂs only going to get worse before it gets better.
Last August, I suggested three names, including former Nike (NYSE:) CEO Mark Parker, as possible replacements for Linton. Constellation Brands (NYSE:) chose to go with one of their own, appointing CFO David Klein as CEO of Canopy Growth.ÃÂ
At least Canopy Growth had plenty of cash, allowing it to take its time finding a successor to Linton. IâÂÂm not sure Aurora has either luxury.
The Bottom Line on Aurora Stock
As I stated in January, Aurora needs Nelson Peltz to step up to the plate and help it get through this troubling period in the companyâÂÂs history. Investor confidence is at an all-time low and there doesnâÂÂt appear to be any quick fixes, other than the ones it announced on Feb. 13.
The analysts are divided about what lies ahead for Aurora. Some, like Eight CapitalâÂÂs Graeme Kreindler, is cautiously optimistic.
âÂÂ[BoothâÂÂs departure] signals the ongoing maturation of ACB and the entire sector from its entrepreneurial roots to an industry that continues to prioritize disciplined cash flow management and returns on capital,â Kreindler wrote in early February. âÂÂ[BoothâÂÂs replacement ] will have experience in managing a global business and a track record of allocating capital in strategic initiatives.âÂÂ
Others arenâÂÂt nearly as confident.
âÂÂAlthough we donâÂÂt view the departure of Mr. Booth in isolation to be a concern, after disappointing FQ1 results, increasing industry headwinds and now surprisingly muted expectations for AuroraâÂÂs remaining FY20, we have made substantial downward revisions to our model,â stated Canaccord Genuity analyst Matt Bottomley.
However, there is consensus amongst most of the analysts covering Aurora, that it needed a significant pruning to rein in costs relative to its revenue structure. That process is underway.
In the months ahead, investors will find out who BoothâÂÂs replacement is. Unlike Canopy or Cronos Group (NASDAQ:), it doesnâÂÂt have well-funded partners to lend a hand.
At best, Aurora is a speculative buy. I wouldnâÂÂt touch it until some of the questions facing the company, including finding a new CEO, are answered.
Until then, all bets are off.
Will Ashworth has written about investments full-time since 2008. Publications where heâÂÂs appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.
At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | âÂÂ[BoothâÂÂs departure] signals the ongoing maturation of ACB and the entire sector from its entrepreneurial roots to an industry that continues to prioritize disciplined cash flow management and returns on capital,â Kreindler wrote in early February. Terry Booth Feb. 6 as CEO of Aurora Cannabis (NYSE:ACB) and Aurora stock fell 29% over several days of trading on the news. It Will Be Hard to Find a Quality CEO Like Bruce Linton at Canopy Growth (NYSE:), itâÂÂs never good when a person with such influence on a companyâÂÂs founding is shown the door, but if the company wants to pull itself out of the hole itâÂÂs dug for itself, the board had to go in another direction. | Terry Booth Feb. 6 as CEO of Aurora Cannabis (NYSE:ACB) and Aurora stock fell 29% over several days of trading on the news. âÂÂ[BoothâÂÂs departure] signals the ongoing maturation of ACB and the entire sector from its entrepreneurial roots to an industry that continues to prioritize disciplined cash flow management and returns on capital,â Kreindler wrote in early February. Aurora finished Q2 2020 with through the first six months of the year, a 197 million CAD operating loss, 156.3 million CAD in cash, and debt of 273.3 million CAD. | Terry Booth Feb. 6 as CEO of Aurora Cannabis (NYSE:ACB) and Aurora stock fell 29% over several days of trading on the news. âÂÂ[BoothâÂÂs departure] signals the ongoing maturation of ACB and the entire sector from its entrepreneurial roots to an industry that continues to prioritize disciplined cash flow management and returns on capital,â Kreindler wrote in early February. MKM Partners analyst Bill Kirk, who has a and a $1.32 price target on Aurora stock, weighed in on the subject recently, saying âÂÂAurora will have a hard time attracting the talent necessary to instill investor confidence.â It isnâÂÂt hard to understand why. | Terry Booth Feb. 6 as CEO of Aurora Cannabis (NYSE:ACB) and Aurora stock fell 29% over several days of trading on the news. âÂÂ[BoothâÂÂs departure] signals the ongoing maturation of ACB and the entire sector from its entrepreneurial roots to an industry that continues to prioritize disciplined cash flow management and returns on capital,â Kreindler wrote in early February. The board, of which Booth remains, felt the band-aid had to come off quickly. |
37634.0 | 2020-02-24 00:00:00 UTC | Aurora Cannabis (ACB) Still Appears off Target With the Cannabis Market | ACB | https://www.nasdaq.com/articles/aurora-cannabis-acb-still-appears-off-target-with-the-cannabis-market-2020-02-24 | nan | nan | Along with their major reorganization announcement, Aurora Cannabis (ACB) announced plans to create a value brand called The Daily Special. A big part of avoiding the stock over the last year centered on some irrational plans with cultivation targets. The new value brand has some questionable plans while the company is still wildly building inventory levels. While the reorg plans appear logical, investors need to question the execution potential of a company with the previous Chairman and CFO still running the company.
Value Prices Too High
On the FQ2earnings call Aurora detailed a market shifting to value brands. The company lists the market share for cannabis selling for less than C$9 per gram as having grown from 2% over the Summer to 17% now. During the period, premium weed lost the majority of the market share.
Using a hockey term considering this a Canadian LP, the question is whether Aurora is actually skating to where the market is headed. HEXO (HEXO) created a value brand called “Original Stash” back over the summer with a price target of C$5 per gram and the illegal market is already down around this pricing level.
In Q4, the price for illegal weed according to Statistics Canada was already down at C$5.73 per gram while legal prices were up at C$10.30 per gram. The concept of value brand weed selling for up to C$9 per gram still appears far off target considering cannabis prices rose during Q4.
The real question is whether Aurora is willing to aggressively compete with the illegal sources and other cannabis companies like HEXO.
Too Much Inventory
The troubling part here is the levels of inventory held by Aurora following several quarters of production far in excess of sales. Even despite this issue, the company forecasts maintaining annual production of 150,000 kg, or the equivalent of 37,500 kg of production each quarter.
The company ended FQ2 with a listed inventory value of C$217 million, up from C$179 million in the prior quarter. Aurora produced around 50,000 kg in excess of production in the last two quarters alone.
For September, Aurora produced 41,436 kg of cannabis while only selling 12,463 kg. For the December quarter, the Canadian cannabis company produced 30,691 kg of cannabis while only selling 9,501 kg. Note, the amount sold declined sequentially as the company dumped less cannabis into the wholesale market.
With so much extra weed in inventory and the company still aggressively growing new weed at a cash cost below C$1 per gram, Aurora should undercut the illegal market here. The company recently reported a quarterly loss of C$80 million so the company needs some aggressive moves to capture market share while cutting costs.
With a targeted C$45 million operating expense base going forward, Aurora doesn’t need as much revenue to turn EBITDA positive.
Consensus Verdict
What does the Street make of Aurora's prospects? 1 Buy, 11 Holds and 3 Sell ratings coalesce into a Hold consensus rating. However, with an upside potential of over 30%, the stock's consensus price target stands at $2.07. (See Aurora's stock analysis on TipRanks)
Takeaway
The key investor takeaway is that Aurora Cannabis still has a Canadian market with a lot of positive catalysts to play out in 2020, but the company lacks the financial discipline for an investment. The stock trades at $1.50 for a reason and the lack of new executive leadership makes Aurora too big of a gamble to buy on any weakness. Investors should prepare for the company to struggle with the massive cuts to the operations spilling over into weak revenues.
To find good ideas for cannabis stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Along with their major reorganization announcement, Aurora Cannabis (ACB) announced plans to create a value brand called The Daily Special. The concept of value brand weed selling for up to C$9 per gram still appears far off target considering cannabis prices rose during Q4. With a targeted C$45 million operating expense base going forward, Aurora doesn’t need as much revenue to turn EBITDA positive. | Along with their major reorganization announcement, Aurora Cannabis (ACB) announced plans to create a value brand called The Daily Special. For the December quarter, the Canadian cannabis company produced 30,691 kg of cannabis while only selling 9,501 kg. (See Aurora's stock analysis on TipRanks) Takeaway The key investor takeaway is that Aurora Cannabis still has a Canadian market with a lot of positive catalysts to play out in 2020, but the company lacks the financial discipline for an investment. | Along with their major reorganization announcement, Aurora Cannabis (ACB) announced plans to create a value brand called The Daily Special. For the December quarter, the Canadian cannabis company produced 30,691 kg of cannabis while only selling 9,501 kg. With so much extra weed in inventory and the company still aggressively growing new weed at a cash cost below C$1 per gram, Aurora should undercut the illegal market here. | Along with their major reorganization announcement, Aurora Cannabis (ACB) announced plans to create a value brand called The Daily Special. The company lists the market share for cannabis selling for less than C$9 per gram as having grown from 2% over the Summer to 17% now. However, with an upside potential of over 30%, the stock's consensus price target stands at $2.07. |
37635.0 | 2020-02-24 00:00:00 UTC | NFL Owners Soften Their Stance on Marijuana Use in Latest Collective Bargaining Proposal | ACB | https://www.nasdaq.com/articles/nfl-owners-soften-their-stance-on-marijuana-use-in-latest-collective-bargaining-proposal | nan | nan | The National Football League is starting to come around on its marijuana policy. The collective bargaining agreement between the league and its players runs out at the end of next season, and the two sides are in negotiations for a new one. Among the items in the proposal that NFL owners recently submitted to players was a plan to reduce the penalties for marijuana use, and change the way that the league it tests for it.
One of the biggest changes is that the league would no longer suspend players who test positive for cannabis. In addition, the league would test fewer players, and the testing window would shrink from a period of four months to just two weeks. https://nflpaweb.blob.core.windows.net/media/Default/PDFs/CBA%20Proposal%20Fact%20Sheet%20Final.pdf
Dallas Cowboys' owner Jerry Jones has hinted in the past that there will likely be an "adjustment" in the way the league handles its drug policy with respect to marijuana use.
Image source: Getty Images.
Other sports leagues already further ahead
The NFL has been one of the harshest professional sports leagues when it comes to how it responds to players using marijuana. Canopy Growth (NYSE: CGC) has partnered with the National Hockey League (NHL) Alumni Association to research how cannabis can help former players dealing with injuries related to their athletic careers. Canopy Growth is active in the sports industry, and in October, it announced that it bought a majority stake in sports drink company Biosteel. The company intends to develop hemp-based cannabidiol (CBD) products designed for athletes.
Rival marijuana producer Aurora Cannabis (NYSE: ACB) partnered with the Ultimate Fighting Championship (UFC) in 2019 to do research on the impact that hemp-based CBD products can have on athletes in terms of improving their overall wellness and recovery times from injuries.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
David Jagielski has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Rival marijuana producer Aurora Cannabis (NYSE: ACB) partnered with the Ultimate Fighting Championship (UFC) in 2019 to do research on the impact that hemp-based CBD products can have on athletes in terms of improving their overall wellness and recovery times from injuries. https://nflpaweb.blob.core.windows.net/media/Default/PDFs/CBA%20Proposal%20Fact%20Sheet%20Final.pdf Dallas Cowboys' owner Jerry Jones has hinted in the past that there will likely be an "adjustment" in the way the league handles its drug policy with respect to marijuana use. Canopy Growth (NYSE: CGC) has partnered with the National Hockey League (NHL) Alumni Association to research how cannabis can help former players dealing with injuries related to their athletic careers. | Rival marijuana producer Aurora Cannabis (NYSE: ACB) partnered with the Ultimate Fighting Championship (UFC) in 2019 to do research on the impact that hemp-based CBD products can have on athletes in terms of improving their overall wellness and recovery times from injuries. One of the biggest changes is that the league would no longer suspend players who test positive for cannabis. Canopy Growth (NYSE: CGC) has partnered with the National Hockey League (NHL) Alumni Association to research how cannabis can help former players dealing with injuries related to their athletic careers. | Rival marijuana producer Aurora Cannabis (NYSE: ACB) partnered with the Ultimate Fighting Championship (UFC) in 2019 to do research on the impact that hemp-based CBD products can have on athletes in terms of improving their overall wellness and recovery times from injuries. Other sports leagues already further ahead The NFL has been one of the harshest professional sports leagues when it comes to how it responds to players using marijuana. Canopy Growth (NYSE: CGC) has partnered with the National Hockey League (NHL) Alumni Association to research how cannabis can help former players dealing with injuries related to their athletic careers. | Rival marijuana producer Aurora Cannabis (NYSE: ACB) partnered with the Ultimate Fighting Championship (UFC) in 2019 to do research on the impact that hemp-based CBD products can have on athletes in terms of improving their overall wellness and recovery times from injuries. The National Football League is starting to come around on its marijuana policy. One of the biggest changes is that the league would no longer suspend players who test positive for cannabis. |
37636.0 | 2020-02-24 00:00:00 UTC | Cowen Downgrades 3 Canadian Cannabis Stocks | ACB | https://www.nasdaq.com/articles/cowen-downgrades-3-canadian-cannabis-stocks-2020-02-24 | nan | nan | One of the most enthusiastic analyst teams covering the cannabis sector just dialed back some of its assumptions about the state of retail cannabis sales in Canada. On Feb. 24, Vivien Azer, the top marijuana stock analyst at Cowen, lowered the investment bank's ratings for majors Aurora Cannabis (NYSE: ACB) and Tilray (NASDAQ: TLRY), and the much-smaller Sundial Growers, from outperform to market perform.
Top analyst?
Despite disappointing sales during the first few months that adult-use recreational marijuana was fully legal in Canada, in January 2019, Azer told investors Canadian sales would probably reach CA$3.1 billion that year.
Image source: Getty Images.
A few months later, Azer was especially enthusiastic about the roads ahead of Aurora Cannabis, Tilray, and Canopy Growth (NYSE: CGC). She still maintains an outperform rating on Canopy Growth, but you might want to look for a second opinion before purchasing any of these stocks.
Health Canada's commercial ineptitude has caught Azer by surprise at least once already. During the 12 months that ended September 2019 -- the first full-year period in which Canada allowed people to buy marijuana without a prescription -- retail sales of recreational marijuana reached just CA$908 million.
Looking ahead
In 2020, Azer thinks sales of recreational plus medical cannabis will climb to a combined CA$3.5 billion, or around 13% more than she had predicted for recreational sales a year earlier.
Even if she's correct, Aurora Cannabis, Tilray, Sundial, Canopy Growth, and more than a hundred other licensed producers will be trying to divide that CA$3.5 billion pie into enough slices to feed everyone. Those four companies alone have a combined market cap of around CA$14.36 billion. Betting on their shares to perform in line with the broad market -- or better in the case of Canopy Growth -- seems like a risky position to take right now.
10 stocks we like better than Aurora Cannabis Inc.
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Aurora Cannabis Inc. wasn't one of them! That's right -- they think these 10 stocks are even better buys.
See the 10 stocks
*Stock Advisor returns as of December 1, 2019
Cory Renauer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | On Feb. 24, Vivien Azer, the top marijuana stock analyst at Cowen, lowered the investment bank's ratings for majors Aurora Cannabis (NYSE: ACB) and Tilray (NASDAQ: TLRY), and the much-smaller Sundial Growers, from outperform to market perform. A few months later, Azer was especially enthusiastic about the roads ahead of Aurora Cannabis, Tilray, and Canopy Growth (NYSE: CGC). Even if she's correct, Aurora Cannabis, Tilray, Sundial, Canopy Growth, and more than a hundred other licensed producers will be trying to divide that CA$3.5 billion pie into enough slices to feed everyone. | On Feb. 24, Vivien Azer, the top marijuana stock analyst at Cowen, lowered the investment bank's ratings for majors Aurora Cannabis (NYSE: ACB) and Tilray (NASDAQ: TLRY), and the much-smaller Sundial Growers, from outperform to market perform. A few months later, Azer was especially enthusiastic about the roads ahead of Aurora Cannabis, Tilray, and Canopy Growth (NYSE: CGC). During the 12 months that ended September 2019 -- the first full-year period in which Canada allowed people to buy marijuana without a prescription -- retail sales of recreational marijuana reached just CA$908 million. | On Feb. 24, Vivien Azer, the top marijuana stock analyst at Cowen, lowered the investment bank's ratings for majors Aurora Cannabis (NYSE: ACB) and Tilray (NASDAQ: TLRY), and the much-smaller Sundial Growers, from outperform to market perform. Looking ahead In 2020, Azer thinks sales of recreational plus medical cannabis will climb to a combined CA$3.5 billion, or around 13% more than she had predicted for recreational sales a year earlier. See the 10 stocks *Stock Advisor returns as of December 1, 2019 Cory Renauer has no position in any of the stocks mentioned. | On Feb. 24, Vivien Azer, the top marijuana stock analyst at Cowen, lowered the investment bank's ratings for majors Aurora Cannabis (NYSE: ACB) and Tilray (NASDAQ: TLRY), and the much-smaller Sundial Growers, from outperform to market perform. A few months later, Azer was especially enthusiastic about the roads ahead of Aurora Cannabis, Tilray, and Canopy Growth (NYSE: CGC). She still maintains an outperform rating on Canopy Growth, but you might want to look for a second opinion before purchasing any of these stocks. |
37637.0 | 2020-02-24 00:00:00 UTC | Investing $10,000 in Canopy Growth and Aurora Cannabis 4 Years Ago Would Be Worth This Much Today | ACB | https://www.nasdaq.com/articles/investing-%2410000-in-canopy-growth-and-aurora-cannabis-4-years-ago-would-be-worth-this-much | nan | nan | Few industries have grown as rapidly in recent years as marijuana. Between 2014 and 2018, worldwide legal weed sales more than tripled to $10.9 billion. Meanwhile, Wall Street is forecasting that global annual pot sales could hit $50 billion, at minimum, by 2030. Even with the recent growing pains the North American pot industry has contended with, this represents a healthy rate of expansion.
Although there are no shortage of marijuana stocks for investors to choose from, there's no denying that Canadian pot stocks have been among the most prominent and popular. In particular, Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC) have continually stood out from their peers as being the preferred way to play the green rush.
Image source: Getty Images.
Long-term investors in Canopy and Aurora have done exceptionally well
What you might be surprised to learn, though, is that despite being clobbered in 2019, long-term investors in both companies are still doing quite well. How well, you ask? Let's just imagine, for the sake of argument, that you were prescient enough to invest $10,000 into each of these companies exactly four years ago, as of Feb. 19 (so, Feb. 19, 2016). Here's how much that $10,000 investment would be worth now:
Aurora Cannabis: $38,430
Canopy Growth: $107,990
That's right -- even with Canopy Growth shedding more than half of its market cap since reaching its 2019 closing high in April, and Aurora Cannabis losing more than 85% of its share price since mid-March 2019, long-term investors would still be rolling in the green.
Let's not forget that these two companies are expected to be cannabis production leaders in Canada, and that they rank as the top-two Canadian growers in terms of international reach, with Aurora Cannabis having a presence in 24 countries outside of Canada, and Canopy Growth able to reach 16 countries beyond its domestic market.
But at the same time, more recent investors have not fared as well. Aurora Cannabis' shareholders who've purchased into the company on a trailing three-year basis are almost certainly underwater. The same can be said for Canopy Growth's investors who've bought into the company since the beginning of 2018.
The question is, what does the future hold for these two highly popular pot stocks?
Image source: Getty Images.
Canopy Growth's new CEO has his work cut out for him
Despite being an absolute train wreck in 2019, there's genuine hope from Wall Street that Canopy Growth's new CEO, David Klein, is going to be able to right the ship.
You see, Klein comes over having spent some time as Chief Financial Officer of Corona and Modelo beer maker Constellation Brands. As you might be aware, Constellation Brands owns a 37% stake in Canopy Growth, and also has notable representation on its board of directors. This representation played a key role in the firing of cannabis visionary co-CEO Bruce Linton in July, and is why Mark Zekulin was required to step down in December.
Klein, who carries with him quite a bit of consumer-packaged goods knowledge, has his work cut out for him. He's being tasked with tightening the belt at a company that's spent frivolously for years. In fact, share-based compensation at Canopy Growth wound up surpassing net sales in the company's fiscal second-quarter results. The good news is that Canopy's fiscal third quarter showed a clear reduction in share-based expensing and general and administrative costs.
On the other hand, Klein's lack of cannabis experience is a concern. There's little doubt that he'll be capable of cutting costs, but will he understand how best to grow Canopy with a significantly reduced budget? That's a question that remains to be answered.
Right now, Canopy Growth's $2.27 billion Canadian in cash, cash equivalents, and marketable securities is tops in the Canadian pot industry, and it'll likely help provide a downside buffer to the company's share price. Nevertheless, real bottom-line progress will be needed in fiscal 2021 if newer investors in Canopy Growth are to see green of their own.
Image source: Getty Images.
Aurora Cannabis is a dumpster fire that should be avoided
Whereas Canopy Growth's latest earnings report offered hope, Aurora Cannabis looks to have trampled any hope of a quick rebound following its fiscal second-quarter operating results.
As recently as mid-2019, Aurora Cannabis was expecting 625,000 kilos of run-rate production by the end of fiscal 2020 (June 30, 2020). As noted, it was also expected to be a major player in international markets (especially Europe).
But less than a year later, Aurora is backpedaling at an alarming pace. In order to conserve capital, Aurora Cannabis has halted construction on two of its largest grow farms (Aurora Nordic 2 and Aurora Sun), and has put a third greenhouse (Exeter) up for sale. With just six grow rooms operational at Aurora Sun, the company is probably looking at an annual run rate of 150,000 kilos by the end of June.
As for overseas markets, they've been an early stage bust. Most international markets that have legalized medical marijuana are still in the process of forming their regulations on use and imports. All the while, Aurora's overseas investments are yielding virtually no return for the company.
Things have gotten so bad that Aurora Cannabis recently made a number of amendments to its secured credit line, including reducing its access to available capital by CA$141.5 million. Right now, issuing stock and further diluting shareholders looks to be the only reasonable way Aurora Cannabis can raise cash.
In short, any investment gains with Aurora, be they short- or long-term in nature, could prove fleeting.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Sean Williams has no position in any of the stocks mentioned. The Motley Fool recommends Constellation Brands. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | In particular, Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC) have continually stood out from their peers as being the preferred way to play the green rush. This representation played a key role in the firing of cannabis visionary co-CEO Bruce Linton in July, and is why Mark Zekulin was required to step down in December. Things have gotten so bad that Aurora Cannabis recently made a number of amendments to its secured credit line, including reducing its access to available capital by CA$141.5 million. | In particular, Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC) have continually stood out from their peers as being the preferred way to play the green rush. Right now, Canopy Growth's $2.27 billion Canadian in cash, cash equivalents, and marketable securities is tops in the Canadian pot industry, and it'll likely help provide a downside buffer to the company's share price. As recently as mid-2019, Aurora Cannabis was expecting 625,000 kilos of run-rate production by the end of fiscal 2020 (June 30, 2020). | In particular, Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC) have continually stood out from their peers as being the preferred way to play the green rush. Here's how much that $10,000 investment would be worth now: Aurora Cannabis: $38,430 Canopy Growth: $107,990 That's right -- even with Canopy Growth shedding more than half of its market cap since reaching its 2019 closing high in April, and Aurora Cannabis losing more than 85% of its share price since mid-March 2019, long-term investors would still be rolling in the green. Let's not forget that these two companies are expected to be cannabis production leaders in Canada, and that they rank as the top-two Canadian growers in terms of international reach, with Aurora Cannabis having a presence in 24 countries outside of Canada, and Canopy Growth able to reach 16 countries beyond its domestic market. | In particular, Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC) have continually stood out from their peers as being the preferred way to play the green rush. Although there are no shortage of marijuana stocks for investors to choose from, there's no denying that Canadian pot stocks have been among the most prominent and popular. Here's how much that $10,000 investment would be worth now: Aurora Cannabis: $38,430 Canopy Growth: $107,990 That's right -- even with Canopy Growth shedding more than half of its market cap since reaching its 2019 closing high in April, and Aurora Cannabis losing more than 85% of its share price since mid-March 2019, long-term investors would still be rolling in the green. |
37638.0 | 2020-02-23 00:00:00 UTC | 5 Ways Cannabis Stocks Are Looking to Cut Costs | ACB | https://www.nasdaq.com/articles/5-ways-cannabis-stocks-are-looking-to-cut-costs-2020-02-23 | nan | nan | Over the long run, the cannabis industry could provide a smorgasbord of growth for investors. Having already tripled global sales between 2014 and 2018, Wall Street has weighed in and expects worldwide weed sales to catapult by another 400% to 1,800% by 2030. The wide margin in Wall Street's forecast reflects the uncertainties associated with launching a high-growth yet still-nascent industry.
Yet at the same time, near-term prospects for the industry aren't as bright. It was long suspected that not every pot stock was going to be a winner, and we've begun to see a shakeout taking place throughout North America.
In particular, financing has become a front-and-center concern, with quite a few marijuana companies scrambling to cut costs and conserve their capital. How are cannabis stocks going to reduce their expenses after a two-year period of frivolous expansion and spending? Here you'll find five ways they'll make it happen.
Image source: Getty Images.
1. Halt construction projects and/or idle cultivation facilities
Beginning last October, we began to see a number of Canadian growers halting construction projects or idling completed projects to not only better align production with consumer demand but also reduce their operating expenses.
The poster child for this is the most popular pot stock, Aurora Cannabis (NYSE: ACB). Aurora announced in November that it would halt construction on Aurora Sun in Alberta and Aurora Nordic 2 in Denmark to save up to a combined $190 million Canadian. It's also putting its 1 million-square-foot Exeter greenhouse up for sale, which was acquired during the MedReleaf acquisition. While these construction halts aren't necessarily permanent, the aggregate loss of peak annual run-rate output from these halts and the Exeter sale is around 430,000 kilos.
Aurora Cannabis' management has made it abundantly clear to its shareholders that positive EBITDA and profitability matter. But at the same time, Aurora has probably lost its spot as Canada's top grower.
Image source: Getty Images.
2. Reduce headcount
Another way cannabis stocks will be looking to reduce expenditures is by laying off workers. With a number of growers cutting back on projects or idling cultivation space, job eliminations are an expected result.
For instance, Quebec-based HEXO (NYSE: HEXO) announced in October that it would be idling cultivation at the 240,000-square-foot Niagara facility (acquired when it purchased Newstrike Brands), as well as halt cultivation for 200,000 square feet of completed space at its flagship Gatineau campus. In addition, HEXO would be eliminating 200 jobs throughout various departments. Until Aurora's very recent announcement that it was eliminating 500 jobs, HEXO's 200 layoffs were the highest in the cannabis industry.
While it is possible that some of these layoffs could prove temporary, they're very much needed in the short run to help push cannabis stocks toward profitability.
Image source: Getty Images.
3. Scale back share-based compensation
A third way pot stocks will be cutting back on expenses is by being more careful with stock-based compensation, which shows up in the expense column on income statements.
For example, former Canopy Growth (NYSE: CGC) co-CEO Bruce Linton believed that offering long-term-vesting stock to employees would be a way to improve loyalty and align their interests with that of the company. In other words, if employees did their job well and everyone executed as planned, their stock would be worth a lot of money down the line. This sounds great on paper, but share-based compensation had grown into Canopy's largest expense by the fiscal second quarter. In fact, share-based compensation topped net sales in Q2 2020.
In Canopy Growth's recently reported fiscal third-quarter results, aggregate share-based compensation was down CA$31 million from the sequential quarter, and it's expected to fall even further. With Constellation Brands' former CFO, David Klein, now at the reins, some serious belt-tightening is in order.
Image source: Getty Images.
4. Make fewer acquisitions
Investors should also expect marijuana stocks to significantly scale back their acquisition activity in 2020. Although buying other businesses can result in cost synergies (i.e., redundant operations are eliminated), it can be financially burdensome for one company to buy another, especially when we're talking about the cash-strapped pot industry.
Aurora Cannabis, for instance, has bet the farm on acquisitions. It's made more than one dozen purchases since August 2016 -- and the huge amount of goodwill on its balance sheet suggests it grossly overpaid for most of those deals. Moving forward, Aurora has to focus on existing revenue-producing assets, and there's little doubt that it'll be shying away from acquisitions.
The same can be said for Canopy Growth. With Canopy's cash, cash equivalents, and marketable securities shrinking from north of CA$4.9 billion to CA$2.27 billion in just one year, the company's management team has made clear that organic opportunities are what they're now focused on.
Image source: Getty Images.
5. Raise capital by issuing stock, rather than taking on debt
Last, but not least, don't be surprised if marijuana companies issue their own stock to raise capital, rather than going the route of issuing convertible debt or taking on traditional secured loans.
The problem is that secured loans in the highly uncertain cannabis industry are going to require repayment within two to four years (most likely). They're also going to accrue interest each year, which further hampers the ability of pot stocks to reduce their expenditures. Issuing stock, while dilutive to existing shareholders, offers a relatively fast way to raise capital.
Not to continually pick on Aurora Cannabis, but no marijuana stock has leaned more on share issuances to raise capital. Over the past 5.5 years, Aurora's share count has ballooned from 16 million shares to 1.17 billion! This share expansion has helped fuel its acquisitive activity, but it's also contributed to the company's share price hitting a three-year low.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Sean Williams has no position in any of the stocks mentioned. The Motley Fool recommends Constellation Brands and HEXO. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | The poster child for this is the most popular pot stock, Aurora Cannabis (NYSE: ACB). For example, former Canopy Growth (NYSE: CGC) co-CEO Bruce Linton believed that offering long-term-vesting stock to employees would be a way to improve loyalty and align their interests with that of the company. In Canopy Growth's recently reported fiscal third-quarter results, aggregate share-based compensation was down CA$31 million from the sequential quarter, and it's expected to fall even further. | The poster child for this is the most popular pot stock, Aurora Cannabis (NYSE: ACB). Halt construction projects and/or idle cultivation facilities Beginning last October, we began to see a number of Canadian growers halting construction projects or idling completed projects to not only better align production with consumer demand but also reduce their operating expenses. With a number of growers cutting back on projects or idling cultivation space, job eliminations are an expected result. | The poster child for this is the most popular pot stock, Aurora Cannabis (NYSE: ACB). Halt construction projects and/or idle cultivation facilities Beginning last October, we began to see a number of Canadian growers halting construction projects or idling completed projects to not only better align production with consumer demand but also reduce their operating expenses. Raise capital by issuing stock, rather than taking on debt Last, but not least, don't be surprised if marijuana companies issue their own stock to raise capital, rather than going the route of issuing convertible debt or taking on traditional secured loans. | The poster child for this is the most popular pot stock, Aurora Cannabis (NYSE: ACB). Until Aurora's very recent announcement that it was eliminating 500 jobs, HEXO's 200 layoffs were the highest in the cannabis industry. Make fewer acquisitions Investors should also expect marijuana stocks to significantly scale back their acquisition activity in 2020. |
37639.0 | 2020-02-23 00:00:00 UTC | Is the Worst Still to Come for the Cannabis Industry? | ACB | https://www.nasdaq.com/articles/is-the-worst-still-to-come-for-the-cannabis-industry-2020-02-23 | nan | nan | In 2019, the Horizons Marijuana Life Sciences ETF fell 36%. That was disappointing given how good of a year it was for the S&P 500, which went in the opposite direction, rising by 30%. It was a tough year for cannabis stocks as companies continued to turn out losses and disappointing quarterly results that investors simply grew tired of.
Unfortunately, there's little reason to believe the bleeding will stop in 2020, as there's already been no shortage of bad news this year, and there could still be more to come.
Many companies reporting layoffs and changes in upper management
When there are disappointing results and companies are not performing as well as investors and analysts expected, it usually means there will be changes. That's what's been happening with a lot of companies. MedMen Enterprises CEO Adam Bierman stepped down from his position and the company announced it would lay off more than 40% of its corporate staff.
One of the largest announcements came earlier this month when Aurora Cannabis (NYSE: ACB) announced it would be shedding 500 positions and that its CEO, Terry Booth, would be retiring. However, whether that was a voluntary decision is questionable as in a recent interview he referred to himself as "the latest carnage" in the industry. He pointed to the company's rapid growth as a possible reason behind its problems.
Image source: Getty Images.
Cannabis producer HEXO (NYSE: HEXO) didn't replace its CEO, but the company announced in October that nearly 200 people would be laid off. The company was coming off a disappointing quarter during which its losses grew from 10 million Canadian dollars a year ago to a loss of CA$57 million in Q4.
Are more headwinds in the forecast for 2020?
With share prices falling and cash burn still high, cannabis companies may continue looking for ways to cut costs. And reducing staff is an easy way to do that. The problems faced by cannabis companies today are self-inflicted, at least according to one industry insider who believes companies were too aggressive in their initial rollouts.
Lisa Campbell is the CEO of Mercari Agency, a sales and marketing agency for the cannabis industry based out of Toronto. She blames the problems on companies not prioritizing the right aspects of their business. "A lot of money was burned through and there wasn't so much focus on quality or execution because the focus was on who could send out more press releases and acquire the most companies," she told BNN Bloomberg.
She's not surprised that it's come to this, either, stating:
We all kind of saw the writing on the wall and that many companies were running out of money. It makes sense that a shakeup was inevitable. It was just a question of when.
HEXO is a prime example of a company that was too aggressive when it said it aimed to make CA$400 million in revenue in fiscal 2020. It reaffirmed the guidance in June 2019, but by October it was cutting jobs and had completely abandoned the forecast altogether. It was a quick 180-degree turn for the company. And unless those moves translate into profitability and improved financials soon, the company may feel compelled to take on even more cost-cutting measures in the hopes of breaking even.
The sad reality is HEXO may not even be in the worst position, as smaller marijuana stocks aren't faring any better and 2020 could prove to be the year many companies go under.
What should investors do?
Now, more than ever, investors need to be diligent when choosing a pot stock to invest in, if they choose to invest in the industry at all. Rather than focusing on sheer sales growth and company size, investors should carefully analyze how sound the company's business is, whether it's generating cash flow, and if it's profitable.
Those are metrics that are going to matter to big investors and that can help a stock turn things around. Operating cash flow is arguably the most important number investors should look at. Without positive cash flow, companies may have no choice but to take on more debt or issue shares, and that could put them into even more difficult situations than they're in now.
Pot stocks can't rely on growth prospects anymore to get them out of this mess, and by focusing on a company's fundamentals, investors can avoid taking on risky investments.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
David Jagielski has no position in any of the stocks mentioned. The Motley Fool recommends HEXO. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | One of the largest announcements came earlier this month when Aurora Cannabis (NYSE: ACB) announced it would be shedding 500 positions and that its CEO, Terry Booth, would be retiring. It was a tough year for cannabis stocks as companies continued to turn out losses and disappointing quarterly results that investors simply grew tired of. And unless those moves translate into profitability and improved financials soon, the company may feel compelled to take on even more cost-cutting measures in the hopes of breaking even. | One of the largest announcements came earlier this month when Aurora Cannabis (NYSE: ACB) announced it would be shedding 500 positions and that its CEO, Terry Booth, would be retiring. It was a tough year for cannabis stocks as companies continued to turn out losses and disappointing quarterly results that investors simply grew tired of. Cannabis producer HEXO (NYSE: HEXO) didn't replace its CEO, but the company announced in October that nearly 200 people would be laid off. | One of the largest announcements came earlier this month when Aurora Cannabis (NYSE: ACB) announced it would be shedding 500 positions and that its CEO, Terry Booth, would be retiring. It was a tough year for cannabis stocks as companies continued to turn out losses and disappointing quarterly results that investors simply grew tired of. The problems faced by cannabis companies today are self-inflicted, at least according to one industry insider who believes companies were too aggressive in their initial rollouts. | One of the largest announcements came earlier this month when Aurora Cannabis (NYSE: ACB) announced it would be shedding 500 positions and that its CEO, Terry Booth, would be retiring. It was a tough year for cannabis stocks as companies continued to turn out losses and disappointing quarterly results that investors simply grew tired of. What should investors do? |
37640.0 | 2020-02-22 00:00:00 UTC | 3 Underrated Pot Stocks to Buy in 2020 | ACB | https://www.nasdaq.com/articles/3-underrated-pot-stocks-to-buy-in-2020-2020-02-22 | nan | nan | It can be difficult to find good buys in the cannabis industry, especially since a lot of the focus is on industry leaders Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC). That means investors may overlook other, smaller stocks that may not get as much attention but that offer good value. Below are three stocks in that category that could be good buys this year as the industry matures.
1. Aphria
With a market cap of $1.1 million, Aphria (NYSE: APHA) is technically one of the bigger pot stocks on the market. However, the stock often doesn't benefit from the same fanfare Canopy Growth and Aurora enjoy. It trades at only three times revenue, meaning investors value it significantly less than the nine times they're willing to pay for Aurora's stock. Canopy's price-to-sales multiple of 26 is even larger.
What makes Aphria an intriguing option for investors is that with sales of 449 million Canadian dollars over the past 12 months, it generated significantly more over the past four quarters than Aurora, which posted CA$295 million. Aphria's recorded more revenue than Canopy Growth as well, which saw sales over the last 12 months of CA$385 million.
Image source: Getty Images.
In addition, with profits in two of the past three quarters, Aphria's also produced some strong results further down its income statement. Reaching breakeven has been much more elusive for both Canopy and Aurora. But despite its more stable performance, Aphria's stock has still fallen 58% over the past 12 months. While that's not as bad as Aurora's 76% fall during that time, Canopy's stock failed less with a more modest decrease of 53%.
This year could be a good one for Aphria as the edibles market in Canada could help the company produce stronger results in 2020. And with a low valuation, there's a lot of potential for the stock to rise, especially if the company is able to stay in the black.
2. iAnthus
iAnthus Capital Holdings (OTC: ITHUF) has a market cap of just over $200 million. The U.S.-based stock is a much more modest buy as it has recorded sales of only $53 million over the trailing 12 months. It trades at four times revenue, so investors have also not valued it as highly as they have the big-name pot stocks in the industry.
iAnthus claims to operate more than 30 dispensaries. Its tetrahydrocannabinol (THC) products are in more than 190 stores, while its cannabidiol (CBD) products are in over 2,300 stores across the country. The multistate operator is continuing to grow its reach -- iAnthus announced in 2020 that New Jersey had given it a cultivation permit and that Massachussetts green-lighted it to begin operating activities in the state.
With a footprint in 10 states, including hot markets like California, Florida, and Massachusetts, the company could see a lot of growth in 2020. While it's still a modestly sized pot stock today, that could change this year as it continues to rake in more sales. It may be due for a rebound, as iAnthus' share price cratered nearly 80% in the past year.
3. Green Thumb
Green Thumb Industries (OTC: GTBIF) is much further ahead in its growth than iAnthus with $161 million in sales in the past four quarters. The Chicago-based company opened its seventh store in Illinois on Jan. 31, which was its 41st in the country, as it looks to benefit from the promising opportunities in its home state, where it became legal to sell recreational pot on Jan. 1.
With analysts projecting the Illinois market could be worth as much as $2.5 billion at maturation, Green Thumb has positioned itself for success by being one of the first movers in the state.
Although profitability has been a challenge for Green Thumb, in its most recent quarterly results, released on Nov. 20, the company did achieve positive adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $14.1 million. And the company's CEO, Ben Kovler, knows the importance of having strong financials to facilitate its growth, stating in the earnings release, "Critical to our ongoing success is a strong balance sheet that provides us with ample liquidity and financial flexibility to support our growth plans."
Green Thumb isn't as cheap as the other stocks on this list, trading at more than 11 times its sales, but that could quickly change as the company benefits from significant sales growth in 2020 now that it's operating in 12 states.
The company plans to release its full-year results for 2019 on March 26. Over the past 12 months, its share price is down 37%.
Which is the better buy today?
The three companies listed above have some terrific opportunities to grow in 2020. However, with the U.S. market being significantly larger than the Canadian one and Green Thumb already owning a significant presence in many major markets, the company looks to be the marijuana stock with the most potential to benefit.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
David Jagielski has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | It can be difficult to find good buys in the cannabis industry, especially since a lot of the focus is on industry leaders Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC). The Chicago-based company opened its seventh store in Illinois on Jan. 31, which was its 41st in the country, as it looks to benefit from the promising opportunities in its home state, where it became legal to sell recreational pot on Jan. 1. Although profitability has been a challenge for Green Thumb, in its most recent quarterly results, released on Nov. 20, the company did achieve positive adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $14.1 million. | It can be difficult to find good buys in the cannabis industry, especially since a lot of the focus is on industry leaders Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC). What makes Aphria an intriguing option for investors is that with sales of 449 million Canadian dollars over the past 12 months, it generated significantly more over the past four quarters than Aurora, which posted CA$295 million. Green Thumb Green Thumb Industries (OTC: GTBIF) is much further ahead in its growth than iAnthus with $161 million in sales in the past four quarters. | It can be difficult to find good buys in the cannabis industry, especially since a lot of the focus is on industry leaders Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC). What makes Aphria an intriguing option for investors is that with sales of 449 million Canadian dollars over the past 12 months, it generated significantly more over the past four quarters than Aurora, which posted CA$295 million. Green Thumb isn't as cheap as the other stocks on this list, trading at more than 11 times its sales, but that could quickly change as the company benefits from significant sales growth in 2020 now that it's operating in 12 states. | It can be difficult to find good buys in the cannabis industry, especially since a lot of the focus is on industry leaders Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC). Aphria's recorded more revenue than Canopy Growth as well, which saw sales over the last 12 months of CA$385 million. Green Thumb isn't as cheap as the other stocks on this list, trading at more than 11 times its sales, but that could quickly change as the company benefits from significant sales growth in 2020 now that it's operating in 12 states. |
37641.0 | 2020-02-22 00:00:00 UTC | The Canadian Marijuana Industry Has a Surprising $1 Billion Problem | ACB | https://www.nasdaq.com/articles/the-canadian-marijuana-industry-has-a-surprising-%241-billion-problem-2020-02-22 | nan | nan | In case you haven't noticed, the North American cannabis industry has been a borderline mess in recent months. To our north, Canada has been contending with regulatory-based supply issues that have created shortages or bottlenecks. Meanwhile, in the U.S., high tax rates, and to a lesser degree supply issues, have stymied legal-channel sales. No matter the problem, it's opened the door for black-market producers to thrive.
But this isn't all. Individually, financing remains a serious concern for a number of cannabis stocks, as does investor trust following a number of breaches of that trust in 2019. Goodwill has also become a prevailing issue for a handful of marijuana companies.
Unfortunately, there's yet another balance sheet statistic to add to the worry column, at least for Canadian growers: inventory.
Image source: Getty Images.
Cannabis inventory levels are rising in Canada
Generally speaking, building up inventory has been viewed as a positive thing for the Canadian pot industry. The expectation has been that consumer demand would ramp up for a couple of years, with Canadian growers benefiting from the ability to also export their product to overseas markets. In effect, inventory levels (represented in dollar amounts on balance sheets) would eventually balance out as growers find a healthy equilibrium between supply and demand.
But few folks could have foreseen just how slow the ramp-up in sales has been domestically for Canadian pot stocks. First, Health Canada was slow to approve cultivation and sales licensing applications, which led to supply shortages when adult-use sales commenced in October 2018. Then, last year, Health Canada delayed the launch of higher-margin derivatives by two months. A number of these alternative consumptions options are still not on dispensary shelves in Canada.
Regulatory issues with certain provinces are also to blame. Ontario, the country's most populous province, had a mere 24 dispensaries open at the one-year anniversary mark of adult-use weed sales commencing. For context, that's one retail store for every 604,000 people in the province, and it's created supply bottlenecks galore in the region. All of these factors have made illicit cannabis attractive with consumers, and it's caused legal-channel marijuana inventory to build to potentially dangerous levels.
Image source: Getty Images.
Canopy Growth could be facing substantive inventory writedowns...
Earlier this week, MKM Partners' covering analyst Bill Kirk recognized this inventory issue when putting out a research note that left Canopy Growth's (NYSE: CGC) rating of neutral unchanged, but reduced his firm's price target on the company to $21 Canadian ($15.85) from CA$23.
Kirk noted that Canopy's production has outpaced what the company has sold since Dec. 31, 2017, by 115,000 kilos. By comparison, run-rate demand for the entire Canadian market has only been approximately 180,000 kilos per year. Said Kirk:
On an annual basis, the entire legal market is ~ 180,000 kgs (run rate), suggesting Canopy carries > 50% of industry wide needs for the year (some may be CBD inventory in U.S.). Assuming Canopy ceased all growing operations AND maintained current market share, it would take ~ 2.5 years to sell this product in Canada.
Furthermore, Kirk believes this buildup in inventory isn't finished. He and his team believe Canopy may have no choice but to either get more price-competitive with its product or risk destroying or writing down the value of some of its inventoried cannabis.
Image source: Getty Images.
... But so might the entire Canadian marijuana industry
The thing is, Canopy Growth may not be alone. We've witnessed inventory levels rising pretty significantly across the board in the Canadian cannabis space. Here's a rundown of the latest inventory figures from some of the most prominent growers to our north:
Canopy Growth: CA$622.6 million
Aurora Cannabis (NYSE: ACB): CA$205.5 million
Aphria: CA$152.2 million
Tilray: CA$146.4 million
OrganiGram Holdings: CA$101.9 million
HEXO (NYSE: HEXO): CA$83.9 million
Cronos Group: CA$52.9 million
Auxly Cannabis Group: CA$48.1 million
Mind you, this list doesn't include a number of mid-tier, small, and privately held growers. Even so, just these eight growers account for CA$1.41 billion in cannabis inventory on their balance sheets, which translates into $1.07 billion U.S.
For context, Canadians spent about CA$1 billion ($755 million) on legal marijuana in the first trailing 12 months since sales commenced on Oct. 17, 2018. This suggests that there might be enough inventory in the pipeline right now, inclusive of all smaller and privately held cultivators, to sustain consumers for the next two years without having to grow a single plant. That's terrible news if you're a Canadian pot stock investor and hoping for improved margins.
Image source: Getty Images.
Can cultivators cut output fast enough?
Although we've witnessed a number of cannabis stocks reducing their expenditures in recent months to conserve cash, these cutbacks may just as much entail the need to lower production in order to limit inventory levels.
Aurora Cannabis, for example, has halted construction on two of its largest grow farms, and recently announced plans to sell its Exeter greenhouse, which was expected to eventually be retrofit to become another key production source. In total, Aurora has shed around 430,000 kilos of peak annual run-rate output in just the past four months.
The same can be said for HEXO, which announced that it would completely idle the Niagara facility and roughly 200,000 square feet of cultivation space at its flagship Gatineau campus. Idling this growing space not only conserves capital, but it'll likely reduce HEXO's peak annual output by up to one third.
The question is, can Canadian growers cut production fast enough to ensure that inventory levels don't get out of hand and require adjustments or writedowns? To be honest, I'm not sure they can. What we do know is that without much of an export presence, at least for the time being, Canadian pot stocks are reliant on provinces like Ontario to fix their problems. This means Canadian inventory levels could get a lot worse before they begin to improve.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Sean Williams has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends OrganiGram Holdings. The Motley Fool recommends Auxly Cannabis Group and HEXO. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Here's a rundown of the latest inventory figures from some of the most prominent growers to our north: Canopy Growth: CA$622.6 million Aurora Cannabis (NYSE: ACB): CA$205.5 million Aphria: CA$152.2 million Tilray: CA$146.4 million OrganiGram Holdings: CA$101.9 million HEXO (NYSE: HEXO): CA$83.9 million Cronos Group: CA$52.9 million Auxly Cannabis Group: CA$48.1 million Mind you, this list doesn't include a number of mid-tier, small, and privately held growers. Earlier this week, MKM Partners' covering analyst Bill Kirk recognized this inventory issue when putting out a research note that left Canopy Growth's (NYSE: CGC) rating of neutral unchanged, but reduced his firm's price target on the company to $21 Canadian ($15.85) from CA$23. Although we've witnessed a number of cannabis stocks reducing their expenditures in recent months to conserve cash, these cutbacks may just as much entail the need to lower production in order to limit inventory levels. | Here's a rundown of the latest inventory figures from some of the most prominent growers to our north: Canopy Growth: CA$622.6 million Aurora Cannabis (NYSE: ACB): CA$205.5 million Aphria: CA$152.2 million Tilray: CA$146.4 million OrganiGram Holdings: CA$101.9 million HEXO (NYSE: HEXO): CA$83.9 million Cronos Group: CA$52.9 million Auxly Cannabis Group: CA$48.1 million Mind you, this list doesn't include a number of mid-tier, small, and privately held growers. Cannabis inventory levels are rising in Canada Generally speaking, building up inventory has been viewed as a positive thing for the Canadian pot industry. Even so, just these eight growers account for CA$1.41 billion in cannabis inventory on their balance sheets, which translates into $1.07 billion U.S. For context, Canadians spent about CA$1 billion ($755 million) on legal marijuana in the first trailing 12 months since sales commenced on Oct. 17, 2018. | Here's a rundown of the latest inventory figures from some of the most prominent growers to our north: Canopy Growth: CA$622.6 million Aurora Cannabis (NYSE: ACB): CA$205.5 million Aphria: CA$152.2 million Tilray: CA$146.4 million OrganiGram Holdings: CA$101.9 million HEXO (NYSE: HEXO): CA$83.9 million Cronos Group: CA$52.9 million Auxly Cannabis Group: CA$48.1 million Mind you, this list doesn't include a number of mid-tier, small, and privately held growers. Cannabis inventory levels are rising in Canada Generally speaking, building up inventory has been viewed as a positive thing for the Canadian pot industry. Even so, just these eight growers account for CA$1.41 billion in cannabis inventory on their balance sheets, which translates into $1.07 billion U.S. For context, Canadians spent about CA$1 billion ($755 million) on legal marijuana in the first trailing 12 months since sales commenced on Oct. 17, 2018. | Here's a rundown of the latest inventory figures from some of the most prominent growers to our north: Canopy Growth: CA$622.6 million Aurora Cannabis (NYSE: ACB): CA$205.5 million Aphria: CA$152.2 million Tilray: CA$146.4 million OrganiGram Holdings: CA$101.9 million HEXO (NYSE: HEXO): CA$83.9 million Cronos Group: CA$52.9 million Auxly Cannabis Group: CA$48.1 million Mind you, this list doesn't include a number of mid-tier, small, and privately held growers. Cannabis inventory levels are rising in Canada Generally speaking, building up inventory has been viewed as a positive thing for the Canadian pot industry. First, Health Canada was slow to approve cultivation and sales licensing applications, which led to supply shortages when adult-use sales commenced in October 2018. |
37642.0 | 2020-02-21 00:00:00 UTC | Is Aurora Cannabis Stock a Buy? | ACB | https://www.nasdaq.com/articles/is-aurora-cannabis-stock-a-buy-2020-02-21 | nan | nan | Nothing seems to be going right for Aurora Cannabis (NYSE: ACB). Last year, the Canadian pot grower's shares plunged by 56.5%, and while the cannabis industry as a whole performed poorly, Aurora's performance was bad even by that less-than-flattering standard. More recently, Aurora Cannabis announced that its founder and CEO, Terry Booth, would be stepping down. The company also announced it was eliminating 500 employees -- including about 25% of its corporate positions -- in an attempt to cut costs.
Furthermore, Aurora's most recent financial results failed to reassure investors that the future is looking bright. The company's total net revenue of 56 million Canadian dollars represented a 26% sequential decrease, and Aurora recorded a net loss of more than CA$1.3 billion.
Amid all these troubles, Aurora's shares are worth a mere $1.66, but a cheap price tag doesn't necessarily make for a cheap stock. With that in mind, let's dig in a little deeper and find out whether Aurora Cannabis is a stock worth buying right now.
Image source: Getty Images.
The buy thesis
In my view, there are two main reasons to consider buying shares of Aurora. First, there's the company's position in the Canadian market. Aurora boasts supply agreements with nine Canadian provinces and territories, and it has one of the highest projected peak production capacities.
These factors could help Aurora deliver better financial results in its domestic market. The province of Ontario -- the largest by population -- will be opening up more cannabis stores this year, which should lead to a more favorable retail environment from which cannabis companies will be able to benefit. The market for cannabis derivative products opened on Oct. 17, 2019, and Aurora is looking to profit from this opportunity as well.
The company has already introduced several derivative products to be sold in legally licensed retail cannabis stores, including "vapes, concentrates, gummies, chocolates, mints and cookies." Given that these products tend to carry higher margins than dried cannabis products -- and given Aurora's footprints in its domestic market -- the company could benefit immensely from the cannabis derivative market.
The second reason to consider buying shares of Aurora is the company's international presence. The pot grower has assets in about two dozen countries around the world, and Aurora claims to be "positioned to capitalize on nascent markets." If marijuana laws around the world become less restrictive -- as the company hopes they will -- Aurora could be one of the big winners.
The avoid thesis
There are several reasons why it might be best to stay away from Aurora Cannabis. First, despite its seemingly good position in the Canadian market, Aurora has yet to deliver consistently strong financial results. The company's strategy is clearly not working so far. Second, Aurora pursued an aggressive growth strategy in its early days, and the pot grower relied heavily on dilutive forms of financing such as convertible notes and warrants. This could lead to Aurora's outstanding share count ballooning in the future, thus diluting existing shares.
Furthermore, thanks to a boatload of expensive acquisitions, Aurora's balance sheet has about $2.4 billion in goodwill. This much goodwill on the company's balance sheet could lead to writedowns in the future, which could have a negative effect on Aurora's bottom line. Note that Aurora recently announced a writedown of goodwill "in the range of CA$740 million to CA$775 million." However, this could only be the beginning.
The verdict
Given the troubles it has encountered over the past six months or so, Aurora is probably best avoided at the moment. This is especially true given the company's share dilution problems, as well as the abnormal amount of goodwill on its balance sheet -- problems that will keep plaguing Aurora for a while. Sure, the company could benefit from a more favorable retail environment in Canada, and from the cannabis derivative market, but until Aurora manages to deliver consistently good financial results, it isn't worth buying its shares.
10 stocks we like better than Aurora Cannabis Inc.
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Aurora Cannabis Inc. wasn't one of them! That's right -- they think these 10 stocks are even better buys.
See the 10 stocks
*Stock Advisor returns as of December 1, 2019
Prosper Junior Bakiny owns shares of Aurora Cannabis Inc. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Nothing seems to be going right for Aurora Cannabis (NYSE: ACB). The company has already introduced several derivative products to be sold in legally licensed retail cannabis stores, including "vapes, concentrates, gummies, chocolates, mints and cookies." Second, Aurora pursued an aggressive growth strategy in its early days, and the pot grower relied heavily on dilutive forms of financing such as convertible notes and warrants. | Nothing seems to be going right for Aurora Cannabis (NYSE: ACB). The province of Ontario -- the largest by population -- will be opening up more cannabis stores this year, which should lead to a more favorable retail environment from which cannabis companies will be able to benefit. First, despite its seemingly good position in the Canadian market, Aurora has yet to deliver consistently strong financial results. | Nothing seems to be going right for Aurora Cannabis (NYSE: ACB). Given that these products tend to carry higher margins than dried cannabis products -- and given Aurora's footprints in its domestic market -- the company could benefit immensely from the cannabis derivative market. Sure, the company could benefit from a more favorable retail environment in Canada, and from the cannabis derivative market, but until Aurora manages to deliver consistently good financial results, it isn't worth buying its shares. | Nothing seems to be going right for Aurora Cannabis (NYSE: ACB). First, there's the company's position in the Canadian market. Sure, the company could benefit from a more favorable retail environment in Canada, and from the cannabis derivative market, but until Aurora manages to deliver consistently good financial results, it isn't worth buying its shares. |
37643.0 | 2020-02-21 00:00:00 UTC | Aurora Cannabis Spinoff Cancels Merger With Hemp Company | ACB | https://www.nasdaq.com/articles/aurora-cannabis-spinoff-cancels-merger-with-hemp-company-2020-02-21 | nan | nan | Australis Capital, an investment company that was spun off in 2018 from cannabis industry major Aurora Cannabis (NYSE: ACB), has put the kibosh on a planned business tie-up. Australis announced this week that it has cancelled its previously announced merger with hemp products producer Folium Biosciences.
The company said in a press release that it "recently discovered new relevant information with regard to Folium and, on that basis, [Australis] has decided to not proceed with the merger." It did not elaborate.
Image source: Getty Images.
The Australis-Folium deal was announced last December, and it was to take the form of a reverse merger. Under its terms, the two companies would exchange shares (in the case of Australis) and membership units (Folium) to create a new entity. This was to inherit the name Folium Biosciences, with the acquired party holding an estimated 89% of shares in the combination.
At the time, Australis pledged that it would provide details of Folium's financials.
Hemp is seen by numerous analysts and investors to be a good business opportunity in the U.S. The plant produces minimal amounts of Delta-9 tetrahydrocannabinol -- THC, the compound that gets a user high -- compared to its relative, cannabis. However, it produces far higher levels of cannabidiol (CBD), which is purported to have medicinal properties. Hemp-derived products were legalized in the U.S. with the passage of the 2018 Farm Bill.
Australis was created by Canada-based marijuana vertical Aurora to take advantage of cannabis industry investment opportunities in the U.S. As marijuana remains illegal at the federal level in this country, however, Australis stock -- like that of Aurora Cannabis -- is listed in Canada, even though the company is headquartered in Las Vegas.
On Thursday, Aurora shares closed down by nearly 2%.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Australis Capital, an investment company that was spun off in 2018 from cannabis industry major Aurora Cannabis (NYSE: ACB), has put the kibosh on a planned business tie-up. The company said in a press release that it "recently discovered new relevant information with regard to Folium and, on that basis, [Australis] has decided to not proceed with the merger." The plant produces minimal amounts of Delta-9 tetrahydrocannabinol -- THC, the compound that gets a user high -- compared to its relative, cannabis. | Australis Capital, an investment company that was spun off in 2018 from cannabis industry major Aurora Cannabis (NYSE: ACB), has put the kibosh on a planned business tie-up. Australis announced this week that it has cancelled its previously announced merger with hemp products producer Folium Biosciences. Australis was created by Canada-based marijuana vertical Aurora to take advantage of cannabis industry investment opportunities in the U.S. As marijuana remains illegal at the federal level in this country, however, Australis stock -- like that of Aurora Cannabis -- is listed in Canada, even though the company is headquartered in Las Vegas. | Australis Capital, an investment company that was spun off in 2018 from cannabis industry major Aurora Cannabis (NYSE: ACB), has put the kibosh on a planned business tie-up. Australis announced this week that it has cancelled its previously announced merger with hemp products producer Folium Biosciences. Australis was created by Canada-based marijuana vertical Aurora to take advantage of cannabis industry investment opportunities in the U.S. As marijuana remains illegal at the federal level in this country, however, Australis stock -- like that of Aurora Cannabis -- is listed in Canada, even though the company is headquartered in Las Vegas. | Australis Capital, an investment company that was spun off in 2018 from cannabis industry major Aurora Cannabis (NYSE: ACB), has put the kibosh on a planned business tie-up. Australis announced this week that it has cancelled its previously announced merger with hemp products producer Folium Biosciences. Australis was created by Canada-based marijuana vertical Aurora to take advantage of cannabis industry investment opportunities in the U.S. As marijuana remains illegal at the federal level in this country, however, Australis stock -- like that of Aurora Cannabis -- is listed in Canada, even though the company is headquartered in Las Vegas. |
37644.0 | 2020-02-21 00:00:00 UTC | Surprise! Billionaire Money Managers Bought These 4 Pot Stocks in the Fourth Quarter | ACB | https://www.nasdaq.com/articles/surprise-billionaire-money-managers-bought-these-4-pot-stocks-in-the-fourth-quarter-2020 | nan | nan | As you're probably aware, marijuana stocks had an awful 2019. Though last year was supposed to be when cannabis stocks proved to Wall Street that they deserved premium valuations, supply issues in Canada and high tax rates in select U.S. markets derailed these plans. Instead, most pot stocks lost money as the black market continued to thrive throughout North America.
But what you might be surprised to learn is that, in spite of these struggles, big-time money managers were buyers of cannabis stocks during the fourth quarter.
Image source: Getty Images.
No joke: Money managers (even billionaires) bought cannabis stocks in Q4
Every quarter, asset management firms with more than $100 million under management are required to file Form 13F with the Securities and Exchange Commission. Form 13F provides an under-the-hood look at what the brightest minds on Wall Street were buying and selling in the preceding quarter. This past weekend marked the deadline for money managers to file Form 13F for the fourth quarter.
What really stood out, courtesy of data provided by 13F aggregator WhaleWisdom.com, is that four pot stocks saw a significant uptick in institutional ownership, at least among 13F filers. Between the end of the third quarter and the end of the fourth quarter, the amount of shares held by 13F filers in the following four marijuana stocks increased by a double-digit percentage:
Aurora Cannabis (NYSE: ACB): +16.6%
Cronos Group (NASDAQ: CRON): +22.5%
HEXO (NYSE: HEXO): +26.1%
Tilray (NASDAQ: TLRY): +21.2%
What's more, each of these pot stocks saw buying from billionaire money managers. Ken Griffin's Citadel Advisors opened a position in or added to all four of these cannabis stocks, with the largest addition (on a share basis) going to Aurora Cannabis. Griffin's Citadel purchased 2.86 million shares of Aurora in Q4, thereby pushing its total holdings in the company up to 3.17 million shares.
Furthermore, billionaire Jim Simons' Renaissance Technologies acquired nearly 1.4 million shares of HEXO during the fourth quarter, pushing its holding in the stock to about 1.43 million shares.
Image source: Getty Images.
Billionaire money managers are probably going to regret buying these four pot stocks
While money managers' optimism looks to be a positive for this downtrodden industry, I wouldn't discount the possibility that these asset managers could be proven terribly wrong.
For one, none of these four cannabis stocks are anywhere near profitability. Last week, Aurora Cannabis reported its highly anticipated fiscal second-quarter results, which featured a 119.6 million Canadian dollars operating loss. Mind you, this included a CA$7.1 million fair value adjustment in the company's favor. Meanwhile, HEXO's management team has suggested that the company would need to earn 20% of national market share to become profitable on a recurring basis. That's a seemingly impossible task given domestic supply issues and industrywide cash constraints.
Speaking of cash constraints, only Cronos Group isn't seemingly in dire need of capital to execute on its long-term strategy. Cronos Group netted $1.8 billion (that's U.S.) in March 2019 via an equity investment from Altria Group. It still had more than $1.5 billion at its disposal as of its most recent quarter. Comparatively, HEXO has raised approximately CA$100 million from a combination of common stock offerings and a convertible note offering since October, while Tilray will likely look to do the same with convertible offerings. Aurora Cannabis' finances are also clearly in question, according to a couple of Wall Street analysts.
This quartet of cannabis stocks has also done a very poor job of evaluating and pricing the businesses they've acquired. While it's not uncommon for some level of goodwill to be accounted for following an acquisition, cannabis stock balance sheet have been drowning in goodwill of late. Aurora Cannabis wrote down CA$762.2 million in goodwill in its most recent quarter, and I suspect still has plenty of impairments to follow. In the meantime, a little over half the value of Tilray's $316 million purchase (that's U.S.) of food and hemp products company Manitoba Harvest wound up being recognized as goodwill. The premiums paid for early-stage acquisitions are unlikely to be recouped, which means writedowns could become standard practice for pot stocks in 2020.
Image source: Getty Images.
Another problem with most of this quartet is that Wall Street and investors have lost faith in management. Aurora's longtime CEO, Terry Booth, announced his resignation (and retirement) just over three weeks ago following Aurora's numerous struggles. Then there's HEXO's Sebastien St-Louis, who's struggled to meet virtually all of the goals laid out by the company's management team. Something similar can be said for Tilray CEO Brendan Kennedy, who decided to retool his company's strategy out of the blue in March 2019.
Lastly, there are external factors that need to be accounted for. As an example, Ontario is still in the process of initially vetting dispensary licensing applications. This means that while the number of open retail locations in Canada's most populous province should rise significantly in 2020, it's still going to take some time before we witness significant sell-through for cannabis stocks. It should be noted that most of these pot stocks are on the defensive, with Aurora halting construction at two of its largest grow farms, HEXO idling about a third of its peak production, and Cronos Group repurposing some of its growing space at its only decently sized cultivation facility (Peace Naturals).
In short, billionaire money managers hoping for some green may wind up sorely disappointed.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Sean Williams has no position in any of the stocks mentioned. The Motley Fool recommends HEXO. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Between the end of the third quarter and the end of the fourth quarter, the amount of shares held by 13F filers in the following four marijuana stocks increased by a double-digit percentage: Aurora Cannabis (NYSE: ACB): +16.6% Cronos Group (NASDAQ: CRON): +22.5% Though last year was supposed to be when cannabis stocks proved to Wall Street that they deserved premium valuations, supply issues in Canada and high tax rates in select U.S. markets derailed these plans. Last week, Aurora Cannabis reported its highly anticipated fiscal second-quarter results, which featured a 119.6 million Canadian dollars operating loss. | Between the end of the third quarter and the end of the fourth quarter, the amount of shares held by 13F filers in the following four marijuana stocks increased by a double-digit percentage: Aurora Cannabis (NYSE: ACB): +16.6% Cronos Group (NASDAQ: CRON): +22.5% No joke: Money managers (even billionaires) bought cannabis stocks in Q4 Every quarter, asset management firms with more than $100 million under management are required to file Form 13F with the Securities and Exchange Commission. Griffin's Citadel purchased 2.86 million shares of Aurora in Q4, thereby pushing its total holdings in the company up to 3.17 million shares. | Between the end of the third quarter and the end of the fourth quarter, the amount of shares held by 13F filers in the following four marijuana stocks increased by a double-digit percentage: Aurora Cannabis (NYSE: ACB): +16.6% Cronos Group (NASDAQ: CRON): +22.5% No joke: Money managers (even billionaires) bought cannabis stocks in Q4 Every quarter, asset management firms with more than $100 million under management are required to file Form 13F with the Securities and Exchange Commission. Billionaire money managers are probably going to regret buying these four pot stocks While money managers' optimism looks to be a positive for this downtrodden industry, I wouldn't discount the possibility that these asset managers could be proven terribly wrong. | Between the end of the third quarter and the end of the fourth quarter, the amount of shares held by 13F filers in the following four marijuana stocks increased by a double-digit percentage: Aurora Cannabis (NYSE: ACB): +16.6% Cronos Group (NASDAQ: CRON): +22.5% But what you might be surprised to learn is that, in spite of these struggles, big-time money managers were buyers of cannabis stocks during the fourth quarter. Cronos Group netted $1.8 billion (that's U.S.) in March 2019 via an equity investment from Altria Group. |
37645.0 | 2020-02-20 00:00:00 UTC | The 4 Biggest Cannabis Stock Catalysts in 2020 | ACB | https://www.nasdaq.com/articles/the-4-biggest-cannabis-stock-catalysts-in-2020-2020-02-20 | nan | nan | Putting aside the fact that 2019 was not a good year for cannabis stocks, we've witnessed a lot of history being made in recent years. In 2018, Canada became the first industrialized country in the modern era to green-light recreational marijuana. This was followed in 2019 by Illinois becoming the first state to legalize adult-use consumption and sales entirely at the legislative level. And, rest assured, 2020 will be full of catalysts for the pot industry.
The question, though, is what those catalysts might be. As we look out at the remaining 10 months and change for 2020, the following four catalysts could help make or break cannabis stocks.
Image source: Getty Images.
1. The buildout of significant retail operations in Ontario
To begin with, Ontario, Canada's most populous province, is finally beginning to address the supply bottlenecks that have plagued the region since day one of legalization (Oct. 17, 2018). Ontario, which is home to nearly 40% of Canada's residents, had been utilizing a lottery system to award retail licenses until the end of 2019. This system only allowed 24 dispensaries to open by the one-year anniversary of recreational pot sales. That's a problem when Ontario's population could probably support as many as 1,000 cannabis retail locations.
Moving forward, Ontario has chosen a more traditional application vetting process. Beginning in April, we should see at least 20 dispensary license applications approved each month, which is forecast to increase Ontario's licensed retail presence tenfold by the end of 2020. This should reduce some of the province's supply issues and help grow legal-channel pot sales.
While Ontario is a pivotal cog for all of Canada's marijuana growers, it's particularly important to those that call the province home. Ontario-based Aphria (NYSE: APHA), for example, is slated to be perhaps the second-largest producer in Canada, with 255,000 kilos in peak annual run-rate output. With Aphria finally getting the go-ahead to plant at its 1.3-million-square-foot Aphria Diamond joint venture in November (capable of 140,000 kilos annually, at its peak), the company should see easier access to retail markets in its home province by later this year.
Image source: Getty Images.
2. The ongoing rollout of derivatives in Canada
Secondly, there's little doubt that the ongoing rollout of derivatives will play a big role for Canadian cannabis stocks. Derivatives consist of alternative consumption options, such as vapes, edibles, infused beverages, topicals, and concentrates.
The reason derivatives, which first began hitting dispensary shelves in mid-December, are so important to pot stocks is that they boast significantly higher margins than traditional dried cannabis flower. This means all growers will be devoting a substantial portion of their product portfolios to the development and sale of these products. Of course, derivative supply is still building up, and, as noted, retail space is slowly but steadily expanding in key provinces. Thus, investors shouldn't expect an overnight increase in operating margins for pot stocks. Rather, margins should rise incrementally as the year wears on.
An obvious beneficiary here would be New Brunswick-based OrganiGram Holdings (NASDAQ: OGI). OrganiGram spent $15 million Canadian on a fully automated assembly line capable of producing 4 million kilos of infused chocolates per year. The company also developed a proprietary powder that can be added to beverages to enhance the onset of cannabinoids, such as tetrahydrocannabinol (THC), the cannabinoid that gets users high. OrganiGram is even one of a small handful of partners chosen by PAX Labs to supply its Era vaping device. As high-margin derivative uptake expands, so should OrganiGram's margins.
Image source: Getty Images.
3. U.S. elections
A third catalyst for cannabis stocks in 2020 are the November elections in the United States. As it pertains to pot stock investors, I'd be less concerned with who ultimately wins the presidency, and pay much more attention to the political makeup of Congress, and individual state-level voting on marijuana initiatives and amendments.
There are a number of elected seats up for grabs in Congress during the November election, and it's become pretty clear via polling that Democrats and Independents are willing to push for nationwide legalization. If the GOP loses its majority hold on the Senate, the likelihood of marijuana being legalized at the federal level grows significantly.
Likewise, there are at least three states voting on medical and/or recreational marijuana come November, and this figure should grow in the months to come.
As an example, Harvest Health & Recreation (OTC: HRVSF) is likely hoping that its home state of Arizona will vote on a recreational pot initiative come November. Harvest Health has the largest presence of any vertically integrated dispensary in Arizona. After failing to pass an adult-use pot initiative by a mere 2 percentage points in 2016, history suggests that the second time will be the charm for the Grand Canyon State. On a broader basis, with Harvest Health boasting approximately 130 total retail licenses spanning 18 states, it has a lot riding on the continued green push in the United States.
Image source: Getty Images.
4. The cannabis industry shakeout
Lastly, one of the biggest catalysts in 2020 just might be the misfortune that other cannabis stocks have to contend with.
It was no secret prior to the liftoff of marijuana stocks in 2017 and 2018 that not all of them would be long-term winners. In recent months, we've witnessed financing concerns and trust issues absolutely wreak havoc on the industry. The thing is, as some marijuana stocks struggle, others that are better suited for survival will step in to gobble up market share.
For instance, Aurora Cannabis (NYSE: ACB) was widely viewed as a top-tier pot stock. It boasted the highest peak production potential in the world, and had access to more overseas countries than any other cannabis stock. But since October, Aurora Cannabis has been backpedaling at a breakneck pace. It's halted construction on two of its largest cultivation facilities and has put a third up for sale. The company is also letting go of roughly 15% of its workforce and is looking to cut its selling, general, and administrative expenses by as much as 60% in just two quarters' time. Once a presumed industry leader, Aurora Cannabis may struggle to survive over the long run.
However, Aurora's loss could mean gains for other Canadian cannabis stocks, including the likes of OrganiGram, which has supply deals in place with every Canadian province.
One thing is for certain: It's going to be an eventful year for cannabis stocks in 2020.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Sean Williams has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends OrganiGram Holdings. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | For instance, Aurora Cannabis (NYSE: ACB) was widely viewed as a top-tier pot stock. The reason derivatives, which first began hitting dispensary shelves in mid-December, are so important to pot stocks is that they boast significantly higher margins than traditional dried cannabis flower. As it pertains to pot stock investors, I'd be less concerned with who ultimately wins the presidency, and pay much more attention to the political makeup of Congress, and individual state-level voting on marijuana initiatives and amendments. | For instance, Aurora Cannabis (NYSE: ACB) was widely viewed as a top-tier pot stock. The buildout of significant retail operations in Ontario To begin with, Ontario, Canada's most populous province, is finally beginning to address the supply bottlenecks that have plagued the region since day one of legalization (Oct. 17, 2018). With Aphria finally getting the go-ahead to plant at its 1.3-million-square-foot Aphria Diamond joint venture in November (capable of 140,000 kilos annually, at its peak), the company should see easier access to retail markets in its home province by later this year. | For instance, Aurora Cannabis (NYSE: ACB) was widely viewed as a top-tier pot stock. The reason derivatives, which first began hitting dispensary shelves in mid-December, are so important to pot stocks is that they boast significantly higher margins than traditional dried cannabis flower. However, Aurora's loss could mean gains for other Canadian cannabis stocks, including the likes of OrganiGram, which has supply deals in place with every Canadian province. | For instance, Aurora Cannabis (NYSE: ACB) was widely viewed as a top-tier pot stock. As an example, Harvest Health & Recreation (OTC: HRVSF) is likely hoping that its home state of Arizona will vote on a recreational pot initiative come November. However, Aurora's loss could mean gains for other Canadian cannabis stocks, including the likes of OrganiGram, which has supply deals in place with every Canadian province. |
37646.0 | 2020-02-19 00:00:00 UTC | Strong Earnings Support the Long-Term Case for Canopy Growth Stock | ACB | https://www.nasdaq.com/articles/strong-earnings-support-the-long-term-case-for-canopy-growth-stock-2020-02-19 | nan | nan | Canopy Growth (NYSE:) stock has been my top pick a a long-term winner in cannabis. After fiscal third quarter earnings last week, Canopy Growth stock remains my top pick.
Source: Shutterstock
Obviously, other investors agree. CGC stock gained 13% on Friday following the release. Other cannabis plays bounced as well.
The gains make sense. CanopyâÂÂs earnings admittedly donâÂÂt look all that impressive, and the company still is posting a loss. But a closer look shows why the report strengthens the long-term case for CGC stock.
Canopy Growth Beats Estimates
CanopyâÂÂs earnings came in well ahead of Wall Street estimates. Excluding the impact of one-time restructuring charges that hit reported second quarter sales, revenue grew 13% sequentially. Analysts were . A loss of 35 cents Canadian was 14 cents better than consensus.
Certainly, a quarter that topped Street expectations is good news for CGC stock. ThatâÂÂs doubly true given that another marijuana major, Aurora Cannabis (NYSE:), missed estimates the day before.
The Q3 numbers also are a boost to the sector, which itself needed good news after AuroraâÂÂs miss. IâÂÂve long tracked the ETFMG Alternative Harvest ETF (NYSEARCA:) as a proxy for investor sentiment toward cannabis stocks. MJ bounced 3.7% on Friday, and finally seems to be holding support around $16.
But even with CanopyâÂÂs beat, this is not the time to be blindly buying any cannabis stock. MJ still is down 58% from its 52-week high, after all. Overall industry growth remains slower than hoped. Companies in the sector are nearing a potential cash crunch. Some â and potentially even some big ones â will inevitably go bankrupt.
Even for CGC stock itself, simply beating Wall Street estimates isnâÂÂt alone a reason to buy the stock. ItâÂÂs how Canopy Growth topped consensus, and the companyâÂÂs commentary after the quarter, that truly support the long-term case.
Broad Strength in Revenue
A 13% increase in revenue quarter-over-quarter isnâÂÂt that impressive in the context of past expectations. In the current environment, however, itâÂÂs a strong performance.
After all, AuroraâÂÂs sales declined almost 10% q/q. And CanopyâÂÂs major catalysts havenâÂÂt even played out yet. The retail rollout in Canada remains slower than hoped amid a regulatory backlog. Cannabis 2.0 products like vapes and edibles will help in the fiscal fourth quarter and beyond. They had minimal effect on Q3, however.
Even with those headwinds, Canopy posted strong growth. And that growth was strong across the board. Recreational B2B (business to business) sales increased 8%. Direct-to-consumer increased 16% as the companyâÂÂs retail strategy took hold. Medical sales rose 5% in that more mature market. International revenue rose by the same amount.
Canopy Growth is the leader in cannabis. Q3 shows not only that the company is still the leader, but that its lead is growing.
New Management
Owning the leader in a growing industry is a smart strategy, whether that leader is Canopy, Tesla (NASDAQ:), or telehealth play Teledoc (NYSE:). And while cannabis stocks will be winners long-term, the industry still faces short-term challenges.
ThatâÂÂs one reason why IâÂÂve recommended selling covered calls on CGC stock in my service. And CanopyâÂÂs earnings show the impact of those challenges. Revenue growth did impress in the quarter. But Canopy still posted an Adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) loss of 92 million CAD in the quarter. Its cash balance dropped some 400 million CAD.
Under new chief executive officer David Klein, however, the company is responding to the âÂÂnew normalâ in cannabis. Klein told Yahoo! Finance after earnings â wisely â that the company would in its existing business rather than buying new ones. ItâÂÂs cutting costs as well. Operating expenses declined some 14% from the second quarter, and Canopy plans to tackle ballooning share-based compensation as well.
Investors cheered when Klein was hired from Constellation Brands (NYSE:,NYSE:STZ.B), which owns a large stake in Canopy. The commentary after Q3 shows why. Klein has created a smart strategy for Canopy that will allow the company to ride out near-term headwinds â and from there, deliver long-term shareholder value.
CGC Stock Short- and Long-Term
Again, there are going to be bankruptcies in the cannabis industry. ThereâÂÂs simply no way around it at this point. Klein that âÂÂthereâÂÂs not a lot of market demandâ for production facilities. A study from Ello Capital found that the average Canadian cannabis company has just six and a half remaining.
Those struggling companies are not going to be able to sell assets to keep themselves afloat. But Canopy Growth wonâÂÂt have that problem. The from Constellation gives the company a fortress balance sheet.
As those rivals falter, Canopy can win two ways. First, its dominant market share should only expand. Second, it will have the opportunity to buy valuable assets â whether production facilities or retail brands â at distressed prices.
Of course, it takes a strong management team to execute on both fronts. And thatâÂÂs part of why Canopy earnings help the bull case. Klein already has helped the company cut costs and improve execution. HeâÂÂs proven that heâÂÂs not going to spend money now when assets could be cheaper six or twelve months from now.
Canopy already is the market leader in cannabis. Its position will only get stronger going forward. There may be more choppy trading as the industry undergoes an inevitable upheaval. But I expect Canopy will come out the other side in even better shape â and that the CGC stock price will be much, much higher.
MatthewàMcCallàleft Wall Street to actually help investors â by getting them into the worldâÂÂs biggest, most revolutionary trends BEFORE anyone else. The power of being âÂÂfirstâ gave MattâÂÂs readers the chance to bank +2,438% in Stamps.com (STMP), +1,523% in Ulta Beauty (ULTA) and +1,044% in Tesla (TSLA), just to name a few.ààMatt does not directly own the aforementioned securities.
More From InvestorPlace
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | IâÂÂve long tracked the ETFMG Alternative Harvest ETF (NYSEARCA:) as a proxy for investor sentiment toward cannabis stocks. But Canopy still posted an Adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) loss of 92 million CAD in the quarter. Klein has created a smart strategy for Canopy that will allow the company to ride out near-term headwinds â and from there, deliver long-term shareholder value. | After fiscal third quarter earnings last week, Canopy Growth stock remains my top pick. Even for CGC stock itself, simply beating Wall Street estimates isnâÂÂt alone a reason to buy the stock. New Management Owning the leader in a growing industry is a smart strategy, whether that leader is Canopy, Tesla (NASDAQ:), or telehealth play Teledoc (NYSE:). | Canopy Growth (NYSE:) stock has been my top pick a a long-term winner in cannabis. After fiscal third quarter earnings last week, Canopy Growth stock remains my top pick. Canopy Growth is the leader in cannabis. | Canopy Growth (NYSE:) stock has been my top pick a a long-term winner in cannabis. Even for CGC stock itself, simply beating Wall Street estimates isnâÂÂt alone a reason to buy the stock. Even with those headwinds, Canopy posted strong growth. |
37647.0 | 2020-02-19 00:00:00 UTC | Wall Street Just Upgraded This Popular Pot Stock, but You Should Avoid It Like the Plague | ACB | https://www.nasdaq.com/articles/wall-street-just-upgraded-this-popular-pot-stock-but-you-should-avoid-it-like-the-plague | nan | nan | To say that marijuana stocks have had a bad go of things over the past 10-plus months would be a bit of an understatement. The vast majority of cannabis stocks have lost at least half of their value since hitting their yearly highs during the first quarter of 2019, with some even pushing to multiyear lows.
Why, you ask? Look no further than the growing pains that the cannabis industry is contending with. Canada has dealt with both supply shortages and bottlenecks, which is keeping legal-channel weed out of the hands of consumers, while a number of key U.S. states are struggling with the wide pricing gap between legal weed and black market pot created by high tax rates on legal cannabis.
These struggles have been particularly apparent for shareholders of Aurora Cannabis (NYSE: ACB), the most popular pot stock in the world. Shares of Aurora are down about 85% over the past 11 months, with well over $7 billion in market cap being wiped out over that period.
Image source: Getty Images.
Say what? A Wall Street firm actually upgraded Aurora Cannabis?
Yet, according to one Wall Street firm, the short thesis on Aurora Cannabis isn't a recommended option at this point.
Before the opening bell on Friday, Feb. 14, MKM Partners' covering analyst Bill Kirk channeled a bit of Valentine's Day spirit and upgraded Aurora Cannabis to neutral from sell. However, he also lowered his firm's price target on the company from 2 Canadian dollars ($1.51) to CA$1.75 ($1.32), which actually represents 10% downside from when the research note was released by Kirk, and 16% downside from where Aurora ended the week.
Why upgrade the most popular pot stock? According to the note released by Kirk, it has everything to do with the near-term quarter for Aurora being "largely de-risked." Having recently reported its fiscal second-quarter operating results, Aurora called for flat to modest revenue growth and announced a number of debt covenant adjustments that pushed any immediate concerns about its liquidity a bit further down the road.
Of course, even with this upgrade, Kirk isn't convinced that the worst is behind Aurora Cannabis. In the released research note, Kirk is skeptical that the company will be profitable by the fiscal first quarter of 2021 (ended Sept. 30, 2020), and expects additional writedowns down the line.
Image source: Getty Images.
Ignore this upgrade and steer clear of Aurora Cannabis
While it is true that Aurora Cannabis' revamped management team looks to (finally) be coming clean about the company's ugly balance sheet and is making a number of tough choices, including laying off 500 workers to reduce expenditures, this isn't a business that's deserving of your investment dollars.
For one, the company has already guided to the very real possibility of zero growth for the fiscal third quarter. That's highly disappointing for a company that's been a marijuana production leader for multiple quarters and is angling to produce a profit within the next three quarters after delivering its largest EBITDA loss in history in the fiscal second quarter. In other words, Aurora Cannabis has a poor track record of delivering on its earnings-based promises, so investors shouldn't exactly take management's word that Q1 2021 will yield positive EBITDA, or that Q3 2020 will even hit CA$65 million in sales, as noted in the company's outlook.
I also firmly believe that Kirk is correct in believing that additional writedowns are warranted. While I wasn't surprised to see Aurora take a CA$762.2 million writedown on its goodwill, what did shock me is that a good chunk of its impairment was tied to its overseas assets and not its MedReleaf acquisition. It's my belief that the MedReleaf deal will go down as the worst deal in marijuana history, with Aurora paying CA$2.64 billion for two facilities (Markham and Bradford) that can produce a combined 35,000 kilos of weed per year. The Exeter greenhouse, which when retrofitted was expected to produce 105,000 kilos per year, is now for sale by Aurora for just CA$17 million. Thus, Aurora paid CA$2.64 billion for 35,000 kilos of output and MedReleaf's brands. There's no doubt in my mind that much of this CA$2.64 billion won't be recouped and will lead to a future writedown.
Image source: Getty Images.
Although the bulk of Aurora's debt repayment isn't due until 2024, financing also remains a major concern. In spite of removing its EBITDA ratio covenants, the need to generate positive EBITDA by Q1 2021 to satisfy the newly revised covenants looks to be far from a guarantee. Aurora is aiming for CA$40 million to CA$45 million in selling, general and administrative (SG&A) expenses by Q4 2020 after just producing CA$99.9 million in SG&A expenses in Q2 2020, which included higher salaries and benefits for certain employees. Transformations don't happen overnight, especially in such a nascent industry.
As one last note, Aurora Cannabis is still going to have to contend with issues that are beyond its control. In Ontario, for example, regulators are now vetting dispensary license applications traditionally, as opposed to using a lottery system. But we're still a few months from seeing a rush of new store openings in Canada's most populous province. It's going to take time before enough retail outlets exist to relieve supply bottlenecks in the region, which means ongoing struggles for Aurora Cannabis and its peers.
As I stated when the year began, Aurora Cannabis remains a marijuana stock to avoid like the plague in 2020.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Sean Williams has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | These struggles have been particularly apparent for shareholders of Aurora Cannabis (NYSE: ACB), the most popular pot stock in the world. Before the opening bell on Friday, Feb. 14, MKM Partners' covering analyst Bill Kirk channeled a bit of Valentine's Day spirit and upgraded Aurora Cannabis to neutral from sell. Having recently reported its fiscal second-quarter operating results, Aurora called for flat to modest revenue growth and announced a number of debt covenant adjustments that pushed any immediate concerns about its liquidity a bit further down the road. | These struggles have been particularly apparent for shareholders of Aurora Cannabis (NYSE: ACB), the most popular pot stock in the world. Canada has dealt with both supply shortages and bottlenecks, which is keeping legal-channel weed out of the hands of consumers, while a number of key U.S. states are struggling with the wide pricing gap between legal weed and black market pot created by high tax rates on legal cannabis. However, he also lowered his firm's price target on the company from 2 Canadian dollars ($1.51) to CA$1.75 ($1.32), which actually represents 10% downside from when the research note was released by Kirk, and 16% downside from where Aurora ended the week. | These struggles have been particularly apparent for shareholders of Aurora Cannabis (NYSE: ACB), the most popular pot stock in the world. Ignore this upgrade and steer clear of Aurora Cannabis While it is true that Aurora Cannabis' revamped management team looks to (finally) be coming clean about the company's ugly balance sheet and is making a number of tough choices, including laying off 500 workers to reduce expenditures, this isn't a business that's deserving of your investment dollars. In other words, Aurora Cannabis has a poor track record of delivering on its earnings-based promises, so investors shouldn't exactly take management's word that Q1 2021 will yield positive EBITDA, or that Q3 2020 will even hit CA$65 million in sales, as noted in the company's outlook. | These struggles have been particularly apparent for shareholders of Aurora Cannabis (NYSE: ACB), the most popular pot stock in the world. To say that marijuana stocks have had a bad go of things over the past 10-plus months would be a bit of an understatement. A Wall Street firm actually upgraded Aurora Cannabis? |
37648.0 | 2020-02-19 00:00:00 UTC | 3 Big Challenges Canopy Growth Faces After Its Tremendous Q3 Results | ACB | https://www.nasdaq.com/articles/3-big-challenges-canopy-growth-faces-after-its-tremendous-q3-results-2020-02-19 | nan | nan | Canopy Growth (NYSE: CGC) is full of surprises these days. The company blew past Wall Street estimates with its fiscal 2020 third-quarter results last week. Its bottom line even trended in a positive direction. And while its top rival, Aurora Cannabis, emphasized the issues with the low number of Canadian retail cannabis stores, Canopy credited a growing number of retail stores as a big factor driving its revenue growth.
But don't think for a minute that the road ahead is an easy one for Canopy Growth. New CEO David Klein acknowledged the difficult trek ahead in the company's Q3 conference call, stating, "Make no mistake -- we have a lot of work to do." Here are three especially big challenges that Canopy Growth still faces after its tremendous performance in Q3.
Image source: Getty Images.
1. Achieving profitability
By far, the greatest undone task for Canopy Growth is to achieve profitability. It's the biggest negative associated with most Canadian marijuana stocks, including Canopy. You might be surprised, though, that David Klein listed defining a path to profitability and positive cash flow as only his third-highest priority.
However, Klein's two top priorities are important steps in the company becoming profitable. His No. 1 priority is to improve Canopy's connection with its customers. He realizes that the best way to achieve financial success is to grow the top line, and the best way to increase sales is to market products that customers love. Klein's No. 2 priority is "bringing more focus and discipline" to the company. He said this "means deciding where we won't play as well as where we will."
Look for rightsizing from Canopy Growth both in terms of employees and production in the next three months as part of the quest to become consistently profitable. The company has already begun the process of aligning its inventory with its projected demand. But Klein said that Canopy hasn't scrambled to cut staff across the board as some in the industry have. His approach is to first "understand where we need to win and where we want to win and where we can profitably play in the businesses." Canopy will then invest in the targeted areas and cut spending in other areas.
2. Succeeding in the U.S.
No Canadian cannabis producer has moved as quickly to secure a place at the table in the huge U.S. market as Canopy Growth has. The company jumped into the U.S. hemp CBD market soon after hemp was legalized in the U.S. It also struck a deal to acquire U.S.-based cannabis operator Acreage Holdings if marijuana becomes legal at the federal level in the United States.
Canopy even launched its first hemp CBD products under the First & Free brand in December 2019. It's fair to say that Canopy hasn't yet succeeded in the U.S. market. Klein said, the company wants and needs "to move faster and make bolder moves in the U.S."
Moving faster and bolder doesn't mean investing more heavily in the U.S., though. Klein stated that the primary goal for Canopy in the U.S. market is to get its brands on retail shelves as much as possible. The First & Free launch was primarily through online channels.
Canopy plans to focus now on establishing a solid retail channel in the U.S. for Fire & Free and its other CBD products. It seems likely that Klein will use his connections at his former employer and Canopy's largest shareholder, Constellation Brands, to help build a strong distribution network in the U.S. for Canopy's products.
3. Proving its big Cannabis 2.0 bet will pay off
One of Klein's first acts as Canopy Growth's CEO wasn't a pleasant one. Only days after taking the helm, he had to announce an embarrassing delay in the company's launch of cannabis-infused beverages in the Canadian Cannabis 2.0 market.
Some industry observers were already skeptical about the prospects for cannabis-infused beverages. Such beverages haven't been tremendously successful in the U.S. so far. But Canopy and its partner Constellation Brands have bet heavily that there will be a market for beverage products.
Klein shared an anecdote in Canopy's Q3 conference call about several members of the company's board of directors recently tasting "live versions" of Canopy's cannabis beverages. He said that after this tasting, one board member sent him a text that read, "Game changer." Klein believes that that sentiment is spot-on. He said that Canopy continues to "see our cannabis beverage[s] as truly disruptive and the best vehicle to attract new consumers to the cannabis market."
But while Canopy Growth thinks that is big Cannabis 2.0 bet on beverage will pay off, it's going to take a longer-than-expected time for the company to prove it. Klein didn't provide an estimated launch date for the new products. He only said that "we are going to take the next few months to get it right and ensure that we can introduce our consumers of today and of the future to a true game-changer."
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Keith Speights has no position in any of the stocks mentioned. The Motley Fool recommends Constellation Brands. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | New CEO David Klein acknowledged the difficult trek ahead in the company's Q3 conference call, stating, "Make no mistake -- we have a lot of work to do." Succeeding in the U.S. No Canadian cannabis producer has moved as quickly to secure a place at the table in the huge U.S. market as Canopy Growth has. But while Canopy Growth thinks that is big Cannabis 2.0 bet on beverage will pay off, it's going to take a longer-than-expected time for the company to prove it. | And while its top rival, Aurora Cannabis, emphasized the issues with the low number of Canadian retail cannabis stores, Canopy credited a growing number of retail stores as a big factor driving its revenue growth. Klein said, the company wants and needs "to move faster and make bolder moves in the U.S." Moving faster and bolder doesn't mean investing more heavily in the U.S., though. Proving its big Cannabis 2.0 bet will pay off One of Klein's first acts as Canopy Growth's CEO wasn't a pleasant one. | It seems likely that Klein will use his connections at his former employer and Canopy's largest shareholder, Constellation Brands, to help build a strong distribution network in the U.S. for Canopy's products. Proving its big Cannabis 2.0 bet will pay off One of Klein's first acts as Canopy Growth's CEO wasn't a pleasant one. Klein shared an anecdote in Canopy's Q3 conference call about several members of the company's board of directors recently tasting "live versions" of Canopy's cannabis beverages. | Klein's No. But Klein said that Canopy hasn't scrambled to cut staff across the board as some in the industry have. Canopy even launched its first hemp CBD products under the First & Free brand in December 2019. |
37649.0 | 2020-02-18 00:00:00 UTC | Aurora Cannabis (ACB) Stock Needs More Clarity Before Pushing Higher | ACB | https://www.nasdaq.com/articles/aurora-cannabis-acb-stock-needs-more-clarity-before-pushing-higher-2020-02-18 | nan | nan | The latest earnings report of Aurora Cannabis (ACB) came in as expected, with results confirming a weak quarter for the company.
While the worst appears to be over, a major problem is the lack of clarity in Canada especially, concerning what the actual demand for cannabis is.
In this article we'll examine why this will keep the future outlook of Aurora Cannabis and its Canadian peers in the dark, and what it means to long-term investors.
Lack of demand discovery
Anyone that understands why socialism never has worked, knows that the primary reason is the resultant lack of price discovery. Without that, economies aren't able to operate in an efficient manner.
Something similar is happening in the Canadian cannabis market in regard to demand discovery. What I mean by that is the horrifically slow licensing process that has failed to come close to meeting Canadian demand, has left a vacuum in regard to demand discovery that will take as long as two years to be solved.
By demand discovery I mean the lack of retail outlets that give investors an idea of what the actual demand for marijuana in Canada is. There are thoughts and projections in that regard, but that is only guessing at this time because of the inability of producers to sell at meaningful levels into the large provinces of Ontario and Quebec, which together represent over 22 million people as of 2019.
Until that changes, it's only guesswork as to the potential demand residing in those two large provinces. It can't be projected based upon sales in the smaller provinces because some of them generate a lot more sales per population than the others do.
How long will it take?
How long will it take to achieve Canadian demand discovery? It depends on the commitment of the two provinces, and if they can perform better at streamlining the process.
In the case of Quebec, it has stated in the past it isn't in a hurry to roll out new stores. That doesn't mean they won't improve on its lack of urgency, only that it appears it won't accelerate the process because of market pressure.
I think that could change, but there's no doubt of the two, Ontario has a much higher sense of urgency than Quebec has, and that's good for Aurora Cannabis, and the remainder of its peers based in Canada.
It looks like Ontario, once it starts expediting the licensing process, will continue to do so until the province has enough cannabis retail outlets to meet market demand. There's a long way to go before it reaches that permeation level.
Consensus Verdict
Most of Wall Street is surveying the embattled cannabis giant from the sidelines, with TipRanks analytics demonstrating ACB as a Hold. Based on 15 analysts polled in the last 3 months, 2 are bullish on the stock, 10 are sidelined, while 3 are bearish. However, the 12-month average price target stands at C$3.05, marking a nearly 40% upside from where the stock is currently trading. (See Aurora stock analysis on TipRanks)
Conclusion
Aurora Cannabis will continue to struggle until 100s of more Canadian stores are opened for business. The last eight months of 2020 are important in that regard because it doesn't look like things will pick up for the licensing process until April 2020.
Once that kicks into gear though, it should give a much clearer picture of what Canadian demand really is. In this case, because of it being in Ontario, and secondarily Quebec, we can get a clearer idea of what demand will be after several quarters of these new stores being opened.
That points to the latter part of 2020, or the first half of 2021.
As this happens, Aurora Cannabis will be given a chance to sell into, not only a larger retail market as measured by the number of retail outlets that are operational, but also presumable sell a significant amount of derivatives that command higher prices and wider margins.
Once demand discover for the Canadian cannabis market is visible, we can then look at how Aurora Cannabis can grow under that specific sector environment. We'll also be able to see what its potential growth trajectory is as this unfolds.
Again, for now this is all guesswork, but within a year or a little longer, these demand issues should be result in relationship to visibility, and assuming the provinces come through with 100s of more stores in the first half of 2021, we'll know what the real potential of the legal market is in Canada, and how much market share Aurora can take against its legal and illegal competitors.
Last, on the illegal side of the business, we should see that start to shrink as customers are provided more retail options to buy in, especially new customers that I think are waiting and willing to give legal cannabis a try.
All of this should benefit Aurora Cannabis. We'll have to wait to see to what degree by probably another twelve to eighteen months.
In the near term, I think Aurora could start to press toward the C$2.00 per share mark, unless there is a negative catalyst that emerges.
To find good ideas for cannabis stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Consensus Verdict Most of Wall Street is surveying the embattled cannabis giant from the sidelines, with TipRanks analytics demonstrating ACB as a Hold. The latest earnings report of Aurora Cannabis (ACB) came in as expected, with results confirming a weak quarter for the company. There are thoughts and projections in that regard, but that is only guessing at this time because of the inability of producers to sell at meaningful levels into the large provinces of Ontario and Quebec, which together represent over 22 million people as of 2019. | The latest earnings report of Aurora Cannabis (ACB) came in as expected, with results confirming a weak quarter for the company. Consensus Verdict Most of Wall Street is surveying the embattled cannabis giant from the sidelines, with TipRanks analytics demonstrating ACB as a Hold. Something similar is happening in the Canadian cannabis market in regard to demand discovery. | The latest earnings report of Aurora Cannabis (ACB) came in as expected, with results confirming a weak quarter for the company. Consensus Verdict Most of Wall Street is surveying the embattled cannabis giant from the sidelines, with TipRanks analytics demonstrating ACB as a Hold. It looks like Ontario, once it starts expediting the licensing process, will continue to do so until the province has enough cannabis retail outlets to meet market demand. | The latest earnings report of Aurora Cannabis (ACB) came in as expected, with results confirming a weak quarter for the company. Consensus Verdict Most of Wall Street is surveying the embattled cannabis giant from the sidelines, with TipRanks analytics demonstrating ACB as a Hold. By demand discovery I mean the lack of retail outlets that give investors an idea of what the actual demand for marijuana in Canada is. |
37650.0 | 2020-02-18 00:00:00 UTC | 3 Reasons Canadian Pot Stocks Still Aren't Good Buys | ACB | https://www.nasdaq.com/articles/3-reasons-canadian-pot-stocks-still-arent-good-buys-2020-02-18 | nan | nan | The cannabis industry in Canada is hurting, and the danger is that things could get even worse. Investors have been bearish on the industry as companies have been shedding jobs, making leadership changes, and, of course, posting disappointing financial results. And there's little hope that things will improve anytime soon.
There are three reasons why investors shouldn't be too optimistic about the Canadian cannabis industry in 2020.
1. The black market will keep dominating
There's a lot of growth still left in the Canadian market as a slow retail rollout and supply issues plagued the country's first year of legal pot. The problem is that the red tape in the industry is still making black-market products more attractive, and the gap in prices is getting wider. With many restrictions surrounding advertising and how big edible packages can be, it's probably easier for consumers to find the products they want from illicit sources. And given the price discrepancy, there's even less of an incentive to buy from legal sources.
Statistics Canada released an update in January on the average price of marijuana; the findings showed that the gap was widening between legal and illegal pot. From under 10 Canadian dollars per gram last year, the average price for legal pot is now well over that mark at CA$10.30 per gram. Meanwhile, the average black-market price for pot has been falling during that time, from CA$6.44 to just CA$5.73. It's unlikely that cannabis customers are going to pay nearly double for pot in the legal market. Until prices start coming down, the industry is going to remain at a big disadvantage.
Image source: Getty Images.
The disappointing outlook for the Canadian industry is nothing new, and last year, research company BDS Analytics downgraded its forecast for the market. Originally expecting it to be worth $5.9 billion by 2022, BDS' revised forecast now calls for the market to reach $5.2 billion by 2024. However, if prices come down and competition ramps up, that could change things in a hurry. But at this point, given the challenges many cannabis companies are facing, they aren't going to be in a rush to lower their prices.
2. Lower prices could do more harm than good
A lack of profitability is perhaps the biggest problem in the industry today; if the average price for legal pot were to come down in Canada, that wouldn't be good news for Canadian producers as that would shrink their margins. Aurora Cannabis (NYSE: ACB) released its second-quarter results on Feb. 13, and even before the massive writedowns that it incurred during the quarter, the company's operating loss was still CA$119.6 million, just under a 50% increase from the prior-year quarter.
The company's margins before fair value adjustments of 41% are decent, but a decline in price will bring those numbers down and make it even more difficult for Aurora to improve and get closer to breakeven. It's a similar situation for other Canadian pot stocks -- lower prices may only compound their problems rather than improve their situations.
3. Stocks remain very expensive compared to their U.S. counterparts
Although marijuana stocks are falling heavily, the ones operating in Canada are still fairly expensive. Aurora, for instance, trades at more than seven times its sales over the past 12 months, while investors are paying more than eight times sales for HEXO. In contrast, Trulieve Cannabis is trading at a much more modest 5.4 times its sales. Curaleaf Holdings, when factoring in its proforma revenue numbers, could reach more than $500 million in annual sales, putting its valuation at a price-to-sales multiple about the same as Trulieve's. Both stocks look to be cheaper buys, and that's even with Aurora and HEXO incurring much more significant losses over the past year:
TCNNF data by YCharts
What should investors do?
Given the headwinds that are still facing the industry in Canada, now may not be the best time to invest in Canadian pot stocks, even with their relatively low prices. While there's still risk involving U.S. pot stocks, they look like much more stable buys today. As legalization progresses in the U.S., they could become even more attractive investments over the long term.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
David Jagielski has no position in any of the stocks mentioned. The Motley Fool recommends HEXO. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Aurora Cannabis (NYSE: ACB) released its second-quarter results on Feb. 13, and even before the massive writedowns that it incurred during the quarter, the company's operating loss was still CA$119.6 million, just under a 50% increase from the prior-year quarter. Statistics Canada released an update in January on the average price of marijuana; the findings showed that the gap was widening between legal and illegal pot. The company's margins before fair value adjustments of 41% are decent, but a decline in price will bring those numbers down and make it even more difficult for Aurora to improve and get closer to breakeven. | Aurora Cannabis (NYSE: ACB) released its second-quarter results on Feb. 13, and even before the massive writedowns that it incurred during the quarter, the company's operating loss was still CA$119.6 million, just under a 50% increase from the prior-year quarter. From under 10 Canadian dollars per gram last year, the average price for legal pot is now well over that mark at CA$10.30 per gram. Lower prices could do more harm than good A lack of profitability is perhaps the biggest problem in the industry today; if the average price for legal pot were to come down in Canada, that wouldn't be good news for Canadian producers as that would shrink their margins. | Aurora Cannabis (NYSE: ACB) released its second-quarter results on Feb. 13, and even before the massive writedowns that it incurred during the quarter, the company's operating loss was still CA$119.6 million, just under a 50% increase from the prior-year quarter. Lower prices could do more harm than good A lack of profitability is perhaps the biggest problem in the industry today; if the average price for legal pot were to come down in Canada, that wouldn't be good news for Canadian producers as that would shrink their margins. Given the headwinds that are still facing the industry in Canada, now may not be the best time to invest in Canadian pot stocks, even with their relatively low prices. | Aurora Cannabis (NYSE: ACB) released its second-quarter results on Feb. 13, and even before the massive writedowns that it incurred during the quarter, the company's operating loss was still CA$119.6 million, just under a 50% increase from the prior-year quarter. Aurora, for instance, trades at more than seven times its sales over the past 12 months, while investors are paying more than eight times sales for HEXO. Given the headwinds that are still facing the industry in Canada, now may not be the best time to invest in Canadian pot stocks, even with their relatively low prices. |
37651.0 | 2020-02-18 00:00:00 UTC | 2020 Could Be the Year Cronos Comes Alive | ACB | https://www.nasdaq.com/articles/2020-could-be-the-year-cronos-comes-alive-2020-02-18 | nan | nan | Cronos Group (NASDAQ:) reports its fourth-quarter and fiscal 2019 results on Feb. 27 before the markets open. While the top-line and bottom-line numbers wonâÂÂt do much to drive cannabis investors into CRON stock, I do believe that the company will have lots to say about the year ahead.ÃÂ
Source: Shutterstock
And Cronos should have lots of good things to report.
In 2020, I continue to see the company as one of the must-own Canadian cannabis stocks. HereâÂÂs why.ÃÂ
Altria Will Continue to Help Cronos Grow
If youâÂÂve followed Cronos for some time, youâÂÂre likely aware that Altria (NYSE:), the maker of Marlboro cigarettes, invested $1.8 billion in the company in December 2018. The investment gave Altria a 45% stake and warrants to up its ownership to 55% in the future.ÃÂ
Around the time Altria made its investment, I argued that compared to its Juul Labs investment, the cigarette company . Fast forward to today and the numbers would suggest my rationale was correct.ÃÂ
Altria recently announced that it would have to take another $4.1 billion charge on its investment in Juul in the fourth quarter. The latest impairment is due to growing litigation against the e-cigarette company. The company valued Juul at down from the 2018 value of $38 billion. That means its investment is worth only $4.2 billion.ÃÂ
By comparison, AltriaâÂÂs of Cronos stock are worth just over $1 billion as I write this. ThatâÂÂs 44% less than what the company paid at the end of 2018. In approximately the same amount of time, AltriaâÂÂs investment in Juul has fallen in value by 67%.ÃÂ
If IâÂÂm Altria CEO Howard Willard, IâÂÂve got to be hopping mad that my Juul investment has lost 10 times as much money over the past 14 months.
Given all the troubles e-cigarettes have faced over the past year, I continue to believe that AltriaâÂÂs upside is far more significant with Cronos. For Cronos, AltriaâÂÂs involvement is a blessing, not a curse. ThatâÂÂs especially true if Willard wants to remain CEO. He canâÂÂt afford to have two duds on his hands.ÃÂ
Altria will put more effort into growing Cronos in 2020 as a result.ÃÂ Others agree.ÃÂ
Raymond James Likes CRON Stock
Raymond James analyst Rahul Sarugaser recently wrote in a note to clients that Cronos has more going for it than most investors realize. Sarugaser mentioned both its relationship with Altria and its move into the U.S. CBD market as critical reasons the company has a bright future.ÃÂ
That said, the analyst believes Cannabis 2.0 benefits wonâÂÂt kick in until the second half of 2020.ÃÂ
âÂÂWe predict a rebound among strong, fiscally prudent operators beginning ~May 2020, materializing more fully in 2H20 with the realization of and, perhaps, the expansion of retail cannabis store footprint across Canada, particularly in Ontario, driving accelerated sell-through,â Sarugaser wrote.ÃÂ
The analyst pointed to Cronosâ significant cash balance of almost $2 billion and its fiscal discipline as reasons why itâÂÂs positioned better than most.ÃÂ
As I said in November, of the top seven cannabis companies in Canada, Cronos and Canopy Growth (NYSE:) are the strongest financially of the bunch. After whatâÂÂs happened to Aurora Cannabis (NYSE:) in recent weeks, my assessment seems even more accurate today.ÃÂ
The Bottom Line
Another interesting point Sarugaser made is that Altria has more than 250,000 points of distribution through convenience stores in the U.S. Those will become very important for expanding CronosâÂÂàU.S. CBD business.ààÃÂ
Sarugaser has a âÂÂbuyâ rating on its stock and a $9.03 price target. His target implies upside of 31% over the next 12 months.ÃÂ
I continue to believe that when it comes to Canadian cannabis stocks, the better the balance sheet, the safer the investment. I still see Cronos as a long-term buy at current prices.ÃÂ ÃÂ ÃÂ
At the time of this writing, Will Ashworth did not hold a position in any of the aforementioned securities.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Fast forward to today and the numbers would suggest my rationale was correct.àAltria recently announced that it would have to take another $4.1 billion charge on its investment in Juul in the fourth quarter. Sarugaser mentioned both its relationship with Altria and its move into the U.S. CBD market as critical reasons the company has a bright future.àThat said, the analyst believes Cannabis 2.0 benefits wonâÂÂt kick in until the second half of 2020.àâÂÂWe predict a rebound among strong, fiscally prudent operators beginning ~May 2020, materializing more fully in 2H20 with the realization of and, perhaps, the expansion of retail cannabis store footprint across Canada, particularly in Ontario, driving accelerated sell-through,â Sarugaser wrote.àThe analyst pointed to Cronosâ significant cash balance of almost $2 billion and its fiscal discipline as reasons why itâÂÂs positioned better than most.àAs I said in November, of the top seven cannabis companies in Canada, Cronos and Canopy Growth (NYSE:) are the strongest financially of the bunch. His target implies upside of 31% over the next 12 months.àI continue to believe that when it comes to Canadian cannabis stocks, the better the balance sheet, the safer the investment. | While the top-line and bottom-line numbers wonâÂÂt do much to drive cannabis investors into CRON stock, I do believe that the company will have lots to say about the year ahead.àSource: Shutterstock And Cronos should have lots of good things to report. He canâÂÂt afford to have two duds on his hands.àAltria will put more effort into growing Cronos in 2020 as a result.àOthers agree.àRaymond James Likes CRON Stock Raymond James analyst Rahul Sarugaser recently wrote in a note to clients that Cronos has more going for it than most investors realize. Sarugaser mentioned both its relationship with Altria and its move into the U.S. CBD market as critical reasons the company has a bright future.àThat said, the analyst believes Cannabis 2.0 benefits wonâÂÂt kick in until the second half of 2020.àâÂÂWe predict a rebound among strong, fiscally prudent operators beginning ~May 2020, materializing more fully in 2H20 with the realization of and, perhaps, the expansion of retail cannabis store footprint across Canada, particularly in Ontario, driving accelerated sell-through,â Sarugaser wrote.àThe analyst pointed to Cronosâ significant cash balance of almost $2 billion and its fiscal discipline as reasons why itâÂÂs positioned better than most.àAs I said in November, of the top seven cannabis companies in Canada, Cronos and Canopy Growth (NYSE:) are the strongest financially of the bunch. | HereâÂÂs why.àAltria Will Continue to Help Cronos Grow If youâÂÂve followed Cronos for some time, youâÂÂre likely aware that Altria (NYSE:), the maker of Marlboro cigarettes, invested $1.8 billion in the company in December 2018. The investment gave Altria a 45% stake and warrants to up its ownership to 55% in the future.àAround the time Altria made its investment, I argued that compared to its Juul Labs investment, the cigarette company . Sarugaser mentioned both its relationship with Altria and its move into the U.S. CBD market as critical reasons the company has a bright future.àThat said, the analyst believes Cannabis 2.0 benefits wonâÂÂt kick in until the second half of 2020.àâÂÂWe predict a rebound among strong, fiscally prudent operators beginning ~May 2020, materializing more fully in 2H20 with the realization of and, perhaps, the expansion of retail cannabis store footprint across Canada, particularly in Ontario, driving accelerated sell-through,â Sarugaser wrote.àThe analyst pointed to Cronosâ significant cash balance of almost $2 billion and its fiscal discipline as reasons why itâÂÂs positioned better than most.àAs I said in November, of the top seven cannabis companies in Canada, Cronos and Canopy Growth (NYSE:) are the strongest financially of the bunch. | In 2020, I continue to see the company as one of the must-own Canadian cannabis stocks. In approximately the same amount of time, AltriaâÂÂs investment in Juul has fallen in value by 67%.àIf IâÂÂm Altria CEO Howard Willard, IâÂÂve got to be hopping mad that my Juul investment has lost 10 times as much money over the past 14 months. Sarugaser mentioned both its relationship with Altria and its move into the U.S. CBD market as critical reasons the company has a bright future.àThat said, the analyst believes Cannabis 2.0 benefits wonâÂÂt kick in until the second half of 2020.àâÂÂWe predict a rebound among strong, fiscally prudent operators beginning ~May 2020, materializing more fully in 2H20 with the realization of and, perhaps, the expansion of retail cannabis store footprint across Canada, particularly in Ontario, driving accelerated sell-through,â Sarugaser wrote.àThe analyst pointed to Cronosâ significant cash balance of almost $2 billion and its fiscal discipline as reasons why itâÂÂs positioned better than most.àAs I said in November, of the top seven cannabis companies in Canada, Cronos and Canopy Growth (NYSE:) are the strongest financially of the bunch. |
37652.0 | 2020-02-18 00:00:00 UTC | Where Will OrganiGram Holdings Be in 10 Years? | ACB | https://www.nasdaq.com/articles/where-will-organigram-holdings-be-in-10-years-2020-02-18 | nan | nan | The pot wars have officially broken out in earnest. With less revenue to go around than anticipated due to structural and regulatory deficiencies in Canada, the country's top licensed producers have all had to scale back operations, cut costs, and pay close attention to their often dwindling cash positions. The net result is that this harsh economic climate has started to truly separate the wheat from the chaff. Companies like Aurora Cannabis (NYSE: ACB) and HEXO Corp. (NYSE: HEXO) have crumbled in lockstep with the legal cannabis industry as a whole, whereas Canopy Growth Corp. (NYSE: CGC) and OrganiGram Holdings Inc. (NASDAQ: OGI) have both proven themselves capable of swimming against the current, so to speak.
OrganiGram Holdings is a particularly interesting case for a number of reasons. Instead of stressing its balance sheet out to the max with costly acquisitions like Aurora, Canopy, and HEXO, OrganiGram has essentially stayed home in order to focus on growing great pot in a cost-efficient manner. This seemingly zen-like approach to business development has quite possibly set the company up for long-term success. The same certainly can't be said for more aggressive players like Aurora or HEXO. And even Canopy, the industry's 800-pound gorilla, has a lot of work to do to realign its operations with actual consumer demand.
Image source: Getty Images.
Where will OrganiGram land 10 years from now? While it's definitely a tall task to make any worthwhile predictions this far into the future, OrganiGram's foundation does offer some helpful clues. Let's break down the pot stock's core value proposition to get an idea of what may be yet to come.
OrganiGram's long-term outlook
OrganiGram's secret sauce is a highly efficient, three-tiered indoor growth facility at its Moncton campus located in New Brunswick, Canada. The company currently sports one of the lowest costs of cultivation in the industry, despite not having the same type of economy of scale of other giant licensed producers like Aurora or Canopy. What's more, OrganiGram's various dried flower varieties have garnered rave reviews from end users and professional critics alike. OrganiGram thus has a proven track record of growing high-quality weed without the massive overhead that comes with multiple grow sites spread out across the globe.
Additionally, OrganiGram has built an attractive lineup of derivative cannabis products. With an express interest in fully automating and streamlining the process of packaging these next-gen products, the company has successfully developed an intriguing portfolio of vapes, edible chocolates, and dissolvable powders designed to hasten the absorption of cannabinoids to within 10 to 15 minutes. Therefore, the company is well positioned to be a major player in the era of Cannabis 2.0.
The recurring theme with OrganiGram's underlying value proposition is that the company is run like a consumer packaged goods business. In effect, management places a heavy emphasis on cost controls, which should allow it to eventually turn a profit on a consistent basis with only modest gross margins. That's a key difference between OrganiGram and the rest of the field.
Under their prior management teams, Aurora and Canopy both seemed to have their sights set on generating gross margins on par with the biopharmaceutical industry -- perhaps because of the unique example set by GW Pharmaceuticals and its cannabis-derived epilepsy treatment Epidiolex. As the market has matured, however, Aurora and Canopy have both had to rethink their business plans. OrganiGram, by contrast, has always been a consumer packaged goods company at its very core.
What does this all mean? OrganiGram has the leadership and execution to outlast perhaps all of its closest peers. So, by the middle of the decade, the company should be able to dramatically increase its share of the domestic Canadian market, giving it a solid base of operations for long-term growth. In 10 years, OrganiGram thus stands an outstanding shot at being one of the country's preeminent cannabis players, perhaps with a global reach. That's a testament to the immense power of building a company for sustainable levels of growth over the long term.
Should cannabis investors buy and hold this name?
There aren't many pot stocks worth owning right now. But OrganiGram might be one of the rare exceptions. That said, investors should have realistic expectations for OrganiGram's stock in the near term. The plain truth is that several cannabis companies need to go bankrupt before any of the remaining players can spread their wings. Once the inevitable wave of bankruptcies does happen, though, OrganiGram's key competitive advantages should bear fruit for patient investors in a big way.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
George Budwell has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends OrganiGram Holdings. The Motley Fool recommends HEXO. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Companies like Aurora Cannabis (NYSE: ACB) and HEXO Corp. (NYSE: HEXO) have crumbled in lockstep with the legal cannabis industry as a whole, whereas Canopy Growth Corp. (NYSE: CGC) and OrganiGram Holdings Inc. (NASDAQ: OGI) have both proven themselves capable of swimming against the current, so to speak. With less revenue to go around than anticipated due to structural and regulatory deficiencies in Canada, the country's top licensed producers have all had to scale back operations, cut costs, and pay close attention to their often dwindling cash positions. Instead of stressing its balance sheet out to the max with costly acquisitions like Aurora, Canopy, and HEXO, OrganiGram has essentially stayed home in order to focus on growing great pot in a cost-efficient manner. | Companies like Aurora Cannabis (NYSE: ACB) and HEXO Corp. (NYSE: HEXO) have crumbled in lockstep with the legal cannabis industry as a whole, whereas Canopy Growth Corp. (NYSE: CGC) and OrganiGram Holdings Inc. (NASDAQ: OGI) have both proven themselves capable of swimming against the current, so to speak. The recurring theme with OrganiGram's underlying value proposition is that the company is run like a consumer packaged goods business. The Motley Fool owns shares of and recommends OrganiGram Holdings. | Companies like Aurora Cannabis (NYSE: ACB) and HEXO Corp. (NYSE: HEXO) have crumbled in lockstep with the legal cannabis industry as a whole, whereas Canopy Growth Corp. (NYSE: CGC) and OrganiGram Holdings Inc. (NASDAQ: OGI) have both proven themselves capable of swimming against the current, so to speak. Instead of stressing its balance sheet out to the max with costly acquisitions like Aurora, Canopy, and HEXO, OrganiGram has essentially stayed home in order to focus on growing great pot in a cost-efficient manner. OrganiGram's long-term outlook OrganiGram's secret sauce is a highly efficient, three-tiered indoor growth facility at its Moncton campus located in New Brunswick, Canada. | Companies like Aurora Cannabis (NYSE: ACB) and HEXO Corp. (NYSE: HEXO) have crumbled in lockstep with the legal cannabis industry as a whole, whereas Canopy Growth Corp. (NYSE: CGC) and OrganiGram Holdings Inc. (NASDAQ: OGI) have both proven themselves capable of swimming against the current, so to speak. Therefore, the company is well positioned to be a major player in the era of Cannabis 2.0. There aren't many pot stocks worth owning right now. |
37653.0 | 2020-02-17 00:00:00 UTC | Weekly Cannabis Stock News: Canopy Growth Saves the Marijuana Industry | ACB | https://www.nasdaq.com/articles/weekly-cannabis-stock-news%3A-canopy-growth-saves-the-marijuana-industry-2020-02-17 | nan | nan | Last week was a study in contrasts for publicly traded marijuana stocks. Two 300-pound gorillas of the industry, Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC), both reported their latest quarterly results. Although the pair's bottom lines bettered analyst estimates, there was a world of difference between their performances.
In short, Aurora's quarter deepened pessimism about the prospects of marijuana companies generally. A day later, Canopy Growth's report brought the bulls roaring back into the sector, and peer weed stocks rose in sympathy. Here's more:
Image source: Getty Images.
Aurora Cannabis' Awful Q2
Let's face it, Aurora's Q2 results were grim. Quarter-over-quarter net sales cratered 26%, and while the market was expecting a deep net loss, it wasn't expected to be as bottom-touching as 1.3 billion Canadian dollars ($981 million).
Like that net revenue figure, a worryingly high number of both financial and operational metrics were down for Aurora during the quarter: production, selling prices, even ancillary revenue. The only significant items to rise were the ones no investor wants to see go higher, such as selling, general, and administration expenses (up 23% sequentially), and a whopping CA$762 million ($575 million) goodwill impairment charge.
One factor at least partly responsible for certain Aurora declines in Q2 was the suspension of its license to sell medical marijuana in Germany. This occurred not because of the callousness or favoritism of the German authorities, but rather because the company insisted on putting irradiated product on the market. This was a big no-no that wouldn't have happened had Aurora been following the basic practices and procedures of its business.
Somehow, Aurora's stock has actually traded up (by around 8%) since it released its earnings report on that train wreck of a quarter. I'm not sure why this is; maybe because results weren't as disastrous as some expected, or perhaps there's a crowd of bottom-feeder investors supporting the shares. Either way, I see almost nothing to be positive about here, and I think this is a clear case of a stock that's well worth avoiding.
Canopy Growth's Q3: Cruising to the top
In a refreshing contrast, one day after Aurora reported its latest quarter, Canopy Growth followed suit with its Q3 figures.
Those losing faith in marijuana stocks following Aurora's dim results quickly gained it back. Canopy Growth was true to its name in terms of net revenue, managing to improve it by over 60% on a quarter-over-quarter basis. The company is putting its head down and getting the job done, building out its retail presence and getting more product into the hands of customers.
Make no mistake about it: Canopy Growth is still not a runaway success story. Expenses, while coming down, are still considerable. Feeding into that, the bottom line remains well in the red (at a cool CA$124 million, or $94 million), even though this dropped by almost 70% quarter over quarter.
With this, Canopy Growth is the darling of marijuana stocks right now. It's going to continue with its buildout, which is encouraging because peddling more product is the best way to keep those growth numbers on the rise.
Canada's Cannabis 2.0 segment also provides a fine opportunity, particularly given the company's relationship with its key shareholder and pot beverage-making partner Constellation Brands. That is, if Canopy Growth can roll out those products in a timely way.
In short, there was much to like with Canopy Growth's recent financials. The company isn't there yet with profitability, but I'd give it more of a chance of flipping into the black soon than I would many of its rivals.
Canopy's stock rose almost 20% on Friday in the wake of its earnings announcement, and that bouncy optimism spread throughout the sector. Many investors are coming back to publicly traded weed; hopefully for them, the sector will provide more results like Canopy Growth's, rather than the ugliness that was Aurora's latest.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends Constellation Brands. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Two 300-pound gorillas of the industry, Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC), both reported their latest quarterly results. A day later, Canopy Growth's report brought the bulls roaring back into the sector, and peer weed stocks rose in sympathy. Canada's Cannabis 2.0 segment also provides a fine opportunity, particularly given the company's relationship with its key shareholder and pot beverage-making partner Constellation Brands. | Two 300-pound gorillas of the industry, Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC), both reported their latest quarterly results. Canopy Growth's Q3: Cruising to the top In a refreshing contrast, one day after Aurora reported its latest quarter, Canopy Growth followed suit with its Q3 figures. Many investors are coming back to publicly traded weed; hopefully for them, the sector will provide more results like Canopy Growth's, rather than the ugliness that was Aurora's latest. | Two 300-pound gorillas of the industry, Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC), both reported their latest quarterly results. Canopy Growth's Q3: Cruising to the top In a refreshing contrast, one day after Aurora reported its latest quarter, Canopy Growth followed suit with its Q3 figures. Many investors are coming back to publicly traded weed; hopefully for them, the sector will provide more results like Canopy Growth's, rather than the ugliness that was Aurora's latest. | Two 300-pound gorillas of the industry, Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC), both reported their latest quarterly results. Canopy Growth's Q3: Cruising to the top In a refreshing contrast, one day after Aurora reported its latest quarter, Canopy Growth followed suit with its Q3 figures. With this, Canopy Growth is the darling of marijuana stocks right now. |
37654.0 | 2020-02-17 00:00:00 UTC | Will This Marijuana Stock Soar Again Following the Company's Earnings Release? | ACB | https://www.nasdaq.com/articles/will-this-marijuana-stock-soar-again-following-the-companys-earnings-release-2020-02-17 | nan | nan | Innovative Industrial Properties (NYSE: IIPR), a cannabis industry-focused real estate investment trust (REIT), is slated to report its fourth-quarter and full-year 2019 results after the market closes on Wednesday, Feb. 26.
Despite pulling back since peaking in mid-2019, the company's stock has returned a whopping 68.8% over the one-year period through Friday, Feb. 14. For context, over this same period, the S&P 500 has returned 25.6%, while shares of Canopy Growth, Cronos, and Aurora Cannabis -- the three largest Canadian marijuana growers by market cap -- have dropped 52%, 64.8%, and 77.8%, respectively.
Given Innovative Industrial Properties stock's robust recent performance (it's returned 30.4% in 2020 through Friday, versus the broader market's nearly 5% return) and lofty valuation (its price-to-earnings ratio is 68.5), investors will be expecting the company to continue to deliver rapid growth on both the top and bottom lines.
The day after the company released its third-quarter results, IIP stock popped 10%, thanks to revenue and earnings sailing by Wall Street's expectations. Investors are surely hoping for a repeat.
Here's what to watch and expect in IIP's report.
Image source: Getty Images.
Innovative Industrial Properties' key quarterly numbers
Here are IIP's results from the year-ago quarter and Wall Street's estimates to use as benchmarks.
METRIC
Q4 2018 RESULT
WALL STREET'S Q4 2019 CONSENSUS ESTIMATE
WALL STREET'S PROJECTED CHANGE
Revenue
$4.78 million
$14.37 million
201%
Earnings per share (EPS)
$0.24
$0.57 138%
Adjusted funds from operations (FFO)
$0.38 N/A N/A
Data sources: Innovative Industrial Properties and Yahoo! Finance. Funds from operations (FFO) is a closely watched metric for companies organized as REITs. It adds depreciation expense back to net income and makes a few other adjustments to net income to accurately reflect a REIT's cash flow.
While long-term investors shouldn't place too much weight on the Street's near-term estimates, they're helpful to know because they often help explain market reactions.
Analysts are expecting continued torrid growth, thanks primarily to IIP's acquisition activity. At the end of the year-ago quarter, the company owned just 11 properties in 11 U.S. states where marijuana for medical use is legal. At the end of the fourth quarter of 2019, it owned 44 properties in 14 U.S. states, according to my review of the company's press releases. (As of Feb. 14, that total has increased to 47 properties located in 15 states.) The properties are 100% leased under long-term, triple-net leases.
For financial performance context, in the third quarter, IIP's net rental revenue soared 201% year over year to $11.2 million, driven primarily by the acquisition of new properties, along with contractual rental increases at certain properties. Profitability metrics also performed wonderfully, with EPS rocketing 162% to $0.55, and adjusted FFO per share jumping 126% to $0.86. Both the top and bottom lines easily beat Wall Street's expectations, resulting in the stock notching a 10% gain on the day following the earnings release.
IIP's year-over-year revenue growth rate has been accelerating, as it was 155% in the second quarter, 146% in the first quarter, and 111% in the fourth quarter of 2018.
Earnings call on Feb. 27
Innovative Industrial Properties has scheduled an analyst conference call for the day after the earnings release, Thursday, Feb. 27, at 1 p.m. EST. (Yep, you read that unusual time correctly.)
I encourage investors and potential investors to tune in live or listen to the recorded version at their leisure, as the calls are always meaty.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Beth McKenna owns shares of Canopy Growth. The Motley Fool recommends Innovative Industrial Properties. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Innovative Industrial Properties (NYSE: IIPR), a cannabis industry-focused real estate investment trust (REIT), is slated to report its fourth-quarter and full-year 2019 results after the market closes on Wednesday, Feb. 26. For context, over this same period, the S&P 500 has returned 25.6%, while shares of Canopy Growth, Cronos, and Aurora Cannabis -- the three largest Canadian marijuana growers by market cap -- have dropped 52%, 64.8%, and 77.8%, respectively. Both the top and bottom lines easily beat Wall Street's expectations, resulting in the stock notching a 10% gain on the day following the earnings release. | Innovative Industrial Properties' key quarterly numbers Here are IIP's results from the year-ago quarter and Wall Street's estimates to use as benchmarks. Revenue $4.78 million $14.37 million 201% Earnings per share (EPS) $0.24 $0.57 138% Adjusted funds from operations (FFO) For financial performance context, in the third quarter, IIP's net rental revenue soared 201% year over year to $11.2 million, driven primarily by the acquisition of new properties, along with contractual rental increases at certain properties. | Given Innovative Industrial Properties stock's robust recent performance (it's returned 30.4% in 2020 through Friday, versus the broader market's nearly 5% return) and lofty valuation (its price-to-earnings ratio is 68.5), investors will be expecting the company to continue to deliver rapid growth on both the top and bottom lines. Innovative Industrial Properties' key quarterly numbers Here are IIP's results from the year-ago quarter and Wall Street's estimates to use as benchmarks. For financial performance context, in the third quarter, IIP's net rental revenue soared 201% year over year to $11.2 million, driven primarily by the acquisition of new properties, along with contractual rental increases at certain properties. | For context, over this same period, the S&P 500 has returned 25.6%, while shares of Canopy Growth, Cronos, and Aurora Cannabis -- the three largest Canadian marijuana growers by market cap -- have dropped 52%, 64.8%, and 77.8%, respectively. Innovative Industrial Properties' key quarterly numbers Here are IIP's results from the year-ago quarter and Wall Street's estimates to use as benchmarks. At the end of the year-ago quarter, the company owned just 11 properties in 11 U.S. states where marijuana for medical use is legal. |
37655.0 | 2020-02-17 00:00:00 UTC | Is Canopy Growth the Best Pot Stock to Buy Right Now? | ACB | https://www.nasdaq.com/articles/is-canopy-growth-the-best-pot-stock-to-buy-right-now-2020-02-17 | nan | nan | Canopy Growth Corporation (NYSE: CGC) reported better-than-expected fiscal 2020 third-quarter results last Friday. In turn, the market bid the pot titan's stock up by a healthy 13.4% on extremely heavy volume. Heading into Canopy's latest quarterly earnings, however, Wall Street's expectations were rather subdued, thanks to Aurora Cannabis' (NYSE: ACB) awful fiscal 2020 second-quarter results released the day before on Feb. 13. In short, Canopy was widely expected to underperform due to many of the same industrywide issues -- such as the dearth of retail outlets in key provinces and the slow introduction of high-margin derivative products -- plaguing Aurora at the moment.
What these back-to-back earnings reports made painfully clear, though, is that Canopy and Aurora are now on markedly different trajectories. Canopy has started to emerge as the undisputed king of the Canadian legal cannabis market, whereas Aurora is hanging on for dear life. With Canopy separating itself from the pack, should value and growth investors alike take a flier on this speculative pot stock? Let's break down the company's core value proposition to find out.
Image source: Getty Images.
Canopy: The long and winding road to big weed
The big-picture issue is that the global cannabis market might hit a jaw-dropping $200 billion in annual sales by 2030. To arrive at this massive sales figure, pot needs to become legal for recreational and medical purposes across the Western world. What's more, the cannabis industry will need to significantly expand into several secondary markets such as beverages, candles, cosmetics, perfumes, skin care products, shampoos, soaps, and topical creams, just to name a few.
The good news is that all of these high-dollar opportunities -- and perhaps several unforeseen ones revolving around the use of rare cannabinoids -- are still on the table. The bad news is that the industry's formative period will be brutal, a fact that's been playing out for the past 10 months with numerous executive departures, a sea of red ink, and a wave of downsizing across the space.
What this all means is that there will likely be only a few ginormous companies left standing at the end of the day. And once that happens, we will have officially entered the era of big weed. Canopy, for its part, has finally started to show clear-cut signs that it could be one of these elite few.
Canopy's newly minted CEO David Klein stated as much in the company's latest quarterly conference call:
I firmly believe Canopy is well positioned to win in the global cannabis market. We have a leading market share in the recreational market in Canada and a strong position in the medical market in both Canada and abroad. Additionally, I believe Canopy has the opportunity to create an unassailable global position in cannabis.
The bottom line is that Canopy should directly benefit from the perpetual struggles of chief competitors like Aurora. So, while Canopy is still losing money at an alarming rate and there's no telling when it will achieve profitability on a recurring basis, the overarching market dynamics have clearly started to favor Canopy -- a point underscored by its exceptional third-quarter results. Moreover, if Aurora can't change this narrative soon, Canopy may ultimately end up drinking its milkshake, so to speak.
Is this top pot stock an outstanding buy?
Cautious optimism is arguably warranted on the heels of these surprisingly strong financial results. Canopy still sports a sky-high valuation that simply isn't supported by its near-term outlook. Furthermore, it has to continue to grow sales, while drastically cutting expenses, in a period characterized by less-than-optimal market dynamics.
On the bright side, if David Klein can pull off this herculean feat, Canopy should have the inside track to the winner's circle in an industry that could experience exponential growth over the next decade. In brief, management may be the deciding factor in this ongoing war of attrition. Investors, therefore, should probably tie their buy or sell decisions directly to their view of Canopy's brain trust. Execution will be the name of the game from this point forward, after all.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
George Budwell has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Heading into Canopy's latest quarterly earnings, however, Wall Street's expectations were rather subdued, thanks to Aurora Cannabis' (NYSE: ACB) awful fiscal 2020 second-quarter results released the day before on Feb. 13. In short, Canopy was widely expected to underperform due to many of the same industrywide issues -- such as the dearth of retail outlets in key provinces and the slow introduction of high-margin derivative products -- plaguing Aurora at the moment. The bad news is that the industry's formative period will be brutal, a fact that's been playing out for the past 10 months with numerous executive departures, a sea of red ink, and a wave of downsizing across the space. | Heading into Canopy's latest quarterly earnings, however, Wall Street's expectations were rather subdued, thanks to Aurora Cannabis' (NYSE: ACB) awful fiscal 2020 second-quarter results released the day before on Feb. 13. Canopy Growth Corporation (NYSE: CGC) reported better-than-expected fiscal 2020 third-quarter results last Friday. Canopy has started to emerge as the undisputed king of the Canadian legal cannabis market, whereas Aurora is hanging on for dear life. | Heading into Canopy's latest quarterly earnings, however, Wall Street's expectations were rather subdued, thanks to Aurora Cannabis' (NYSE: ACB) awful fiscal 2020 second-quarter results released the day before on Feb. 13. Canopy has started to emerge as the undisputed king of the Canadian legal cannabis market, whereas Aurora is hanging on for dear life. Canopy's newly minted CEO David Klein stated as much in the company's latest quarterly conference call: I firmly believe Canopy is well positioned to win in the global cannabis market. | Heading into Canopy's latest quarterly earnings, however, Wall Street's expectations were rather subdued, thanks to Aurora Cannabis' (NYSE: ACB) awful fiscal 2020 second-quarter results released the day before on Feb. 13. Is this top pot stock an outstanding buy? Investors, therefore, should probably tie their buy or sell decisions directly to their view of Canopy's brain trust. |
37656.0 | 2020-02-17 00:00:00 UTC | 10 Reasons Aurora Cannabis' Q2 Report Was a Total Dumpster Fire | ACB | https://www.nasdaq.com/articles/10-reasons-aurora-cannabis-q2-report-was-a-total-dumpster-fire-2020-02-17 | nan | nan | The big day investors had been eagerly waiting for has come and gone. On Thursday, Feb. 13, before the opening bell, the most popular pot stock in the world, Aurora Cannabis (NYSE: ACB), lifted the hood on its fiscal second-quarter operating results.
It was no secret before the release of this report that it wasn't going to be great. Aurora wound up providing a corporate update on Feb. 6 that highlighted a number of strategy shifts, including a significant cost-cutting strategy, as well as provided a surface-scratching look at preliminary second-quarter sales. But no one could have imagined just how awful this quarterly report actually was.
Here, you'll find 10 reasons why I believe Aurora Cannabis' Q2 report is a complete dumpster fire.
Image source: Getty Images.
1. Pricing provisions led to a sales decline
The headline number that Wall Street and investors were waiting for was Aurora's total sales for Q2 2020. Ultimately, the company's net sales of $56 million Canadian wound up declining by 26% from the sequential first quarter. What really stood out, though, was the CA$10.6 million in provisions tied to returns and price adjustments, which wound up knocking 16% off of the company's CA$66.6 million in gross sales. While this is a bit less than the significant adjustments Canopy Growth took in its fiscal second quarter, it nevertheless demonstrates the supply and pricing problems Aurora and its peers are contending with.
2. Value products are wrecking margins
An interesting, yet disappointing, trend mentioned in the press release is that Aurora saw a marked increase in value-based cannabis sales. While this isn't all that surprising considering that legal channels have struggled to compete with the black market on price, it's confirmation that lower-margin marijuana could wreck the margins of Canadian growers for the foreseeable future.
3. Cash costs per gram actually increased from Q1 2020
To build on this previous point, Aurora Cannabis also announced that it cash costs to produce per gram sold actually increased on sequential basis to CA$0.88 per gram from CA$0.85 per gram in Q1 2020. While this isn't exactly an eye-opening increase, it's nevertheless baffling. You see, Aurora's maturation should allow for economies of scale and improved yields to push growing costs lower. The company's realigned strategy to focus on high-value, lower-margin cannabis may be to blame.
Image source: Getty Images.
4. International medical pot sales plummeted
Although it wasn't exactly a surprise, the company reported dismal overseas sales during the fiscal second quarter. International revenue came in at CA$1.8 million, down 64% from the sequential first quarter. This decline was due to a temporary suspension in product offerings in Germany, which has since been resolved. The problem is, medical cannabis sales are a substantially higher margin product than adult-use marijuana. In addition, Aurora invested heavily overseas, and it doesn't look as if those investments will pay dividends anytime soon.
5. Ancillary revenue fell across the board
One of the more overlooked aspects of Aurora Cannabis is that it has multiple sources of ancillary revenue, including patient counseling services, analytical testing services, and hemp production. At one time, these ancillary revenue sources were growing across the board. However, Q2 2020 saw every single ancillary sales category decline on a year-over-year basis, including a 70% drop in patient counseling services and a 53% plunge in analytical testing revenue.
6. Aurora's annual run rate down to 150,000 kilos
Certainly one of the bigger kicks in the behind for Aurora's shareholders had to be the company's update regarding production. As noted in the press release, "With continued refinement of our cultivation techniques, we expect to achieve quarterly harvest volumes leading to an average of 150,000 kgs annually or better." For context, this is a company that had been forecasting at least 625,000 kilos of run-rate output by the end of its fiscal 2020 (June 30, 2020). It's crystal clear that Aurora Cannabis is no longer Canada's leading producer.
Image source: Getty Images.
7. SG&A soared, including salary and benefit increases
During the company's corporate update on Feb. 6, it outlined plans to reduce its selling, general, and administrative (SG&A) expenses to a rate of CA$40 million to CA$45 million per quarter in an effort to become profitable. However, the company wound up reporting CA$99.9 million in SG&A during Q2 2020, which actually represents a 23% sequential quarterly increase. While some of this spending makes sense on paper, such as investing in educational campaigns surrounding the Cannabis 2.0 launch (i.e., derivatives), the press release also notes that salaries and benefits were increased (insert management-is-oblivious comment here), leading to higher SG&A.
8. Growth could be nonexistent in Q3
Further putting the nail in the coffin for Aurora Cannabis was the company's vague outlook for the fiscal third quarter. While often a leader in being highly transparent about its sales and profit outlook, the company expects "modest to no growth relative to fiscal Q2's cannabis revenue, excluding provisions." In other words, Aurora is counting on just CA$65 million in gross revenue in Q3 2020, which would not compare favorably to the CA$66.6 million in gross sales for this past quarter. It made no mention of what to expect on a bottom-line basis, but it's fairly evident that a loss is imminent.
9. Goodwill still accounts for 52% of total assets
Aurora Cannabis also wound up doing some much-needed balance sheet cleaning during the quarter, albeit it has a long way to go. The company took a CA$762.2 million writedown on goodwill, a CA$158.7 million impairment on its intangible assets, a CA$51.9 million impairment on property, plant and equipment, and a CA$46.2 million impairment on investments in associates. This is a big reason Aurora logged a CA$1.31 billion loss for the quarter.
But the thing to realize here is that its CA$2.41 billion in remaining goodwill still accounts for 52% of total assets. Add in intangible assets, and 62% of the company's balance sheet is built on hope and finger-crossing. I believe more big writedowns await.
Image source: Getty Images.
10. Access to capital declined by CA$141.5 million
As the icing on the cake, even though Aurora Cannabis was able to rework the debt covenants on its secured debt, its available line of capital was reduced by CA$141.5 million. This leaves the company with few avenues to raise cash, other than issuing its own stock. And, to speak to this point, Aurora ended calendar year 2019 with 1.17 billion shares outstanding. That's up from only 16 million shares outstanding on June 30, 2014. Yikes!
Aurora Cannabis offered virtually nothing encouraging for Wall Street in its fiscal second-quarter operating results, and investors would be wise to keep their distance. Remember, popularity is no guarantee of profitability when it comes to investing.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Sean Williams has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | On Thursday, Feb. 13, before the opening bell, the most popular pot stock in the world, Aurora Cannabis (NYSE: ACB), lifted the hood on its fiscal second-quarter operating results. While this isn't all that surprising considering that legal channels have struggled to compete with the black market on price, it's confirmation that lower-margin marijuana could wreck the margins of Canadian growers for the foreseeable future. While some of this spending makes sense on paper, such as investing in educational campaigns surrounding the Cannabis 2.0 launch (i.e., derivatives), the press release also notes that salaries and benefits were increased (insert management-is-oblivious comment here), leading to higher SG&A. | On Thursday, Feb. 13, before the opening bell, the most popular pot stock in the world, Aurora Cannabis (NYSE: ACB), lifted the hood on its fiscal second-quarter operating results. Pricing provisions led to a sales decline The headline number that Wall Street and investors were waiting for was Aurora's total sales for Q2 2020. Ancillary revenue fell across the board One of the more overlooked aspects of Aurora Cannabis is that it has multiple sources of ancillary revenue, including patient counseling services, analytical testing services, and hemp production. | On Thursday, Feb. 13, before the opening bell, the most popular pot stock in the world, Aurora Cannabis (NYSE: ACB), lifted the hood on its fiscal second-quarter operating results. SG&A soared, including salary and benefit increases During the company's corporate update on Feb. 6, it outlined plans to reduce its selling, general, and administrative (SG&A) expenses to a rate of CA$40 million to CA$45 million per quarter in an effort to become profitable. In other words, Aurora is counting on just CA$65 million in gross revenue in Q3 2020, which would not compare favorably to the CA$66.6 million in gross sales for this past quarter. | On Thursday, Feb. 13, before the opening bell, the most popular pot stock in the world, Aurora Cannabis (NYSE: ACB), lifted the hood on its fiscal second-quarter operating results. At one time, these ancillary revenue sources were growing across the board. However, the company wound up reporting CA$99.9 million in SG&A during Q2 2020, which actually represents a 23% sequential quarterly increase. |
37657.0 | 2020-02-16 00:00:00 UTC | It's Now Abundantly Clear: Canopy Growth Is in a Different League From Aurora Cannabis | ACB | https://www.nasdaq.com/articles/its-now-abundantly-clear%3A-canopy-growth-is-in-a-different-league-from-aurora-cannabis-2020 | nan | nan | I've tended to lump Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC) together as the top-tier players in the Canadian cannabis industry. And to some extent, that grouping was right. Both Aurora and Canopy lead the industry in production capacity. They both claim the highest market shares in the Canadian adult-use recreational marijuana market.
But from this point forward, I won't place both Aurora and Canopy in the top tier among Canadian cannabis producers. The two companies reported their latest quarterly results last week. And it's now abundantly clear that Canopy Growth is in a different league from Aurora.
Image source: Getty Images.
Results vs. excuses
Yes, Aurora reported dismal fiscal 2020 Q2 results while Canopy Growth announced fiscal 2020 Q3 results that were much better than expected. But the differences between those updates went beyond the numbers. Aurora had excuses, while Canopy produced results.
Probably the best example of related to quarter-over-quarter revenue comparisons. Aurora's net revenue plunged 26% sequentially. Most of this decline related to the company's big adjustment for product returns and price adjustments. But Aurora also attributed its poor performance in part to "the industrywide impact from the slow pace of retail store licensing."
Contrast that with what Canopy Growth said about its 62% quarter-over-quarter jump in net revenue. The company singled out the opening of 140 new stores during its fiscal third quarter as a key factor behind its solid sales growth in the adult-use recreational market.
Keep in mind that Aurora and Canopy compete in the same markets. The companies face the same headwinds. However, Canopy appears to be navigating those headwinds more effectively than Aurora is.
Execution vs. mistakes
One reason why Aurora Cannabis' Q2 revenue was lower stemmed from a big mistake made by the company. In December, Aurora announced that German authorities had temporarily suspended its license to sell medical cannabis in the country.
The problem was that Aurora had used radiation to kill microbes on cannabis plants without first obtaining the necessary permit to market irradiated cannabis products. This embarrassing glitch cost the company 3.2 million in Canadian dollars (around US$2.4 million) in its second quarter.
Canopy Growth capitalized on Aurora's blunder. It stated that its medical cannabis sales in Germany were "higher than expected due to opportunistic sales into the German market to fill a supply gap that resulted from a regulatory enforced sales halt of cannabis products offered by another vendor." Aurora's pain was Canopy's gain.
Meanwhile, Canopy's strategic acquisitions paid off for the company. German cannabinoid company C3, German vaporizer manufacturer Storz & Bickel, British skincare and sleep solutions company This Works, and Canadian sports nutrition company BioSteel were all bought by Canopy over the past year -- and they all contributed to organic growth for the big cannabis producer.
A big partner vs. a big hope
The biggest differentiator between Canopy Growth and Aurora Cannabis isn't a new one. Canopy already has a big partner in alcoholic beverage giant Constellation Brands (NYSE: STZ). Aurora is still only hoping to land a major partner.
This gap showed up big-time on Aurora's and Canopy's balance sheets in their quarterly updates. Aurora reported cash and cash equivalents of CA$156.3 million as of Dec. 31, 2019. Canopy's cash stockpile totaled CA$2.27 billion, including cash, cash equivalents, and marketable securities.
It's hard to overstate just how big of an advantage the relationship with Constellation gives to Canopy. The huge amount of cash is obviously an important plus. But Canopy also has access to Constellation's distribution network in the U.S. for marketing its hemp-based CBD products. Aurora doesn't even have a presence in the U.S. CBD market yet.
Sure, Aurora could find a partner. However, there wasn't a single reference to the company's efforts to do so in the Q2 conference call. Probably the closest thing to it was a brief comment by interim CEO and Executive Chairman Michael Singer that Aurora will likely look for a new CEO with experience in the consumer packaged goods (CPG) industry. Of course, Canopy already has a new CEO with CPG experience, with former Constellation Brands CFO David Klein now leading the company.
Top vs. not
Can Aurora Cannabis be a big winner? Absolutely. It could rebound in Germany. It could achieve success in the Cannabis 2.0 market. It could find a fantastic new CEO. And, yes, Aurora could even land a big partner at some point.
However, Canopy still claims the top market share in Canada. Its revenue is growing. Its bottom line is improving. The company has a management team in place that appears to be highly competent and inspires shareholders' confidence. Aurora can't make any of these claims yet.
Like it or not, there are several tiers for Canadian marijuana stocks. The reality is that Canopy Growth is in the top tier right now, but Aurora isn't.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Keith Speights has no position in any of the stocks mentioned. The Motley Fool recommends Constellation Brands. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | I've tended to lump Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC) together as the top-tier players in the Canadian cannabis industry. But from this point forward, I won't place both Aurora and Canopy in the top tier among Canadian cannabis producers. The company singled out the opening of 140 new stores during its fiscal third quarter as a key factor behind its solid sales growth in the adult-use recreational market. | I've tended to lump Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC) together as the top-tier players in the Canadian cannabis industry. But from this point forward, I won't place both Aurora and Canopy in the top tier among Canadian cannabis producers. Results vs. excuses Yes, Aurora reported dismal fiscal 2020 Q2 results while Canopy Growth announced fiscal 2020 Q3 results that were much better than expected. | I've tended to lump Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC) together as the top-tier players in the Canadian cannabis industry. German cannabinoid company C3, German vaporizer manufacturer Storz & Bickel, British skincare and sleep solutions company This Works, and Canadian sports nutrition company BioSteel were all bought by Canopy over the past year -- and they all contributed to organic growth for the big cannabis producer. A big partner vs. a big hope The biggest differentiator between Canopy Growth and Aurora Cannabis isn't a new one. | I've tended to lump Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC) together as the top-tier players in the Canadian cannabis industry. They both claim the highest market shares in the Canadian adult-use recreational marijuana market. But from this point forward, I won't place both Aurora and Canopy in the top tier among Canadian cannabis producers. |
37658.0 | 2020-02-16 00:00:00 UTC | The Most Important Number to Look at Before Buying a Pot Stock | ACB | https://www.nasdaq.com/articles/the-most-important-number-to-look-at-before-buying-a-pot-stock-2020-02-16 | nan | nan | When a company releases its earnings report, two main items are typically the focus for analysts and investors -- revenue and earnings. While those are important numbers to keep an eye on, they may not be the most important, especially in the cannabis industry.
Revenue growth is important, but for companies to continue operating and growing, they need to be generating cash. That's why investors should always start with the statement of cash flow when assessing whether a stock is a good investment or not. In particular, one item should be the focus.
Cash flow from operating activities
At a minimum, a company should be generating positive cash flow from its day-to-day operations. If it's not bringing in more cash than it's spending, that's where investors can expect to see debt or equity issues and cuts to expenses, including job cuts. The severity of these decisions will depend on the long-term trending of operating cash flows. Working capital, for instance, can skew the numbers during a period if a company paid a lot of its liabilities down.
However, if a company is continually burning through cash from its operations, that's where investors need to assess whether it's a good investment or not. Take, for example, a company like Aurora Cannabis (NYSE: ACB) which in the past month announced 500 job cuts. In its most recent earnings report released on Feb. 13, Aurora used up 230 million Canadian dollars to fund its operating activities over the past six months. That's nearly double the CA$133 million it used up a year ago during the same period.
Image source: Getty Images.
Operating activities don't factor in capital expenditures, which will only add to a company's cash needs. If Aurora had not disposed of marketable securities worth CA$84.8 million, the company would have burned through more than CA$475 million from its operating and investing activities combined.
It's normally in the financing section where we see a company make up for this shortfall if it doesn't want to chip away at its cash balance. And indeed, during the past six months, Aurora has issued shares to generate CA$320.8 million and long-term loans which have brought in another CA$64 million in cash.
The danger is that as its stock price continues to fall, issuing shares becomes less and less optimal. It'll lead to more dilution, as more shares will need to be issued to generate the same amount of cash as when the stock was performing better.
Why cash flow should take priority over other statements
The statement of cash flow is one area where a company's results are easy to follow. On the income statement, however, it's not uncommon to find nonoperating items and revaluation gains sometimes making a mess of a company's performance, and as a result, the numbers can be difficult to understand. When looking at cash flow, there are only three sections that investors need to focus on, and that can help minimize the complexity (especially since day-to-day operations are all grouped together).
The statement of cash flow can also be very useful in identifying problems that other statements won't uncover. Whether it's trouble collecting payments or spending too much on inventory, looking at cash flow can help investors track the movement of money, which isn't always clear when looking at an income statement or balance sheet.
Should investors avoid companies with negative cash flow?
For risk-averse investors, it's probably easiest to steer clear of cash-burning companies. Unless they're sitting on a lot of cash, like Canopy Growth from the $4 billion investment it received from Constellation Brands in 2018, a high rate of cash burn can create problems for investors down the road.
That's why many pot stocks are risky buys today, as many are burning through lots of cash. And while they may obtain funding in the short term, that's only a temporary solution. Until a company can become cash-flow positive, it won't be self-sustaining, which can lead to debt, dilution, and all sorts of bad words for investors.
Whether you're investing in Aurora, Canopy Growth, or any pot stock, you should always consider their operating cash flow. It could help uncover other problems in the business and help you decide whether the potential rewards are worth the risk.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
David Jagielski has no position in any of the stocks mentioned. The Motley Fool recommends Constellation Brands. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Take, for example, a company like Aurora Cannabis (NYSE: ACB) which in the past month announced 500 job cuts. In its most recent earnings report released on Feb. 13, Aurora used up 230 million Canadian dollars to fund its operating activities over the past six months. On the income statement, however, it's not uncommon to find nonoperating items and revaluation gains sometimes making a mess of a company's performance, and as a result, the numbers can be difficult to understand. | Take, for example, a company like Aurora Cannabis (NYSE: ACB) which in the past month announced 500 job cuts. In its most recent earnings report released on Feb. 13, Aurora used up 230 million Canadian dollars to fund its operating activities over the past six months. If Aurora had not disposed of marketable securities worth CA$84.8 million, the company would have burned through more than CA$475 million from its operating and investing activities combined. | Take, for example, a company like Aurora Cannabis (NYSE: ACB) which in the past month announced 500 job cuts. Cash flow from operating activities At a minimum, a company should be generating positive cash flow from its day-to-day operations. Why cash flow should take priority over other statements The statement of cash flow is one area where a company's results are easy to follow. | Take, for example, a company like Aurora Cannabis (NYSE: ACB) which in the past month announced 500 job cuts. Cash flow from operating activities At a minimum, a company should be generating positive cash flow from its day-to-day operations. In its most recent earnings report released on Feb. 13, Aurora used up 230 million Canadian dollars to fund its operating activities over the past six months. |
37659.0 | 2020-02-15 00:00:00 UTC | Mexico Moves Closer to Legalizing Cannabis, but 1 Issue Still Remains | ACB | https://www.nasdaq.com/articles/mexico-moves-closer-to-legalizing-cannabis-but-1-issue-still-remains-2020-02-15 | nan | nan | This is expected to be another history-making year for the rapidly growing global cannabis industry.
In 2018, we witnessed Canada become the first industrialized country in the modern era to greenlight recreational marijuana. This was followed in 2019 by Illinois becoming the first U.S. state to legalize the consumption and sale of adult-use weed entirely at the legislative level, as well as include an expungement clause for persons previously convicted of pot possession.
But this year holds something truly special in store. In 2020, we'll witness Mexico become the first country to legalize recreational marijuana based entirely on a ruling by its Supreme Court.
Image source: Getty Images.
Mexico must legalize adult-use cannabis by the end of April
While this legalization is likely to happen soon, there's still a pretty big issue that needs some ironing out. But before delving into the reason for the holdup, let me provide a little background on how Mexico even landed on the verge of legalization.
It all began in late October 2018, when Mexico's highest court ruled that an absolute ban on the recreational use and possession of marijuana was unconstitutional. This ruling happened to be the fifth such occasion over a period of roughly two years where Mexico's Supreme Court reached a similar verdict. Under Mexican law, when its highest court reaches a similar verdict five times, it becomes the set standard throughout the country. In effect, the Supreme Court legalized adult-use marijuana and tasked lawmakers in Mexico with creating the legal framework for a retail marketplace.
Following this ruling, the Mexican Supreme Court gave lawmakers one year to craft the appropriate legislation and implement it. However, lawmakers didn't really get into the weeds of discussing this framework until October 2019, leaving little time to spare or room for compromise. Ultimately, Mexico's lawmakers asked for a last-minute extension to the Supreme Court's deadline and received it (albeit on a one-time basis). Now, lawmakers are required to come up with the regulatory framework for a legal market environment by no later than the end of April.
Sounds pretty straightforward, right? Well, it's not as cut and dried as it would appear.
Image source: Getty Images.
Social equity remains a holdup during the negotiating process
This past week, Marijuana Moment reported that, according to a top senator in Mexico, Congress would vote on a bill to legalize cannabis this month. Although the exact nature of the bill hasn't been released, we were privy to an October 2019 proposal (prior to the Supreme Court's extension) that had relatively broad favorability on a number of points.
For those who may recall, the October 2019 bill called for:
A legal age for consumption and purchase of 18 or older.
Consumption to occur in private.
Strict packaging regulations designed to deter adolescent usage.
Edibles and infused beverages to be off-limits for recreational users.
The creation of The Cannabis Institute to oversee the industry.
While not every lawmaker in Mexico necessarily wants to see cannabis legalized, the Supreme Court decision forces their hands. Among these provisions above, there was virtually no public pushback last year.
There's been disagreement in regard to social equity provisions contained in the October bill, and also in the proposal making its rounds now in Mexico's Congress. In particular, some lawmakers have called for low-income individuals, small farmers, indigenous peoples, and those most impacted by the drug war in Mexico to be first in line to receive licenses, rather than big businesses.
Considering the pushback against this provision in October, it's to be expected that lawmakers are, once again, disagreeing over this social equity provision in the new bill circulating in Congress. This makes it unlikely that Mexico will legalize marijuana in February, especially with Marijuana Moment noting that legislative leaders have yet to convene meetings on the new proposal as of yet. However, the clock is ticking, and the Supreme Court has made it clear that there's no extension to be granted this time around.
Image source: Getty Images.
Mexico is unlikely to be a land of riches for marijuana stock investors
Although Mexico is forecast by the 2019 State of the Legal Cannabis Markets report to top $1 billion in annual sales by 2024, making it one of the highest revenue-generating marijuana markets in the world, it's unlikely to become a market of significance for investors. As noted, some lawmakers are attempting to implement a social equity provision to ensure that Mexico's adult-use industry is dominated by small businesses and local farmers. That's no good for investors in publicly traded marijuana stocks.
Making matters worse, if the new proposal were to mirror the October bill and limit access of edibles and infused beverages to medical patients, it would be a pretty significant blow to investors. Derivatives, such as edibles and infused beverages, sport considerably higher margins than dried cannabis flower. Over time, dried flower has demonstrated a propensity to be oversupplied and commoditized in a number of recreationally legal U.S. states. Thus, pot stock investors looking for their piece of the Mexican cannabis market would be banking on quantity, not quality.
Lastly, even if Mexico's lawmakers allow big businesses to get in on the green rush, there just aren't any intriguing options to take advantage of the Mexican cannabis market. Aurora Cannabis (NYSE: ACB) has a presence in the country through its ownership of Farmacias Magistrales, but the company isn't exactly on the best financial footing.
Aurora Cannabis recently announced a sweeping overhaul that called for significant cost cuts, including 500 layoffs, and a focus on foreign markets that would immediately generate revenue for the company. Given Aurora's potentially serious cash situation, it doesn't exactly have a lot to gain by chasing low-margin cannabis sales in Mexico when it becomes legal.
While recreational legalization should be no more than 10.5 weeks away in Mexico, it's not an event of significance for pot stock investors.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Sean Williams has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Aurora Cannabis (NYSE: ACB) has a presence in the country through its ownership of Farmacias Magistrales, but the company isn't exactly on the best financial footing. Social equity remains a holdup during the negotiating process This past week, Marijuana Moment reported that, according to a top senator in Mexico, Congress would vote on a bill to legalize cannabis this month. Making matters worse, if the new proposal were to mirror the October bill and limit access of edibles and infused beverages to medical patients, it would be a pretty significant blow to investors. | Aurora Cannabis (NYSE: ACB) has a presence in the country through its ownership of Farmacias Magistrales, but the company isn't exactly on the best financial footing. This ruling happened to be the fifth such occasion over a period of roughly two years where Mexico's Supreme Court reached a similar verdict. In effect, the Supreme Court legalized adult-use marijuana and tasked lawmakers in Mexico with creating the legal framework for a retail marketplace. | Aurora Cannabis (NYSE: ACB) has a presence in the country through its ownership of Farmacias Magistrales, but the company isn't exactly on the best financial footing. In effect, the Supreme Court legalized adult-use marijuana and tasked lawmakers in Mexico with creating the legal framework for a retail marketplace. Mexico is unlikely to be a land of riches for marijuana stock investors Although Mexico is forecast by the 2019 State of the Legal Cannabis Markets report to top $1 billion in annual sales by 2024, making it one of the highest revenue-generating marijuana markets in the world, it's unlikely to become a market of significance for investors. | Aurora Cannabis (NYSE: ACB) has a presence in the country through its ownership of Farmacias Magistrales, but the company isn't exactly on the best financial footing. In 2020, we'll witness Mexico become the first country to legalize recreational marijuana based entirely on a ruling by its Supreme Court. Mexico is unlikely to be a land of riches for marijuana stock investors Although Mexico is forecast by the 2019 State of the Legal Cannabis Markets report to top $1 billion in annual sales by 2024, making it one of the highest revenue-generating marijuana markets in the world, it's unlikely to become a market of significance for investors. |
37660.0 | 2020-02-14 00:00:00 UTC | Don't Buy Aurora Cannabis Stock Until These 3 Things Happen | ACB | https://www.nasdaq.com/articles/dont-buy-aurora-cannabis-stock-until-these-3-things-happen-2020-02-14 | nan | nan | Yesterday, Aurora Cannabis (NYSE: ACB) unveiled its fiscal 2020 second-quarter results. Even though the company performed terribly on nearly every financial metric possible for the three-month period, the company's stock still ended the day in positive territory.
Some investors, in short, seem to be convinced that the bottom has finally arrived. After all, Aurora's stock is down by a jaw-dropping 80% over the past 12 months, it is in the process of making major changes to the C-suite, and it recently announced a number of structural changes that should drastically reduce expenses from this point forward. Nonetheless, the worst may be yet to come. Here are three specific events that arguably need to take place before Aurora's shares can be considered a worthwhile long-term buy.
Image source: Getty Images.
Don't push the buy button until these three things happen...
Last week, Aurora announced that longtime CEO Terry Booth would step down effective immediately. In his place, Executive Chairman Michael Singer agreed to take command on an interim basis. As Aurora clearly needs a fresh set of eyes, investors probably shouldn't dip their toes in the water, so to speak, until a permanent CEO has been hired. After all, Aurora might be unable to attract a first-round draft pick to fill this key executive position. And without strong leadership, the pot titan may never recover from this rather deep hole.
During its latestearnings call Aurora's brain trust announced that the remaining amount under the company's at-the-market financing program should be sufficient to get it over the hump financially -- that is, until it reaches "positive EBITDA and good cash flow." While the company has made major strides toward reducing costs by idling key grow facilities and eliminating a sizable chunk of its workforce, Aurora still isn't anywhere near profitability as things stand now. So, in short, the company might ultimately have to recapitalize to become a viable long-term player in this emerging space.
Aurora's recapitalization phase, however, is likely to entail a reverse stock split. In effect, Aurora may have to reduce the number of outstanding shares in order to boost its share price, paving the way for a massive follow-on public offering. At current levels, Aurora can't continually tap the public markets for capital without running the risk of being delisted from the New York Stock Exchange for failing to meet the minimum bid requirement.
What's next?
All eyes are now focused on Aurora's CEO search. The next CEO will have to immediately address the company's problematic balance sheet and fairly weak near-term growth prospects. That's a tall order, to put it mildly, and Aurora will need a healthy dose of luck to find the right person. But the company -- despite these myriad problems -- still has the inside track at evolving into a legit titan of the legal cannabis industry by the end of the decade. That being said, Aurora desperately needs the structural problems plaguing the Canadian cannabis market to evaporate soon. Otherwise, the company's breathtaking value proposition, which has made it one of the most popular stocks among retail investors, could go up in smoke before the end of 2020.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
George Budwell has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Yesterday, Aurora Cannabis (NYSE: ACB) unveiled its fiscal 2020 second-quarter results. During its latestearnings call Aurora's brain trust announced that the remaining amount under the company's at-the-market financing program should be sufficient to get it over the hump financially -- that is, until it reaches "positive EBITDA and good cash flow." While the company has made major strides toward reducing costs by idling key grow facilities and eliminating a sizable chunk of its workforce, Aurora still isn't anywhere near profitability as things stand now. | Yesterday, Aurora Cannabis (NYSE: ACB) unveiled its fiscal 2020 second-quarter results. Here are three specific events that arguably need to take place before Aurora's shares can be considered a worthwhile long-term buy. After all, Aurora might be unable to attract a first-round draft pick to fill this key executive position. | Yesterday, Aurora Cannabis (NYSE: ACB) unveiled its fiscal 2020 second-quarter results. Even though the company performed terribly on nearly every financial metric possible for the three-month period, the company's stock still ended the day in positive territory. While the company has made major strides toward reducing costs by idling key grow facilities and eliminating a sizable chunk of its workforce, Aurora still isn't anywhere near profitability as things stand now. | Yesterday, Aurora Cannabis (NYSE: ACB) unveiled its fiscal 2020 second-quarter results. Even though the company performed terribly on nearly every financial metric possible for the three-month period, the company's stock still ended the day in positive territory. So, in short, the company might ultimately have to recapitalize to become a viable long-term player in this emerging space. |
37661.0 | 2020-02-14 00:00:00 UTC | Stock Market News: Canopy Growth Goes Higher; Expedia Takes Off | ACB | https://www.nasdaq.com/articles/stock-market-news%3A-canopy-growth-goes-higher-expedia-takes-off-2020-02-14 | nan | nan | Friday morning brought a pause to Wall Street, resting after its most recent surge to record-high levels. Investors are still debating whether the coronavirus outbreak will have a dramatic impact on the global economy, with rising death tolls but also signs of hope that an effective treatment might come in the not-too-distant future. As of 10:30 a.m. EST, the Dow Jones Industrial Average (DJINDICES: ^DJI) was down 9 points to 29,414. The S&P 500 (SNPINDEX: ^GSPC) was up 2 points to 3,376, and the Nasdaq Composite (NASDAQINDEX: ^IXIC) had gained ground, picking up 12 points to 9,724.
The cannabis industry has been under pressure for a long time, but industry leader Canopy Growth (NYSE: CGC) saw some encouraging signs that lit a fire under its stock price. Meanwhile, online travel specialist Expedia Group (NASDAQ: EXPE) came out with good news of its own that could get investors less concerned about the headwinds facing the travel industry right now.
A leap forward for Canopy
Shares of Canopy Growth jumped 18% after the Canadian cannabis company reported its fiscal third-quarter results. After a long period of pessimism about marijuana stocks, the news from Canopy restored some confidence in the industry's future.
Image source: Canopy Growth.
Canopy's numbers showed the efforts that the company has made on multiple fronts to improve its financial performance. Net revenue climbed 13% from its level three months earlier, even accounting for the one-time impact of restructuring charges that Canopy took in the previous quarter. Meanwhile, cost discipline was evident, as operating expenses fell 14% on cuts in both overhead expenses and stock-based compensation.
In the Canadian marijuana market, Canopy has emerged as an industry leader. On the recreational side, the company boasted industry-leading market share of 22%. Canopy also continues to see more customers flood in on the medical marijuana front. More broadly, the cannabis company is enjoying strong demand for products across its price and quality spectrum, in both premium offerings and its more value-priced dried flower and prerolled joint products.
Coming after the bad news that Aurora Cannabis (NYSE: ACB) revealed earlier this week, Canopy's positive results were a welcome surprise. The stock has a lot further to go before it can recover all of its recent losses, but today's move is a good start.
Expedia moves forward
Shares of Expedia Group were higher by 10% in the wake of the release of the online travel provider's fourth-quarter financial report. The company's gone through considerable turmoil lately, but investors seem encouraged by the progress that Expedia's made recently.
Expedia's quarterly results were mixed, with an 8% rise in revenue counterbalancing a 4% drop in adjusted net income. Growth in room-nights for accommodations came in at 11%. However, the quarterly figures were enough to give Expedia gains on both the top and bottom lines for the full 2019 year.
Now Expedia faces two challenges. Chairman Barry Diller, who took over executive responsibilities after the company's previous CEO and CFO left, is looking to get a management team in place that will share the board of directors' strategic vision for Expedia. At the same time, the Covid-19 outbreak has caused enormous uncertainty throughout the travel industry.
Yet neither of those challenges stopped Expedia from predicting double-digit percentage gains in earnings for 2020, stemming from further cost-cutting efforts and restructuring. That has shareholders excited about Expedia's prospects even in the face of near-term headwinds.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Coming after the bad news that Aurora Cannabis (NYSE: ACB) revealed earlier this week, Canopy's positive results were a welcome surprise. Investors are still debating whether the coronavirus outbreak will have a dramatic impact on the global economy, with rising death tolls but also signs of hope that an effective treatment might come in the not-too-distant future. Net revenue climbed 13% from its level three months earlier, even accounting for the one-time impact of restructuring charges that Canopy took in the previous quarter. | Coming after the bad news that Aurora Cannabis (NYSE: ACB) revealed earlier this week, Canopy's positive results were a welcome surprise. The cannabis industry has been under pressure for a long time, but industry leader Canopy Growth (NYSE: CGC) saw some encouraging signs that lit a fire under its stock price. A leap forward for Canopy Shares of Canopy Growth jumped 18% after the Canadian cannabis company reported its fiscal third-quarter results. | Coming after the bad news that Aurora Cannabis (NYSE: ACB) revealed earlier this week, Canopy's positive results were a welcome surprise. The cannabis industry has been under pressure for a long time, but industry leader Canopy Growth (NYSE: CGC) saw some encouraging signs that lit a fire under its stock price. Meanwhile, online travel specialist Expedia Group (NASDAQ: EXPE) came out with good news of its own that could get investors less concerned about the headwinds facing the travel industry right now. | Coming after the bad news that Aurora Cannabis (NYSE: ACB) revealed earlier this week, Canopy's positive results were a welcome surprise. Meanwhile, online travel specialist Expedia Group (NASDAQ: EXPE) came out with good news of its own that could get investors less concerned about the headwinds facing the travel industry right now. A leap forward for Canopy Shares of Canopy Growth jumped 18% after the Canadian cannabis company reported its fiscal third-quarter results. |
37662.0 | 2020-02-14 00:00:00 UTC | 10 Pot Stocks That Could Run Out of Money in 10 Months (or Less) | ACB | https://www.nasdaq.com/articles/10-pot-stocks-that-could-run-out-of-money-in-10-months-or-less-2020-02-14 | nan | nan | No one ever said that launching a high-growth industry from the ground up (literally) was easy. Just ask the cannabis industry and pot stock investors for confirmation.
The pot industry entered 2019 with (pardon the pun) high hopes. Unfortunately, those hopes were replaced by deep disappointment when the curtain closed on the year. Supply bottlenecks and shortages dominated the Canadian landscape, while high tax rates and a resilient black market made life difficult for U.S. multistate operators. Put simply, what could go wrong did go wrong for marijuana stocks and the industry as a whole in 2019.
While a new year does bring new opportunities, a handful of the same challenges that affected the industry in 2019 have become even more pronounced in 2020. In particular, financing remains a major worry for both Canadian and U.S. pot stocks.
Image source: Getty Images.
Cannabis stocks are running on cash fumes, report suggests
Earlier this week, boutique investment banking company Ello Capital put this concern into glaring focus. Ello wound up looking at 13 of the largest U.S. pot stocks, as well as seven of the largest Canadian cannabis stocks, and estimated how long they could survive given their current monthly cash burn and available cash on hand. The results were definitely surprising.
According to Ello, the average U.S. pot stock has just 14 months of available cash before running out of money. Meanwhile, the seven Canadian pot stocks it examined had only 6.5 months of cash liquidity, on average, before running out.
In total, the following 10 pot stocks have 10 months or less of available cash on hand, per Ello Capital:
Green Growth Brands: 0.9 months
4Front Ventures: 1.1 months
Aurora Cannabis (NYSE: ACB): 2.3 months
Tilray: 3.7 months
The Green Organic Dutchman: 3.9 months
MedMen Enterprises (OTC: MMNFF): 6 months
HEXO (NYSE: HEXO): 6.5 months
Canopy Growth (NYSE: CGC): 7.7 months
Harvest Health & Recreation: 9.2 months
iAnthus Capital Holdings: 10 months
No doubt, some of these projections are eye-opening. However, it's important to note that Ello's estimates don't take into consideration short-term investments or cash used in acquisitions. For example, Canopy Growth ended the September quarter with 2.74 billion Canadian dollars ($2.06 billion U.S.) in cash, cash equivalents, and short-term investments, combined. However, Ello is taking less than half this amount into account when tabulating Canopy's cash runway, thus leading to a forecast of only 7.7 months of cash remaining, despite a $4 billion equity investment from Constellation Brands in November 2018.
Image source: Getty Images.
Ello is probably correct about the direness of some of these situations
While Canopy Growth is far better off than the above figures imply, other pot stocks are genuinely in trouble.
Aurora Cannabis, for instance, is forecast to run out of cash by midyear, according to GLJ Research founder Gordon Johnson, while Ello suggests that Aurora's doomsday is even closer -- although Ello failed to account for CA$39.4 million in marketable securities on the company's balance sheet at the end of the fiscal first quarter.
Nevertheless, recent corporate moves suggest that Aurora is in serious trouble. The company has seen plenty of management turnover, has halted construction at two key projects while putting another greenhouse up for sale, and announced plans to write off close to $1 billion from its balance sheet. Further, with the company's credit line reduced by CA$141.5 million, Aurora's only means of raising capital at the moment is to sell its stock and dilute its already beaten-down shareholders even more.
In the U.S., MedMen Enterprises looks to be operating on borrowed time. Despite securing up to $280 million in financing from private equity firm Gotham Green Partners, it announced in December that the final $115 million of this financing was no longer available for use. In recent weeks, MedMen has attempted to pay its vendors with its own common stock -- a testament to how serious its cash deficiency has become. Even after calling off its all-stock acquisition of PharmaCann in October, it's unclear if MedMen has the capital to survive.
HEXO is another obvious concern. Even though it's been able to raise around CA$100 million since October through a combination of stock offerings and a convertible debenture, HEXO is no lock to have enough capital to execute on its long-term strategy. Mind you, that's with HEXO idling about a third of its peak capacity cultivation and laying off 200 workers in an effort to significantly reduce its operating expenses.
It is worth noting that a small number of pot stocks have a longer cash runway. According to Ello, Cronos Group has roughly seven years of cash on hand, with Curaleaf and Cresco Labs in the U.S. having in excess of three years, and more than two years, of respective cash.
Image source: Getty Images.
Will things improve for pot stocks?
Keeping in mind that there are limitations to Ello's projections, the big question at this point has to be, "Will pot stocks go bankrupt?" I believe the answer is most definitely yes. We will, at some point, see one or more brand-name pot stocks fail. Failure is a part of every industry, and the fast-growing weed industry is no exception.
In Canada, despite cannabis being legal, banks are simply unwilling to extend the olive branch due to the poor operating performances of marijuana businesses. These operating results are unlikely to improve significantly until Ontario issues additional retail store licenses and a lot of dispensaries open for business. That bodes poorly for the likes of Aurora Cannabis and HEXO, which are both counting on Canada's most populous province.
Meanwhile, U.S. cannabis stocks very much need banking reform measures to pass in the Senate. Senate Banking Committee Chairman Mike Crapo (R-Idaho) has offered a number of suggestions to the Secure and Fair Enforcement (SAFE) Banking Act that would neutralize its effectiveness and has, for all intents and purposes, stalled the SAFE Banking Act on Capitol Hill. Without easy access to traditional forms of financing, there's no question that multistate operators that have overextended themselves (ahem, MedMen) could be in serious trouble.
Without any immediate remedies on the financing front for North American pot stocks, things could get worse before they get better.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Sean Williams has no position in any of the stocks mentioned. The Motley Fool recommends Constellation Brands, Cresco Labs Inc., and HEXO. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | In total, the following 10 pot stocks have 10 months or less of available cash on hand, per Ello Capital: Green Growth Brands: 0.9 months 4Front Ventures: 1.1 months Aurora Cannabis (NYSE: ACB): 2.3 months Tilray: 3.7 months The Green Organic Dutchman: 3.9 months MedMen Enterprises (OTC: MMNFF): 6 months HEXO (NYSE: HEXO): 6.5 months Canopy Growth (NYSE: CGC): 7.7 months Harvest Health & Recreation: 9.2 months iAnthus Capital Holdings: 10 months No doubt, some of these projections are eye-opening. Supply bottlenecks and shortages dominated the Canadian landscape, while high tax rates and a resilient black market made life difficult for U.S. multistate operators. Cannabis stocks are running on cash fumes, report suggests Earlier this week, boutique investment banking company Ello Capital put this concern into glaring focus. | In total, the following 10 pot stocks have 10 months or less of available cash on hand, per Ello Capital: Green Growth Brands: 0.9 months 4Front Ventures: 1.1 months Aurora Cannabis (NYSE: ACB): 2.3 months Tilray: 3.7 months The Green Organic Dutchman: 3.9 months MedMen Enterprises (OTC: MMNFF): 6 months HEXO (NYSE: HEXO): 6.5 months Canopy Growth (NYSE: CGC): 7.7 months Harvest Health & Recreation: 9.2 months iAnthus Capital Holdings: 10 months No doubt, some of these projections are eye-opening. Cannabis stocks are running on cash fumes, report suggests Earlier this week, boutique investment banking company Ello Capital put this concern into glaring focus. For example, Canopy Growth ended the September quarter with 2.74 billion Canadian dollars ($2.06 billion U.S.) in cash, cash equivalents, and short-term investments, combined. | In total, the following 10 pot stocks have 10 months or less of available cash on hand, per Ello Capital: Green Growth Brands: 0.9 months 4Front Ventures: 1.1 months Aurora Cannabis (NYSE: ACB): 2.3 months Tilray: 3.7 months The Green Organic Dutchman: 3.9 months MedMen Enterprises (OTC: MMNFF): 6 months HEXO (NYSE: HEXO): 6.5 months Canopy Growth (NYSE: CGC): 7.7 months Harvest Health & Recreation: 9.2 months iAnthus Capital Holdings: 10 months No doubt, some of these projections are eye-opening. Cannabis stocks are running on cash fumes, report suggests Earlier this week, boutique investment banking company Ello Capital put this concern into glaring focus. Ello wound up looking at 13 of the largest U.S. pot stocks, as well as seven of the largest Canadian cannabis stocks, and estimated how long they could survive given their current monthly cash burn and available cash on hand. | In total, the following 10 pot stocks have 10 months or less of available cash on hand, per Ello Capital: Green Growth Brands: 0.9 months 4Front Ventures: 1.1 months Aurora Cannabis (NYSE: ACB): 2.3 months Tilray: 3.7 months The Green Organic Dutchman: 3.9 months MedMen Enterprises (OTC: MMNFF): 6 months HEXO (NYSE: HEXO): 6.5 months Canopy Growth (NYSE: CGC): 7.7 months Harvest Health & Recreation: 9.2 months iAnthus Capital Holdings: 10 months No doubt, some of these projections are eye-opening. Cannabis stocks are running on cash fumes, report suggests Earlier this week, boutique investment banking company Ello Capital put this concern into glaring focus. However, Ello is taking less than half this amount into account when tabulating Canopy's cash runway, thus leading to a forecast of only 7.7 months of cash remaining, despite a $4 billion equity investment from Constellation Brands in November 2018. |
37663.0 | 2020-02-14 00:00:00 UTC | Aurora Cannabis (ACB) Couldn’t Have Reported a Worse Quarter | ACB | https://www.nasdaq.com/articles/aurora-cannabis-acb-couldnt-have-reported-a-worse-quarter-2020-02-14 | nan | nan | Despite all of the promises for the Canadian cannabis space entering 2020, Aurora Cannabis (ACB) reported one of the worst quarters in the space and the lack of financial discipline has to question where the reorganization will work until new executive leadership joins the company.
EBITDA Loss Doubles
The most alarming number reported for the December quarter was the doubling of the adjusted EBITDA loss. Companies can’t always control revenues, especially in an emerging market with volatile regulations, but any particular company can control expenses.
Aurora Cannabis reported a C$80 million EBITDA loss in the quarter, up from $40 million in the prior quarter. The main culprit was operating expenses surging C$20 million sequentially to over C$106 million.
In no logical way should the company have ramped expenses knowing that Cannabis 2.0 products were set to disappoint. The vape health issue was a big concern in North America and the lack of retail stores in both Ontario and Quebec was logically going to restrict any major revenue boost from these products, yet Aurora Cannabis spent wildly.
Too Many Questions Remain
Investors really have to ponder how Aurora Cannabis is going to cut operating expenses to only C$40 million to C$45 million per quarter. The company is forecasting a cut of above C$60 million from the December quarter levels, but the discussion centered on only eliminating 500 corporate positions.
For FQ2, Aurora Cannabis spent C$71 million alone on general and administration expenses. The company has to eliminate over C$26 million from this category alone while completely wiping out sales and marketing and research and development.
The numbers don’t logically add up to how a company can cut 60% of operating expenses and still maintain the existing revenue levels. Aurora Cannabis still forecasts FQ3 revenues staying generally flat with the C$63 million net cannabis revenues in the last quarter.
So many moving parts aren’t supportive of the company maintaining the existing revenue base. Investors need to remember the existing interim CEO and CFO were executives in charge during the disastrous 2019 year. The company just announced a shift to higher THC products and the introduction of a value brand called Daily Specials. In both cases, investors have to question whether the company is skating towards the market or whether the market will again shift on this executive team.
The large cannabis company burned C$276 million in cash during the quarter. Both the C$135 million burned on operations and the C$131 million burned on investing activities during the quarter were appalling. The company has far too many questions on liquidity and a lack of financial discipline to warrant an investment here.
Consensus Verdict
The market’s current view on ACB is a mixed bag, indicating uncertainty as to its prospects. The stock has a Hold analyst consensus rating with only 3 recent "buy" ratings. This is versus 10 "hold" and 4 "sell" ratings. However, the $2.41 average price target suggests an upside potential of nearly 50% from the current share price. (See Aurora Cannabis stock analysis on TipRanks)
Takeaway
The key investor takeaway is that Aurora Cannabis has a Canadian market with a lot of positive catalysts to play out in 2020, but the company lacks the financial discipline for an investment. The stock trades at $1.50 for a reason and the lack of new executive leadership makes Aurora Cannabis too big of a gamble to buy on any weakness. Investors should prepare for the company to struggle with the massive cuts to the operations spilling over into weak revenues.
To find good ideas for cannabis stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Disclosure: No position.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Despite all of the promises for the Canadian cannabis space entering 2020, Aurora Cannabis (ACB) reported one of the worst quarters in the space and the lack of financial discipline has to question where the reorganization will work until new executive leadership joins the company. Consensus Verdict The market’s current view on ACB is a mixed bag, indicating uncertainty as to its prospects. The vape health issue was a big concern in North America and the lack of retail stores in both Ontario and Quebec was logically going to restrict any major revenue boost from these products, yet Aurora Cannabis spent wildly. | Despite all of the promises for the Canadian cannabis space entering 2020, Aurora Cannabis (ACB) reported one of the worst quarters in the space and the lack of financial discipline has to question where the reorganization will work until new executive leadership joins the company. Consensus Verdict The market’s current view on ACB is a mixed bag, indicating uncertainty as to its prospects. EBITDA Loss Doubles The most alarming number reported for the December quarter was the doubling of the adjusted EBITDA loss. | Despite all of the promises for the Canadian cannabis space entering 2020, Aurora Cannabis (ACB) reported one of the worst quarters in the space and the lack of financial discipline has to question where the reorganization will work until new executive leadership joins the company. Consensus Verdict The market’s current view on ACB is a mixed bag, indicating uncertainty as to its prospects. Too Many Questions Remain Investors really have to ponder how Aurora Cannabis is going to cut operating expenses to only C$40 million to C$45 million per quarter. | Despite all of the promises for the Canadian cannabis space entering 2020, Aurora Cannabis (ACB) reported one of the worst quarters in the space and the lack of financial discipline has to question where the reorganization will work until new executive leadership joins the company. Consensus Verdict The market’s current view on ACB is a mixed bag, indicating uncertainty as to its prospects. Aurora Cannabis reported a C$80 million EBITDA loss in the quarter, up from $40 million in the prior quarter. |
37664.0 | 2020-02-14 00:00:00 UTC | 7 Bright Spots in Aurora Cannabis' Otherwise Bleak Q2 Update | ACB | https://www.nasdaq.com/articles/7-bright-spots-in-aurora-cannabis-otherwise-bleak-q2-update-2020-02-14 | nan | nan | To no one's surprise, Aurora Cannabis (NYSE: ACB) reported dismal fiscal 2020 second-quarter results on Thursday. Aurora's revenue fell 26% from the prior quarter. The company posted another adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) loss that reflected a steep decline from Q1.
But while there was a lot to dislike about Aurora's Q2 results, the company's executives did discuss some good news in the quarterly conference call Thursday morning. Here are seven bright spots in Aurora's otherwise bleak Q2 update.
Image source: Getty Images.
1. Recreational sales growing excluding product returns
Aurora reported that consumer cannabis revenue in Canada's adult-use recreational market fell 24% quarter over quarter to 22.9 million in Canadian dollars. However, that worrisome number reflected a provision totaling CA$10.6 million for returns and price adjustments for prior-quarter sales. Adjusting for that provision, Aurora's recreational sales climbed 11% sequentially in Q2 to CA$33.5 million.
2. Value brand launch
One of the key headwinds for Aurora in Q2 was a dramatic shift in customer buying patterns to value brands. While this trend hurt Aurora's sales in Q2, the company launched its own value brand, Daily Special, earlier this month. CFO Glen Ibbott said in the company's quarterly conference call that Aurora expects the new brand will compete well against gray-market products.
3. Medical cannabis patients
At first glance, Aurora's relatively flat medical cannabis patient base of 90,307 in the second quarter might not seem to be very encouraging. However, it's important to remember that the adult-use recreational market is cannibalizing the medical cannabis market to some extent. Aurora's ability to hold onto its medical customers in the face of this challenge is actually a positive sign.
4. Back in business in Germany
Aurora suffered a major embarrassment in December by temporarily losing its medical cannabis license in Germany. The problem was that Aurora shipped irradiated medical cannabis without first obtaining the required permit to use radiation to kill microbes on cannabis leaves.
The company announced earlier this month that its license had been restored by German authorities. Ibbott said that Aurora built up backorders during the temporary suspension and thinks the company will regain its market share quickly.
5. Cannabis 2.0 market picking up momentum
Interim CEO Michael Singer said that Aurora expects the Cannabis 2.0 cannabis derivatives products market in Canada will build momentum slowly. The important takeaway, though, is that the market should continue to expand quite a bit.
Ibbott projected that 20% of Aurora's Q3 sales will be from Cannabis 2.0 products. That's significant considering the Cannabis 2.0 market didn't exist until December.
6. Looking for a CPG-focused CEO
Aurora didn't commit to a time frame for hiring a new full-time CEO. However, there were some clues as to what kind of CEO the company is looking for.
Singer said that Aurora has already received a lot of interest in the position. He also indicated that the company will likely look for a new CEO with experience in the consumer packaged goods (CPG) industry. With theglobal marketpotential for consumer products containing cannabinoids, a search for a CPG-focused CEO appears to be a smart move for Aurora.
7. On a path to profitability
Probably the brightest spot of all from Aurora's Q4 update is that the company expects to make significant strides toward profitability in the near future. The company announced major staff reductions and cost-cutting initiatives on Feb. 6. Aurora also restructured its secured credit facilities to include a commitment to achieve positive EBITDA thresholds beginning in fiscal 2021 Q1.
Granted, positive EBITDA doesn't translate to true bottom-line profitability. However, generating positive EBITDA is an important step on the path to becoming profitable. In addition to the spending cuts that have already been announced, Ibbott hinted that more cost reductions could be on the way.
One of the biggest factors behind the poor performance of Canadian marijuana stocks overall last year was that the bottom-line trends of many cannabis producers were on the wrong track. Aurora Cannabis now seems to be serious about moving in the right direction.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | To no one's surprise, Aurora Cannabis (NYSE: ACB) reported dismal fiscal 2020 second-quarter results on Thursday. But while there was a lot to dislike about Aurora's Q2 results, the company's executives did discuss some good news in the quarterly conference call Thursday morning. CFO Glen Ibbott said in the company's quarterly conference call that Aurora expects the new brand will compete well against gray-market products. | To no one's surprise, Aurora Cannabis (NYSE: ACB) reported dismal fiscal 2020 second-quarter results on Thursday. Recreational sales growing excluding product returns Aurora reported that consumer cannabis revenue in Canada's adult-use recreational market fell 24% quarter over quarter to 22.9 million in Canadian dollars. CFO Glen Ibbott said in the company's quarterly conference call that Aurora expects the new brand will compete well against gray-market products. | To no one's surprise, Aurora Cannabis (NYSE: ACB) reported dismal fiscal 2020 second-quarter results on Thursday. Recreational sales growing excluding product returns Aurora reported that consumer cannabis revenue in Canada's adult-use recreational market fell 24% quarter over quarter to 22.9 million in Canadian dollars. Medical cannabis patients At first glance, Aurora's relatively flat medical cannabis patient base of 90,307 in the second quarter might not seem to be very encouraging. | To no one's surprise, Aurora Cannabis (NYSE: ACB) reported dismal fiscal 2020 second-quarter results on Thursday. Recreational sales growing excluding product returns Aurora reported that consumer cannabis revenue in Canada's adult-use recreational market fell 24% quarter over quarter to 22.9 million in Canadian dollars. Ibbott projected that 20% of Aurora's Q3 sales will be from Cannabis 2.0 products. |
37665.0 | 2020-02-13 00:00:00 UTC | Aurora Cannabis Inc (ACB) Q2 2020 Earnings Call Transcript | ACB | https://www.nasdaq.com/articles/aurora-cannabis-inc-acb-q2-2020-earnings-call-transcript-2020-02-14 | nan | nan | Image source: The Motley Fool.
Aurora Cannabis Inc (NYSE: ACB)
Q2 2020 Earnings Call
Feb 13, 2020, 8:00 a.m. ET
Contents:
Prepared Remarks
Questions and Answers
Call Participants
Prepared Remarks:
Operator
Good morning, everyone. And welcome to the Aurora Cannabis' Second Quarter Fiscal 2020 Conference Call for the three months ending December 31, 2019. Listeners are reminded that certain matters discussed in today's conference call or answers that may be given to questions asked could constitute forward-looking statements that are subject to the risks and uncertainties relating to Aurora's future financial or business performance. Actual results could differ materially from those anticipated in these forward-looking statements. The risk factors that may affect results are detailed in Aurora's Annual Information Form and other periodic filings and registration statements. These documents may be accessed via SEDAR and EDGAR databases. I'd like to remind everyone that this call is being recorded today, Thursday, February 13, 2020.
I would now like to introduce Mr. Michael Singer, Interim Chief Executive Officer and Executive Chairman of Aurora Cannabis. Please go ahead, Mr. Singer.
Michael Singer -- Interim Chief Executive Officer and Executive Chairman
Good morning everyone and thank you for joining today's call. With me today is Glen Ibbott, our Chief Financial Officer. Given that we just addressed the market last week with a very fulsome call on our succession plans, board expansion, business rationalization, and pre-release of certain Q2 financial information. I think this call will be a bit shorter than normal. I'll do a quick review of the quarter including operational highlights. Then Glen will discuss our financial results in greater detail, followed by a question-and-answer session. To start things off, I'd like to address the current state of the market, which I briefly summarized on last week's call. First, the past year has been challenging for the broader cannabis industry, with issues of retail constraints, evolving consumer demand and provincial distributor inventory management adjustments. As we said in our first quarter conference call, it's important to remind ourselves that the Canadian consumer market is just over a year old and will take time to develop, but we remain extremely bullish on the long-term potential of the Canadian medical and consumer markets as well as established international medical markets.
We firmly believe cannabis is a secular growth story, but as is the case with all growth industries, we need to be patient as the markets evolve. With that as a backdrop and consistent with what we told you last week, our total net revenue excluding provisions totaled CAD67 million for Q2, we did not record some product return and price reduction provisions that Glen will address shortly. It's worth highlighting that our core consumer revenue actually saw modest growth quarter-over-quarter before the impact of these returns and price reductions. We are proud of our strong cultivation capability, highlighted by over 30,000 kilograms of production in fiscal Q2. Our Q2 2020 gross margins on cannabis net revenue of 44% were impacted by the provision for returns and price reductions we took in the quarter.
I'm also proud to report that our high-tech cultivation facilities continue to deliver leading indoor cash costs to produce below CAD1 a gram and in this quarter came in at CAD0.88 per gram on the heels of CAD0.85 per gram in Q1. While we continue to leverage our coast-to-coast supply agreements to offer a broad range of premium consumer products across Canada, Aurora also remains focused on supplying medical patients with consistent premium products. In Q2 2020, the number of total active registered patients of 90,307 was relatively steady compared to Q1, which in the face of market challenges demonstrates the value of Aurora's products and patient loyalty to the Aurora family of brands.
We are a few weeks into the second wave of legalization of Cannabis 2.0 products and I'm very proud of the Aurora team, particularly their focus and energy around the 2.0 launch at the end of 2019. We began loading-in small volumes in Q2 2020 with positive market feedback from distributors and retail customers about our product quality. Those products include vapes, concentrates, gummies, chocolates, mints and cookies and they are available in markets across the country. We have selectively partnered with a variety of organizations, prioritized our resources and built the inventory to ensure that our consumers across Canada will have access to our high-quality derivative products. Our assumption is that the 2.0 market will also develop slowly with previously discussed market constraints affecting the rollout, but the good news is we're managing the business accordingly and feel very confident about our prospects.
I'd now like to turn the call over to Glen, who will discuss the financial highlights of the second quarter and then we'll open up the line to questions. Glen?
Glen Ibbott -- Chief Financial Officer
Thanks, Michael and good morning everyone. The figures I'll be going over today can be found in our financial statements and in MD&A and are all in Canadian dollars. For our second quarter of fiscal 2020, the period from October 1st to December 31st, 2019, we saw our net revenue excluding provisions of CAD10.6 million [Indecipherable] CAD67 million. Our total cannabis net revenue excluding probation's came in at CAD63 million for the quarter. A bit more specifically, our medical cannabis revenue in Canada remains steady quarter-over-quarter at CAD26 million. Our Canadian consumer cannabis delivered CAD33.5 million and our international medical dropped to CAD1.8 million. To get into a bit more detail, as I just noted during Q2 2020, our Canadian medical cannabis net revenue came in at CAD26 million. Our patient base continues to exceed 90,000 clients, which although being relatively flat quarter-over-quarter is indicative of our strong medical position as that market is also facing headwinds mainly from cannibalization into the consumer market. We continue to work at maintaining and growing our leading position, and are making certain internal operational changes that are designed to maximize the lifetime value of our key patients.
International medical sales declined for CAD5 million in Q1 to CAD1.8 million in Q2. And has a temporary sales restriction due to a permitting issue impacted our sales in Europe. As we announced early last week, that issue has now been resolved. I'm pleased to note that our products are once again available for sale as we fill back orders and return to growing European medical from the previous run rate. Similar to the Canadian market, we expect our European business, particularly our German business to grow sequentially, but in the shorter-term, slower than originally anticipated. The recent EU GMP certification of our Aurora River facility with a run rate of approximately 30,000 kilograms annually will allow us to allocate significantly more products for export markets as they develop. Consumer cannabis net revenue excluding provisions was CAD33.5 million up 11% from the prior quarter. In Q2, we recorded a provision of CAD10.6 million against revenue, which captured the impact of returns from provinces and price reductions that we'd agreed to. This included our assessment across the provincial ordering system for products still deemed at risk. The significant majority of this provision was related to products sold much earlier in calendar 2019.
In Q2, we saw a pickup in ordering of 1.0 products late in the quarter and also had a good launch into the 2.0 system with approximately CAD3 million and deliveries to provinces in late December. However, during the quarter we did see a drop-off in our market share in flower as the market shifted significantly toward value brands, which we define as retailing for less than CAD9 per gram. Last week, we launched our competitive brand in this category, Daily Special at a price point and an average potency that we think is a very compelling proposition for the consumer. In fact, we believe it will compete strongly with the gray market and help grow the overall size of the [Indecipherable] segment will clearly be monitoring our performance here closely.
During Q2 2020, the company generated CAD2.4 million in wholesale bulk revenue as compared to CAD10.3 million in the prior quarter. As we've said before, we are opportunistic with wholesale and do not attempt to predict quarter-to-quarter revenue levels. Our average Q2 at selling price for cannabis of CAD5.54 per gram represented a slight decrease from the CAD5.68 reporting the prior quarter. This decrease is primarily attributable to the previously mentioned returns and lower per gram selling prices for wholesale cannabis. We produced over 30,000 kilograms of cannabis in Q2 as compared to 41,000 kilograms in the prior quarter. In Q2, we took decisions at the cultivation level to prioritize planting of higher potency but slightly lower yield than cultivars at our major facilities, and we also took the opportunity to conduct some R&D, potential new high THC cultivars. In Q3 and Q4 2020 we expect our continued refinement of yield and operational efficiencies, deliver production at a quarterly rate that averages 150,000 kilogram annually.
Our cash cost to produce per gram of Dried Cannabis increased slightly to CAD0.88 per gram, up CAD0.03 when the prior quarter. We are pleased that we continue to deliver on a very important KPI for our operations, sub-CAD1 cost to produce. This is the leverage that allows us to launch such a powerful new entry to the value market, while maintaining strong, healthy and sustainable margins. Shifting now to SG&A, for Q2 2020 we reported just shy of CAD100 million for SG&A versus CAD81 million the last quarter. The increase is primarily due to an increase in salaries and benefits from targeted corporate headcount additions and annual merit increases. And investment in consumer education for the 2.0 product rollout and campaign expenses related to the launch of the Aurora Drift brand.
I want to stress that we recognize the importance of reducing our cost structure and as reported last week we have taken decisive action to make change immediately. Consequently, as we discussed last week, we expect to manage our business to an SG&A target range of CAD40 million to CAD45 million per quarter, which we plan to achieve as we exit fiscal Q4 2020. Clearly this represents a substantial decrease from today's reported number. To achieve this we are focusing on our core operation in the Canadian consumer market, the Canadian and established international markets and in certain U.S. initiatives. An important part of this initiative is to reduce the complexity of our business and to instill a culture of financial discipline across all of our operations. As such, we believe there may be further opportunity to find additional medium term cost efficiencies.
Turning to our balance sheet, I'd like to highlight once again the amendments to our credit facility that were announced last week. These amendments include the complete removal of all EBITDA ratio covenants that is originally been set to amendments in the period ending September 30, 2020. The complete removal of the fixed charge coverage ratio constant, adjustment of the total funded debt-to-equity covenant of 0.2 to 1 commencing in our fiscal third quarter 2020, from the 0.25 to 1 that had been in place till now. Introduction of a new minimum liquidity covenant of CAD35 million and the introduction of the covenant requiring Aurora to achieve positive EBITDA threshold beginning of fiscal Q1 2021, so we believe they're consistent with our announced changes. These thresholds are mid-single-digits for the first couple of quarters of fiscal 2021, increasing the back half of the year for a total of CAD51 million cumulative for the entire fiscal year.
We also used CAD45 million in restricted cash to pay down our debt and thereby reduce debt servicing costs. And finally, we downsize the total facility by CAD96.5 million sort of the elimination of facility fee, which had been earmarked specifically for the construction of Aurora Sun. When we reduced the scope of Aurora Sun significantly, facility being no longer available nor unnecessary. I should emphasize that we saw both actions as net positives for the company's financial position. Staying with the balance sheet, you'll note that we've finalized the goodwill and intangible and PP&E asset impairments in our Q2 financial statements, totaling CAD762 million for goodwill and CAD210 million for intangible and PP&E asset impairments; both within our previously disclosed ranges.
Turning to liquidity, as at December 31, 2019 our consolidated cash position was CAD156 million excluding the CAD45 million of restricted cash. We had used our aftermarket financing program and had raised gross proceeds of CAD325 million in the period from July to December 2019. We have roughly CAD200 million remaining under the existing ATM program. Our announced reduction in capex and SG&A costs should provide comfort to our investors that we are laser focused on the health of our income statement and balance sheet. We expect the utilization of the remaining ATM capacity should be sufficient to find operations and remain capital expenditures to the points were positive EBITDA and good cash flow are achieved. Driving Aurora to be a profitable and robust global cannabis company is extremely important to our team, as our call last week demonstrated. Our goal is to manage the business with a high degree of fiscal discipline and we look forward to sharing further developments and progress with you in the coming quarters.
I'll now turn the call back to Michael.
Michael Singer -- Interim Chief Executive Officer and Executive Chairman
In conclusion, we continue to focus on what we can control in an evolving market, consistent execution, operational excellence, and our focus on operating a sustainable business, and in turn that short-term focus will allow Aurora to be a leader as the global cannabis trend takes hold and numerous exciting markets develop. I have no doubt that we have the right team and the right plan to execute against that opportunity and position our shareholder for value creation, especially from these levels.
I'd now like to ask the operator to open up the call for questions.
Questions and Answers:
Operator
Thank you. [Operator Instructions] The first question is from Vivien Azer of Cowen. Please go ahead.
Vivien Azer -- Cowen -- Analyst
Thank you. Good morning.
Michael Singer -- Interim Chief Executive Officer and Executive Chairman
Good morning.
Glen Ibbott -- Chief Financial Officer
Good morning.
Vivien Azer -- Cowen -- Analyst
So I just wanted to touch on your comment around the rollout of 2.0. It makes perfect sense that the provincial boards are taking a more cautious approach and are you as you collaborate with them in terms of inventory load, given some of the write downs that we've seen from you as well as the industry, but I think it would be helpful to understand what your current capacity run rate is because it's pretty striking to me that edibles seem to be fairly consistently out of stock where they are in stock. It seems to be that you guys have chocolates available, but it's kind of few and far between when we've been, both on the website as well as in brick and mortar. So where are you from a capacity standpoint on edible specifically from a 2.0 standpoint? And how would you anticipate that run rate evolving? Thanks.
Glen Ibbott -- Chief Financial Officer
Sure. Vivien? Yes, where's the run rate going? We haven't found that the upper limit on the gummy demand yet, but they do have to say that it is constrained somewhat by the provincial ordering. There have been a couple of; I'll say hiccups as we've gone through this. We -- they, you know one fairly minor short-term extraction issue but that line is back-on. We've also run into a few issues, so packaging, etc, etc. Just the usual kind of a scaling up types of items.
So those are behind us. It looks like there we're kind of full production right now, but there again, the gummies, they are selling out as soon as we can get them to the provinces are ordering in a very, let's say prudent way I think. Their brothers stock out as supposed to and supposed to being overstocked. So it's a little bit early to figure out exactly how -- where the upper limits are there. We don't have constraints on her lines per se, I mean at least at the anticipated levels. We do have plans for larger scale lines that are in place and our new Polaris building as needed. So we introduced that higher capacity as the market develops. And what we're trying to do as we've talked about before is be more prudent with our capital. Make sure we spend it as we see the demand; I don't see any constraints in our production capacity sort of the next number of quarters and by the time we get to that point we'll introduced our capacity if we need it.
Vivien Azer -- Cowen -- Analyst
Well that's helpful. Thank you, Glen. But maybe you could just quantify that a little bit. So in terms of like what you're able to produce versus what you're able to ship, are you guys like running at an eight hour shift, full utilization and you're building inventory and then you're only shipping 10% of what you produce? I'm just trying to get my head around that.
Glen Ibbott -- Chief Financial Officer
I don't have exact numbers for you, Vivien. I will track them down in terms of percentages that are shipping versus what we're producing. I know, we've had some of the ordering is --it's interesting to watch the week by week ordering, there'll be weeks that are 100% above the previous week and then dropped down and getting back to 50% and very, I won't use the word volatile, but very early stage and I think everybody's kind of feeling well which products are moving. So we can follow-up with specific sort of utilization rates of the lines right now for me.
Operator
The next question is from Chris Carey of Bank of America Merrill Lynch. Please go ahead.
Glen Ibbott -- Chief Financial Officer
Good morning, Chris.
Chris Carey -- Bank of America Merrill Lynch -- Analyst
Good morning. So I guess for my first question, I'm just trying to understand why CAD45 million in SG&A is the right number or more specifically how you're thinking about the ability to flex down that cost structure if needed. And I guess underlying that question is, if gross margins stay at this current level and I understand excluding the provisions, but even then the gross margins have been coming down, which seems to be the trend if the category is increasingly going into value, which would imply that you're going to need pretty significant acceleration in revenue to kind of hit that EBITDA positive for fiscal Q1 2021. And so just really simply put, I guess what I'm trying to get at is this concept of you might need to actually flex down that cost even more and maybe just how you're thinking about your capacity to actually make those changes to hit that fiscal Q1 2021 EBITDA covenant if indeed you have to do something like that? And I have a follow-up.
Glen Ibbott -- Chief Financial Officer
Yes, Chris, let me answer the key question, and we've been spending a lot of time on that. We targeted rate that we put out there in terms of coming out of Q4 and into Q1 is a point in time, we have targets for Q4 itself and further targets passed into Q1 and in fact into Q2. So there are some changes we can make to the business that we made immediately. There are some that require negotiation with other parties. We think we're going to have in place for Q4 and then there are other actions that we can take that will impact the company's cost structure in its fall. I don't want to get into the specifics, but they all require -- most of them require negotiation with other folks but or as they require some repositioning some of our assets.
I think the key when we look at the company is about reducing complexity and [Indecipherable] little bit. What we're really talking about is that the fundamental drives the cash flow and the profits of this company in the future and what we've described again core Canadian cannabis in medical and consumer and certainly international markets that have sort of near-term potential. That's as it stands right now with this group, but that's what we need to focus on for various reasons, size, just in terms of building the company. The industry in developing [Indecipherable] we do have a lot of complexity in the business and lots of non-core parts of the business that we're looking at.
How do we rationalize that? How do we streamline this business and just spend our time? Our energy and our focus on that core business that's going to drive the cash flow and profit. So to your point, do we see further opportunity? Yes, we do. But again that's a -- it's a matter of timing and that's why when we worked with our syndicate of banks, we set EBITDA covenants that kicked in fiscal Q1, our EBITDA threshold and started-off modestly and move forward. The other part of your question, I think this is important, you don't want to go one-to-one, but it's an important part. We are being prudent with our revenue projections here and constructing the company to meet those prudent revenue projections. But listen there are upside opportunities here. We just want to make sure we've got a cost structure that those upside opportunities should they arrive fall to the bottom line instead of getting consumed by SG&A. So that's what we're doing there is continuing to drive costs.
I hope you don't take for a moment that we don't believe in this market and we believe that there'll be some good news. We fast-forward a year with a lot of sort of negativeness in the industry. Even we believe there'll be good news, whether it's for vapes last week or just a stronger cadence of retail stores or Ontario consultation on vape lounge and things like that. That's upside. We want to build a company where that's upside and we're not dependent on not showing up to be able to deposit, if it shows up. Excellent, if it's more EBITDA is not getting consumed in corporate overhead.
Chris Carey -- Bank of America Merrill Lynch -- Analyst
Okay. Thanks. And then I guess for shifting gears a little bit. So over the past couple of quarters, so you've produced about 50,000 kilograms more than you've sold, right? And I guess with the expectation for cannabis revenue, excluding provisions to be flat quarter-over-quarter, the still slow store rollout in Canada, it's progressing but slowly, I mean it seems like this dynamic of producing well above what you're selling is going to sustain. I think that leads to an important question, not just for Aurora but for this entire industry.
And I guess that question really is when would you consider maybe shuttering capacity or at least slowing the rate of volume that's coming off your production line? Because you're still --if I understand your comments in your prepared remarks correctly, looking for about 38,000 kilos of quarterly production, which will continue to materially outpays what you're selling. And I just wonder when we see the individual companies or the industry, it's starting to take a closer look at just how much volume they're bringing into this market relative to how much the market can actually withstand? Thanks so much for that.
Glen Ibbott -- Chief Financial Officer
Yes. Absolutely critical question for us and the rest of the industry. So we're actively there were initially -- we've got some probably a central way to really evaluate the impact under a number of different scenarios. And also under new product launches. Don't forget, I mean we haven't launched all the products that we can under legislation and as those come out over the next several months or several quarters, we're looking at consumption. There are, some of them are higher consumers of say trim and things like that. So, we will evaluate -- we are evaluating but differently and we'll lock beat you if we come to a conclusion where we need to reduce the level of production within the company.
The point Michael emphasized, there is a lot is fiscal discipline and certainly we had to deal with one point several years ago that the market would have developed to the point where we could, and certainly out of our existing assets itself, whatever we're producing. So now it's in the short-term that's not necessarily true. But we'll see as we introduced some of these new products and see what the demand for those new products are. But rest assured something we're paying a little closely -- close attention to and we're definitely looking at everything in this company through a fiscal lens. So we won't allow that situation to persist if it doesn't, we don't see our ability to consume that inventory.
Operator
The next question is from Owen Bennett of Jefferies. Please go ahead.
Owen Bennett -- Jefferies -- Analyst
Good morning. Some questions please. And first of all, don't want to labor the points on SG&A, but it seems quite an aggressive target. I was just wondering, which would be helpful from our perspective, if you could put those different bookings you identified, you could quantify them in terms of how much savings you see coming from each? And then my follow-up is just around them daily special launch, what price point that's common in our --and in your internal projections, are you assuming any cannibalization of the mid-price brands with very special and when that's launched? Thank you.
Glen Ibbott -- Chief Financial Officer
Yes, Owen, thanks. So I guess when we look at SG&A, it probably worth remembering that just several quarters ago we were running in the CAD60 million range. Now we ramped up significantly as we -- as I say, as we took on a lot more activities with the company and tried in fact to accelerate the development of a number of things, whether it's the internal IP projects or some of the marketing initiatives. So we ramped up from a rate that say Q4, Q3 of last year within the CAD60 million range. So it's not inconceivable to get back down to that range relatively easy. And then the next steps are basically reducing complexity, which means saying no to a number of things. We've been a very aggressive company, so we tend to work to achieve an awful lot in a short period of time. And again, not just drives costs as opposed to, maybe prioritizing this selfish that's focused on the core of the business and certainly deferring some projects.
So I understand from those current levels down, it is an aggressive part -- it's an important part of that and say most of the changes that we made last week get us significantly closer to our target. We've taken up, it may not be evidence, but if you remember last week we said we -- of our corporate headcount maybe reduced it by about 25%. So there are over 100 million, we are seeing where our driving costs are there plus a number of initiatives. I don't want to get into details on how much an IT or HR or marketing that we've taken out, but we definitely have taken out a lot there and have significantly reduced the burden of some of our subsidiaries as well. In terms of the daily price -- daily special pricing, we've analyzed all the entries in the market and it's the lowest pricing program. And it's also when you look at an important metric; it seems to have developed and marketed at THC [Indecipherable] basically what you're taking for high potency product. Again, it's the best metric of the competitive product. So it depends, depending on pack size, I mean through up to currently after 15 ground packs. And it depends on the problems, exactly what the pricing means, but I'll leave it there. So as it stands right now, I believeit's the sharpest pricing among all the competitive developments.
Operator
The next question is from Michael Lavery of Piper Sandler. Please go ahead.
Michael Lavery -- Piper Sandler -- Analyst
Hi, this is Jeff Kratky on for Michael. Good morning.
Glen Ibbott -- Chief Financial Officer
Hi, Jeff.
Michael Singer -- Interim Chief Executive Officer and Executive Chairman
Good morning.
Michael Lavery -- Piper Sandler -- Analyst
Just one question for me. As you resume sales in Germany, have you seen any impact distribution after having sales paused?
Glen Ibbott -- Chief Financial Officer
There actually was a backlog or back -- instead of back orders. The -- and we were continuing to ship there. So, just to be clear this way though I'm going to characterize it, although it impacted us in quarter as a relatively minor issue, we continued to ship to Germany and build up the inventory there and we were building up back orders and then we started fulfilling those as soon as we have the permit to actually ship to the pharmacies with that product. So, yes, of course there's a little bit of catch demand here, but we don't think that we lost much ground there or regain it fairly quickly. And quite frankly like the story with the rest of Europe, it's not -- there's not strong competition there right now. So we should be back on track shortly as we say, fulfilling back orders and then getting back into the regular CAD ence.
Michael Lavery -- Piper Sandler -- Analyst
Okay. Thank you. That's all for me. I'll pass it on.
Glen Ibbott -- Chief Financial Officer
Thank you.
Operator
The next question is from Pablo Zuanic of Cantor Fitzgerald. Please go ahead.
Pablo Zuanic -- Cantor Fitzgerald -- Analyst
Good morning, thank you.
Glen Ibbott -- Chief Financial Officer
Good morning, Pablo.
Michael Singer -- Interim Chief Executive Officer and Executive Chairman
Good morning.
Pablo Zuanic -- Cantor Fitzgerald -- Analyst
My first question is more like a comment. I mean, obviously you are telling us all the right thing in terms of your restructure covenants, you're cutting costs, you're adapting the company to any reality, but there's no -- there's no guidance, right? So if you provided more specific guidance and almost the guidance bridge, I think it would help curtail these crisis of confidence that this do reflects, OK. You're giving us numbers, we're trying to put them together, but the market doesn't buy that. So hopefully at some point you can provide that bridge because without it, I don't know how to stop, you know stops sliding until of course you showed results. But that's just a general comment.
I have two questions, one; from -- if you can just talk about 2.0 because it is relevant to for us to think it does, how your sales will project over the next few quarters. You say that sales in the March quarter will be flat. So what does that mean in terms of 2.0? Is 2.0 like 5%. 10%, you have to have some visibility? And then how do you see our market progressing whereas other companies they are saying 2.0 would be a CAD1 billion market in a year's time. Do you believe that? So just understand your competitive position in 2.0 so that's the first question. Just more color in terms of how 2.0 can contribute to a company this quarter and going forward in the context from your guidance doesn't seem to be contributing. If you can just give more color on that and then we have a follow-up? Thanks.
Glen Ibbott -- Chief Financial Officer
So, OK. I'll just state I may disagree with some of your comments. I think you laid a position out there where we think we've been pretty directive and provided clarity over our targets on those things within our control. And as you'll know, the last couple of years, the challenge for anybody putting guidance out on the revenue line, if that-s [Indecipherable] taken wrong and that's even, I'm not just talking about roll-out, I'm talking about across the industry and they've had to rescind guidance as the development of the market is kind of taken its pivots and turns and kind of a bit of a choppy road on the way from here to there. We are bullish on the long-term, so I'm not going to comment on analyst projections for the site, the market, but we definitely haven't seen and read aren't backing off or we think this market can be, but question is the road from here to there and how long will that take.
So we are aiming to being prudent with our cost structure that allow us to be profitable on the entire journey as opposed to hoping for doubling of revenues to become profit or not. We don't want to be in that position. So listen I don't want to get into those, we are trying to project the revenues in a brand new market in a 2.0 market, what's happening in Q3 where we're adding to fairly modest growth is as I mentioned in my comments, the market on the 1.0 products has taken a hard turn to the value side. It was at 2% of the market in the summer and 17% of the market in December. Meanwhile, what we characterize as premium went from mid-30% in summer down to 17% of the market in December, so hard turns. We launched our product that I just described Daily Special last week and we can check into the provinces, I think BC got their first batch yesterday, so it's under way. But in terms of this quarter we're suffering by not being in that market for January and the first week or two of February it's been half a quarter there, being in the market that seems to help the most momentum.
As we look at Q3, we think that approximately 20% of our sales will come from 2.0 products but we are gaining and trying to be prudent, it's awfully hard to extrapolate from a week-to-week projection, I've mentioned to Vivien when she asked a question, I look at weekly sales in 2.0 products and it will double from one week and then it will drop off the next and then pop up again, so way too early to project there. So we're really just trying to be prudent. And make sure that if there is additional revenue coming in that drops to the bottom line. So I heard you on the lack of visibility in revenue, but I have to tell you, we're trying to learn from the experiences of the last a year or two in this industry, but it seems a bit pretty risky to be kind of predict the market that is just in the early stages of development.
Pablo Zuanic -- Cantor Fitzgerald -- Analyst
Understood that, that's very helpful, Glen, thanks. Just a very quick follow up, I know this is more medium long-term and may be not relevant today, but when I compare the Canadian market with a lot of the red markets in the U.S. obviously as we all know the Canadian market has significant restrictions that have prevented these growth or have curtailed the growth. Do you see any room to lobby the government over the next few months or even year, to be able to make some changes that will help the market, whether it's in terms of marketing, the way that things are communicated, online retailing, distribution, I am not just talking about opening more stores, but just in terms of the restrictions, which I think, we have here in the market compared to what we see in some parts of the U.S.? Thanks.
Glen Ibbott -- Chief Financial Officer
Sure. So listen we'd all love to do that, of course, right. It's difficult if we wanted the Canadian cannabis store, it's hard to distinguish sometimes that are between the different products and that's why the in-store marketing and education of the budtenders and stuff is important us to make sure that they understand our products and they're being able to talk intelligently to consumers that want to come in and find the product that meets their needs.
I have to tell you -- I don't think that we're not in the near term cards in Canada. So they are at the beginning of the industry that they're focused on the medical [Phonetic] called safety first side and then seeing how it plays out. There are promising indications when you see some of the problems starting to consult about things like vapes lounges and lounges to consume cannabis. That's a nice step forward to more sort of a rational, almost a model that you see in Canada with either alcohol or something like that. So as Michael mentioned we're only a year into legalization, passed a year into legalization and just a month passed 2.0 legalization, so I think the focus right now is getting the kind of the foundation right. And then I guess we'll see where it go, but we're certainly not banking on that in the near term.
Michael Singer -- Interim Chief Executive Officer and Executive Chairman
And I'll just add that, our government relations group are working very hard with the provincial distributors and governments, because the purpose here is to try to remove as much as we can out of the black market into the regulated market. And the last numbers I've seen says that the black market is still a CAD5 billion annual opportunity and the regulated market is somewhere just below CAD1 billion or approximately CAD1.5 billion. So you could see the potential there and the provinces do want to sort of shift that over from -- to the regulated market. So our team are working hard. There is an appetite certainly to try to administer this as quickly as possible. And we are working as quickly or as efficiently as we can with the provinces to make this happen as quickly as well.
Operator
The next question is from Matt Bottomley of Canaccord. Please go ahead.
Matt Bottomley -- Canaccord -- Analyst
Yes. Good morning. Thanks for taking the call.
Michael Singer -- Interim Chief Executive Officer and Executive Chairman
How are you doing?
Matt Bottomley -- Canaccord -- Analyst
Thanks for taking the questions I wanted to touch base, this isn't necessarily a new phenomenon we've been seeing, but my guess is that we'll start seeing the impacts in subsequent quarters for dried cannabis, so can you give any color on how you look at your current inventory balance, which I think for just the dried cannabis stock is about CAD130 million versus the surge and what we've been seeing in dried cannabis that's in various wholesale channels right now. And what should the analyst community as a whole be considering right now with respect to what could occur, whether it's commoditization of pricing versus a lot of this product going into Cannabis 2.0 production, it just seems like it's been this lingering potential disaster for a couple of months or quarters now. And I'm just curious if you could touch on that a bit.
Glen Ibbott -- Chief Financial Officer
Yes, I think it started on that. Well yes, it's been an issue since the sort of the middle of last year, I guess people look to across inventory in the industry in particular, what are the comprised of, how much is at risk, it's just definitely a differentiation between the quality, we'll say that it was there that's defined by the consumer's experience or the levels of THC, whatever, quality cannabis and just think what is a significant amount of lower quality cannabis destined for extraction in the industry. That's a bit of a challenge.
When we look at our inventory is extended to December 31, we definitely even under-- I'd say relatively pessimistic scenarios. We will be consuming all of that over the next several quarters. So we're not concerned about our inventory assets. There was a question earlier about a level of the productions, something that we're watching. It will depend on how our demand plan develops, but we don't have any particular issues in our inventory, as it stand at December, 31. So I can't really comment on the rest of the industry, but I do take your point that it's a developing issue if we are not able to move out or if we're not producing the quality that the consumer's looking for. Now it's really clear that if you're selling flower, so basically you are not going to extract, it's only in the flower then its better have a high level of THC for the most part or it's not going to move very quickly.
Matt Bottomley -- Canaccord -- Analyst
Understood, thanks. And if I could just dovetail that into another question just on the international side of things, so a lot of LPs have been saying certainly over the last year or so, is that any sort of excess in capacity for domestic consumption when it comes to inventory could eventually go into international channel. So outside of Germany, I'm just curious if you have any allocation of your product peg for international export and given the quantity of the goodwill write-offs that we saw on a couple of those assets. I'm just curious how much capital is going to be allocated internationally going forward if there's some sort of range for that and what regions you think are more promising than not?
Glen Ibbott -- Chief Financial Officer
Yes, let Michael address the capital allocation, but listen, with our three facilities, particularly with our River facility just being certified by EU GMP we've got plenty of capacity to serve international markets for the next quarter. I wouldn't want to tell you that the international market can consume all of that capacity by any means in the short term. There are developing markets in Europe, we're seeing some that are looking for domestic production and Dutch tenders are kind of going away. But, I think, it's a great long-term opportunity and is developing a little slower than we might have anticipated a couple of years ago.
There are other bigger markets that are putting in systems, Brazil for instance, putting in a medical system regulations. I think, over the next month it should be clear and in place looks like it'll mainly be a sort of a CBD type system, but if it's possible that we may supply that from our current facility or maybe some other, but -- maybe, Michael we'll talk about capital allocation and international opportunities.
Michael Singer -- Interim Chief Executive Officer and Executive Chairman
Sure. So I think part of what we announced last week and the important discipline that we've now sort of instilled in our business is we're going to be very cautious about how we allocate capital. And that capital allocation has to provide us with a near-term return, that we think is going to be impactful to our business and beneficial to our investors.
So with regards to international markets, we're obviously going to focus on key markets that generate revenue today. But, always look at opportunities and investing capital in additional markets where we see that near term value translating directly to our P&L and of course our balance sheet. So we'll be very careful and methodical about how we allocate that capital to ensure that, we see that immediate value to our story.
Operator
The next question is from John Zamparo, CIBC World Markets. Please go ahead.
John Zamparo -- CIBC World Markets -- Analyst
Thanks. Good morning.
Glen Ibbott -- Chief Financial Officer
Good morning, John.
John Zamparo -- CIBC World Markets -- Analyst
Good morning. My question is on pricing and gross margins. So even after adjusting for the provisions, gross margins are down across the board including consumer and Glen you've talked about the markets pivot toward value in the launch of Daily Special, but when we see average price per gram coming down, is it more a function of mix or price deflation? And I guess what I'm getting at is, are you seeing price compression even on your premium products?
Glen Ibbott -- Chief Financial Officer
Okay, so quickly, no, not on the premium products. By and large, I think [Indecipherable] and a few of the others are holding up really nicely. We were impacted, although it doesn't seem like a significant amount of revenue in the overall picture, the revenue in Europe that we didn't pull in this quarter is pretty much all gravy, that's actually positive, getting a product over there and not as significant as you might expect. And as you know, we get approximately, two or better times priced in Germany as we do for comparable products in Canada, so that did impact some of the average pricing. I think we break this out in our MD&A with the wholesale bulk cost down significantly results and characterize it as a lower potency product. So yes, the prices seem to be holding up actually fairly well. We did have to take some price reductions on the some of the inventory that was in the system that was lower THC, but we're not producing those cultivars anymore and we are producing stuff that in demand in the market.
So, let me pause for sure, the pricing we are offering on the Daily Special -- before extremely competitive, we are taking advantage of our ability to produce at a very low cost that will impact the average pricing. But, we would expect them to see a strong uptick in volume and we're just being cautious. That--s what it looks like until we get to that point. But we internally are very excited to take advantage of this. There's a reason why we put a lot of capital in facilities over the last several years, it's, somewhat riskier for sure, but we've said for well over a year, that with these facilities and automation in low level, that ultra low level costs of production of the quality cannabis are delivering, the 18% plus THC cannabis, it's going to sell at a very low cost. It was meant to allow us to try in any market conditions.
As usual in the cannabis market, as market conditions are lot quickly, I think launch of Daily Special as our first sort of value brand going to be a very important task for us so that we see are seeing extremely lot of scarcity in that market. And if you can offer and meet the consumer with the higher THC levels on a consistent basis and offer them the best price in the product. I'm sure you've seen that in your analysis of the markets, the entrants came in at lower prices and grab a quick material piece of the market very quickly simply based on pricing and minimum acceptable level of potency.
John Zamparo -- CIBC World Markets -- Analyst
Okay, that's helpful. Thanks. And then my second question is more housekeeping. What are your expectations on working capital investments for Q3 and Q4? And is it fair to think that there are incremental investments to be made given the launch of derivative products and now presumably a ramp up in vape products in Alberta?
Glen Ibbott -- Chief Financial Officer
Yes, I think that it's true by and large. As I mentioned earlier, we do need to keep a very close eye on how demand is developing and what we're putting into their production side of the house. So in terms of the inventory, we're continuing to build a certain inventory types. But yes, I think to being mentioned earlier there are a number of our product lines we're selling out fairly quickly, so that's not done. We definitely need to continue to invest there. So there may be some incremental working capital built over the next half, we will of course be driving costs out of the SG&A. So I think overall I think it should be in pretty good shape in terms of our investment in working capital.
Operator
The next question is from Graeme Kreindler of Eight Capital. Please go ahead.
Glen Ibbott -- Chief Financial Officer
Good morning, Graeme.
Graeme Kreindler -- Eight Capital -- Analyst
Hi, good morning. Thank you for taking my question. I wanted to ask a question regarding the search for a full time CEO. Michael, you mentioned in the prepared remarks, the difficult period that the industry as a whole has been going through and in light of that, I was wondering if there -- if that gives you any concerns about finding the right type of candidates, attracting the right type of talent. Has that given anyone, any sort of pause in terms of entering the industry at this point, if its life cycle versus what the expectation is and what we've seen in terms of migration of talent, six months, 12 months ago. Thanks.
Michael Singer -- Interim Chief Executive Officer and Executive Chairman
Sure, Graeme. Good question. Yes, it is something that we initiated obviously, prior to the announcement last week we had very active discussions going into last week's announcement. And we were confident that with last week's announcement we would get additional inbound interest, which we've actually seen this week. So we're encouraged about the status of those ongoing discussions. We're not committing to anytime, these discussions do take time, but we're very encouraged by the level of interest that we're seeing and we're very confident that we're going to be able to find the right long-term permanent CEO that certainly is going to be impactful for our business going forward. And we're, obviously we'll update the market and our investors as we show tangible progress with regards to that search.
Graeme Kreindler -- Eight Capital -- Analyst
Okay. Thank you for that. And just to follow up quickly, do you have any sort of hard and fast criteria that you're looking for? And with that -- is there a separate committee, a search committee that's been established? How's that decision making process being held? Thanks.
Michael Singer -- Interim Chief Executive Officer and Executive Chairman
So, the answer to those two questions are yes. A number of our Independent Directors are playing a very active role in this process. And so we have a lot of hands on deck at the board level to make sure that we certainly attract and secure the right talent going forward. We're taking a good look at our business today and where we anticipate our business to go into the future. And so what we're looking for is a skill set and obviously an ability to lead this organization into the next generation of products. We see this moving toward more cannabinoids, CPG sort of focus. So you're going to probably see somebody that has experience in all of those areas and be able to sort of support the business in its -- as we look at it going forward.
Operator
This concludes the time allocated for the question-and-answer session. I would like to turn the call back over to Michael Singer for closing comments.
Michael Singer -- Interim Chief Executive Officer and Executive Chairman
I would like to thank everyone for joining our call. We look forward, of course to speaking to you in the next quarter and providing you with more updates. Have a great day. Thank you.
Operator
[Operator Closing Remarks]
Duration: 56 minutes
Call participants:
Michael Singer -- Interim Chief Executive Officer and Executive Chairman
Glen Ibbott -- Chief Financial Officer
Vivien Azer -- Cowen -- Analyst
Chris Carey -- Bank of America Merrill Lynch -- Analyst
Owen Bennett -- Jefferies -- Analyst
Michael Lavery -- Piper Sandler -- Analyst
Pablo Zuanic -- Cantor Fitzgerald -- Analyst
Matt Bottomley -- Canaccord -- Analyst
John Zamparo -- CIBC World Markets -- Analyst
Graeme Kreindler -- Eight Capital -- Analyst
More ACB analysis
All earnings call transcripts
10 stocks we like better than Aurora Cannabis Inc.
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Aurora Cannabis Inc. wasn't one of them! That's right -- they think these 10 stocks are even better buys.
See the 10 stocks
*Stock Advisor returns as of December 1, 2019
This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.
Motley Fool Transcribers has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Aurora Cannabis Inc (NYSE: ACB) Q2 2020 Earnings Call Feb 13, 2020, 8:00 a.m. Operator [Operator Closing Remarks] Duration: 56 minutes Call participants: Michael Singer -- Interim Chief Executive Officer and Executive Chairman Glen Ibbott -- Chief Financial Officer Vivien Azer -- Cowen -- Analyst Chris Carey -- Bank of America Merrill Lynch -- Analyst Owen Bennett -- Jefferies -- Analyst Michael Lavery -- Piper Sandler -- Analyst Pablo Zuanic -- Cantor Fitzgerald -- Analyst Matt Bottomley -- Canaccord -- Analyst John Zamparo -- CIBC World Markets -- Analyst Graeme Kreindler -- Eight Capital -- Analyst More ACB analysis All earnings call transcripts 10 stocks we like better than Aurora Cannabis Inc. Listeners are reminded that certain matters discussed in today's conference call or answers that may be given to questions asked could constitute forward-looking statements that are subject to the risks and uncertainties relating to Aurora's future financial or business performance. | Operator [Operator Closing Remarks] Duration: 56 minutes Call participants: Michael Singer -- Interim Chief Executive Officer and Executive Chairman Glen Ibbott -- Chief Financial Officer Vivien Azer -- Cowen -- Analyst Chris Carey -- Bank of America Merrill Lynch -- Analyst Owen Bennett -- Jefferies -- Analyst Michael Lavery -- Piper Sandler -- Analyst Pablo Zuanic -- Cantor Fitzgerald -- Analyst Matt Bottomley -- Canaccord -- Analyst John Zamparo -- CIBC World Markets -- Analyst Graeme Kreindler -- Eight Capital -- Analyst More ACB analysis All earnings call transcripts 10 stocks we like better than Aurora Cannabis Inc. Aurora Cannabis Inc (NYSE: ACB) Q2 2020 Earnings Call Feb 13, 2020, 8:00 a.m. ET Contents: Prepared Remarks Questions and Answers Call Participants Prepared Remarks: Operator Good morning, everyone. | Operator [Operator Closing Remarks] Duration: 56 minutes Call participants: Michael Singer -- Interim Chief Executive Officer and Executive Chairman Glen Ibbott -- Chief Financial Officer Vivien Azer -- Cowen -- Analyst Chris Carey -- Bank of America Merrill Lynch -- Analyst Owen Bennett -- Jefferies -- Analyst Michael Lavery -- Piper Sandler -- Analyst Pablo Zuanic -- Cantor Fitzgerald -- Analyst Matt Bottomley -- Canaccord -- Analyst John Zamparo -- CIBC World Markets -- Analyst Graeme Kreindler -- Eight Capital -- Analyst More ACB analysis All earnings call transcripts 10 stocks we like better than Aurora Cannabis Inc. Aurora Cannabis Inc (NYSE: ACB) Q2 2020 Earnings Call Feb 13, 2020, 8:00 a.m. As we said in our first quarter conference call, it's important to remind ourselves that the Canadian consumer market is just over a year old and will take time to develop, but we remain extremely bullish on the long-term potential of the Canadian medical and consumer markets as well as established international medical markets. | Operator [Operator Closing Remarks] Duration: 56 minutes Call participants: Michael Singer -- Interim Chief Executive Officer and Executive Chairman Glen Ibbott -- Chief Financial Officer Vivien Azer -- Cowen -- Analyst Chris Carey -- Bank of America Merrill Lynch -- Analyst Owen Bennett -- Jefferies -- Analyst Michael Lavery -- Piper Sandler -- Analyst Pablo Zuanic -- Cantor Fitzgerald -- Analyst Matt Bottomley -- Canaccord -- Analyst John Zamparo -- CIBC World Markets -- Analyst Graeme Kreindler -- Eight Capital -- Analyst More ACB analysis All earnings call transcripts 10 stocks we like better than Aurora Cannabis Inc. Aurora Cannabis Inc (NYSE: ACB) Q2 2020 Earnings Call Feb 13, 2020, 8:00 a.m. We will be consuming all of that over the next several quarters. |
37666.0 | 2020-02-13 00:00:00 UTC | Aurora Cannabis Stock Rises Despite Deep Q2 Loss | ACB | https://www.nasdaq.com/articles/aurora-cannabis-stock-rises-despite-deep-q2-loss-2020-02-13 | nan | nan | Shares of Aurora Cannabis (NYSE: ACB) were up in Thursday afternoon trading following the release of the company's fiscal 2020 second-quarter results.
For the period, which ended Dec. 31, Aurora booked net revenue of just over 56 million Canadian dollars ($42 million), which was 26% lower than its fiscal Q1 result.
Higher expenses (up 23% sequentially), provisions for returns, and that revenue dive negatively affected the bottom line -- the company's net loss plunged to CA$1.3 billion ($980 million), from the previous quarter's thin profit of almost CA$11 million ($8 million).
Image source: Getty Images
Following developments last week with Aurora, in which it announced the departure of its CEO, plus a round of job cuts and substantial goodwill impairment charges, many expected the quarter's results would be poor. Analysts were modeling around CA$65.5 million ($49.4 million) in revenue, and a net loss of roughly CA$1.0 billion ($754 million).
In terms of operational and volume metrics, in fiscal Q2 Aurora produced 30,691 kilos of product, and sold 9,501. Those figures represented drops of 26% and 24%, respectively. The company's average net selling price for its cannabis, both medical and recreational, fell to CA$5.54 ($4.18) per gram from the Q1 figure of CA$5.68 ($4.28).
Aurora wrote in its earnings release that it is "bullish on the long-term potential for the global cannabis opportunity."
"However, due to several short-term factors, there is likely to be a slower than previously expected rate of industry growth in the near-term," Aurora added. The company said it's expecting slight or no cannabis revenue growth on a sequential basis in Q3. It did not proffer more detailed guidance.
Investors appeared to be somewhat relieved that Aurora's performance wasn't too much worse than expected. The closely watched marijuana stock was up by slightly more than 1% as of 2 p.m. Thursday.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Shares of Aurora Cannabis (NYSE: ACB) were up in Thursday afternoon trading following the release of the company's fiscal 2020 second-quarter results. "However, due to several short-term factors, there is likely to be a slower than previously expected rate of industry growth in the near-term," Aurora added. Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks. | Shares of Aurora Cannabis (NYSE: ACB) were up in Thursday afternoon trading following the release of the company's fiscal 2020 second-quarter results. Higher expenses (up 23% sequentially), provisions for returns, and that revenue dive negatively affected the bottom line -- the company's net loss plunged to CA$1.3 billion ($980 million), from the previous quarter's thin profit of almost CA$11 million ($8 million). Analysts were modeling around CA$65.5 million ($49.4 million) in revenue, and a net loss of roughly CA$1.0 billion ($754 million). | Shares of Aurora Cannabis (NYSE: ACB) were up in Thursday afternoon trading following the release of the company's fiscal 2020 second-quarter results. Higher expenses (up 23% sequentially), provisions for returns, and that revenue dive negatively affected the bottom line -- the company's net loss plunged to CA$1.3 billion ($980 million), from the previous quarter's thin profit of almost CA$11 million ($8 million). Analysts were modeling around CA$65.5 million ($49.4 million) in revenue, and a net loss of roughly CA$1.0 billion ($754 million). | Shares of Aurora Cannabis (NYSE: ACB) were up in Thursday afternoon trading following the release of the company's fiscal 2020 second-quarter results. Higher expenses (up 23% sequentially), provisions for returns, and that revenue dive negatively affected the bottom line -- the company's net loss plunged to CA$1.3 billion ($980 million), from the previous quarter's thin profit of almost CA$11 million ($8 million). The Motley Fool has no position in any of the stocks mentioned. |
37667.0 | 2020-02-13 00:00:00 UTC | Beaten Down Aphria Stock Could Rebound, But Tread Carefully | ACB | https://www.nasdaq.com/articles/beaten-down-aphria-stock-could-rebound-but-tread-carefully-2020-02-13 | nan | nan | With major pot stocks reeling in recent weeks, whatâÂÂs next for Aphria (NYSE:) stock? In the past year, the shares have fallen from around $10 per share to $4.18 in early trading today. But, with key catalysts in the pipeline, Aphria stock could be a buy at todayâÂÂs price levels.
Source: Shutterstock
DonâÂÂt get me wrong. As a longtime cannabisàbear, I am skeptical of most pot stocks. Yet Aphria trades at a relatively low valuation. While its peers , well-capitalized Aphria stock has a shot at achieving profitability. And while the company may continue to face external headwinds, AphriaâÂÂs relatively low valuation may make it preferable to a larger, more expensive pot stock like Canopy Growth (NYSE:).
LetâÂÂs dive in and see why, as the cannabis sector burns, beaten down Aphria stock could be a good investment.
New Developments Could Boost Aphria Stock
, and reduced guidance are weighing on Aphria stock. As InvestorPlace contributoràVince Martin noted in his column published on Jan. 29, . ThatâÂÂs the crux of the issue. Until regulatory and industry headwinds improve, Aphria will face challenges in both Canada and Europe.
But recent developments could indicate that AphriaâÂÂs fortunes will rebound. In late January, the company for its Aphria One facility. That opens the door for the company to boost its lagging European sales. Due to changes in GermanyâÂÂs medical reimbursement model, AphriaâÂÂs distribution revenue fell 9.3% quarter-over-quarter.
But two key upcoming positive catalysts in Canada could boost Aphria stock. First, AphriaâÂÂs focus on vaping could boost the companyâÂÂs results. After the province of Alberta , Aphria now has a larger market for its vaping products.
Secondly, the company has improved its core Canadian marijuana business. As InvestorPlace columnist Chris Lau recently wrote, AphriaâÂÂs and the rapid rollout of new stores couldàimprove its results this year. In addition, AphriaâÂÂs Diamond production facility finally received a cultivation license last year. Once the facility is up and running, Aphria can materially boost its annual output.
But valuation, not catalysts, may be the reason to buy Aphria stock at todayâÂÂs prices.
An Undervalued Name in an Overvalued Space
Valuation is another reason to consider Aphria stock. Since cannabis companies still arenâÂÂt profitable, I like to use the enterprise value/sales (EV/Sales) metric to assess their value. Based on this metric, Aphria stock is materially cheaper than its peers, including struggling Aurora Cannabis (NYSE:).
However,àAphria should trade at a lower valuation than its âÂÂhigh-qualityâ peers like Canopy Growth and Cronos Group (NASDAQ:). ThatâÂÂs because both Canopy and Cronos have blue-chip connections. Canopy has aàstrategic partnership with deep-pocketed Constellation Brands (NYSE:). Meanwhile, àCronos has cigarette giant Altria Group (NYSE:) in its corner.
Yet Aphria is fairly well capitalized. The company has ÃÂ and relatively small operating losses. Aphria also does not have any large capital projects on the horizon. Unlike Aurora, AphriaÃÂ is unlikely to face a capital crunch. Aphria may not have a blue chip name in its corner, but a from a large institution indicate that a major investor is upbeat about its future prospects.
IâÂÂm not saying Aphria stock is a value play. Far from it. But with AphriaâÂÂs valuation lower than that of Canopy, Aphria is more attractive. Both stocks will rise if the marijuana space improves. At least AphriaâÂÂs valuation provides some âÂÂmargin of safety.âÂÂ
Aphria Offers Opportunity, But Tread Carefully
Challenges remain for marijuana stocks. But Aphria stock may offer an opportunity at todayâÂÂs prices. Its shares remain depressed due to increased bearishness towards the pot space. But, with its strong balance sheet and tangible catalysts, Aphria could climb in the next few months.
However, Aphria is appealing largely because itâÂÂs more attractive than its peers. AphriaâÂÂs valuation is relatively low, and its operating performance is strong relative to its peers. But, if negative external factors continue to hurt the sector, expect Aphria stock to fall further.
With this in mind, consider buying Aphria stock, but tread carefully. The shares offer a âÂÂcheapâ way to play the marijuana legalization trend. But keep in mind that the industry is facing underlying risks.
Thomas Niel, contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016. As of this writing, Thomas Niel did not hold a position in any of the aforementioned securities.
ÃÂ
ÃÂ
ÃÂ
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | And while the company may continue to face external headwinds, AphriaâÂÂs relatively low valuation may make it preferable to a larger, more expensive pot stock like Canopy Growth (NYSE:). As InvestorPlace columnist Chris Lau recently wrote, AphriaâÂÂs and the rapid rollout of new stores couldàimprove its results this year. Based on this metric, Aphria stock is materially cheaper than its peers, including struggling Aurora Cannabis (NYSE:). | And while the company may continue to face external headwinds, AphriaâÂÂs relatively low valuation may make it preferable to a larger, more expensive pot stock like Canopy Growth (NYSE:). However,àAphria should trade at a lower valuation than its âÂÂhigh-qualityâ peers like Canopy Growth and Cronos Group (NASDAQ:). At least AphriaâÂÂs valuation provides some âÂÂmargin of safety.â Aphria Offers Opportunity, But Tread Carefully Challenges remain for marijuana stocks. | With major pot stocks reeling in recent weeks, whatâÂÂs next for Aphria (NYSE:) stock? New Developments Could Boost Aphria Stock , and reduced guidance are weighing on Aphria stock. At least AphriaâÂÂs valuation provides some âÂÂmargin of safety.â Aphria Offers Opportunity, But Tread Carefully Challenges remain for marijuana stocks. | And while the company may continue to face external headwinds, AphriaâÂÂs relatively low valuation may make it preferable to a larger, more expensive pot stock like Canopy Growth (NYSE:). First, AphriaâÂÂs focus on vaping could boost the companyâÂÂs results. Its shares remain depressed due to increased bearishness towards the pot space. |
37668.0 | 2020-02-13 00:00:00 UTC | Should Investors Avoid Large-Cap Pot Stocks Altogether? | ACB | https://www.nasdaq.com/articles/should-investors-avoid-large-cap-pot-stocks-altogether-2020-02-13 | nan | nan | The past couple of weeks have been particularly hard on the cannabis sector. While many investors had hoped that revenue from Canada's 2.0 legalization would help out many companies, that hardly seems to be the case right now. Instead, it seems that the market is going to continue to be tumultuous at best.
Some of the biggest names in the cannabis sector are reporting layoffs, continued losses, resignations in senior management, and some massive goodwill adjustments. This all begs the question: Should you avoid large-cap pot stocks altogether? Let's take a look at the biggest companies in the market and see what's going on with them.
Image source: Getty Images
Aurora Cannabis
Aurora Cannabis (NYSE: ACB) stated last week it was laying off 10% of its workforce to cut costs. To make things worse, the company announced the departure of its longtime CEO Terry Booth as well as a CA$1 billion goodwill adjustment, a charge that will erase a major chunk of Aurora's value from its accounting books. Shaving a billion dollars off the company's valuation is pretty bad, but things could be worse. Considering that Aurora had as much as CA$3.1 billion in goodwill on its balance sheet before the announcement, Aurora bulls are lucky the company hasn't announced steeper adjustments.
Net revenue for Aurora is down a fair bit over the past quarter, falling 25% from the CA$94.6 million reported in the fourth quarter of 2019 to just CA$70.8 million in the first quarter of 2020. Expenses are rising, with the company's adjusted EBITDA loss coming in at CA$39.7 million, a substantial increase from the CA$11.7 million reported in the previous quarter.
Out of all the large-cap pot stocks on this list, Aurora might be in the worst position going forward. Even before last week's announcement, analysts said Aurora could be worth as little as $1 per share if not lower.
Canopy Growth
While Aurora is undergoing some major shifts, Canopy Growth (NYSE: CGC) went through a similar process in 2019. After reporting a staggering CA$1 billion quarterly loss and firing its iconic CEO Bruce Linton, the company has undergone significant changes. Canopy's biggest investor, Constellation Brands, has been exerting its influence in an effort to turn things around, making a number of senior leadership changes in the process. Canopy still has a lot of work to do.
Investors were disappointed when the company said it was delaying the launch of its cannabis beverage products until an undisclosed future date. Cannabis derivative products tend to have higher margins than selling marijuana itself, something that could help turn Canopy's financial situation around.
The cannabis giant reported revenues of CA$76.6 million in its fiscal second quarter for 2020. That's a big improvement from Q2 2019's CA$23.3 million in revenue, but losses have grown as well. Net losses for Canopy reached CA$374.6 million, a fair bit higher than the CA$330.6 million reported a year ago, although notably smaller than the CA$1 billion-plus loss reported back in the company's fiscal first quarter in August 2019.
Canopy appears to be in a better position than Aurora, especially given that it has CA$2.8 billion in cash and short-term assets to fund its operations. However, the fact that the company is burning through hundreds of millions of dollars per quarter amid product launch setbacks is something to be worried about.
Image source: Getty Images
Tilray
Tilray (NASDAQ: TLRY) also announced major layoffs last week, cutting 10% of its workforce to help reduce costs. Just like Aurora and Canopy, Tilray struggles to make a profit. The company brought in $51.1 million according to its third-quarter financial results. However, net losses for the quarter came in at $35.7 million, and with just $122.3 million in cash and short-term investments, Tilray will sooner or later need to secure further funding to keep operating.
Besides the ongoing losses, the company's adult-use recreational marijuana sales have been unusually weak. The cannabis company reported just a 5.3% increase in adult-use sales from the past quarter, growing from $15.0 million to $15.8 million. That's far from an impressive figure, and weak growth in what should be a core market for the company is worth worrying about.
Cronos Group
Cronos Group (NASDAQ: CRON) is an interesting case study. Many investors, including myself, have argued that the company is incredibly overvalued when looking at the financial metrics. Whereas Aurora, Tilray, and Canopy all have price-to-sales (P/S) ratios of 8.2, 12.0, and 25.6 respectively, Cronos Group trades at a seemingly staggering 77.8 P/S ratio.
NAME AURORA CANNABIS CANOPY GROWTH TILRAY CRONOS GROUP APHRIA
Price-to-sales (P/S) ratio 8.2x 25.6x 12.0x 77.8x 3.1x
Market cap (CA$) $2.3 billion $8.9 billion $2.1 billion $3.1 billion $1.4 billion
Quarterly sales $70.8 million $76.6 million $51 million $12.7 million $120.6 million
Data source: YCharts, Aurora, Canopy Growth, Tilray, Cronos Group, Aphria. All figures in CA$0.
Cronos is also very peculiar due to the fact that it's extraordinarily well funded, with almost CA$2 billion in cash and short-term assets. This large cash position is also a reason why the company's P/S ratio seems too high. Cronos has a market cap of CA$3.1 billion, with its CA$2 billion cash position accounting for 63.7% of the business's net worth.
While typically it's not ideal to have so much cash sitting around not doing anything, that might not be such a bad thing right now in the cannabis sector, where losses appear to be common. While the company is technically reporting a pretty big profit right now, over CA$787.9 million, that's almost entirely due to gains realized on financial derivatives that the company owns.
As for its actual cannabis business, Cronos Group remains unprofitable. The previous quarter, where the company didn't have any derivative or financial security gains, saw product revenues of just $12.7 million with a net loss of CA$7.2 million. While Cronos isn't in a financially desperate position, having enough cash to last the company potentially decades, what's uncertain is how Cronos expects to grow in the future.
Aphria
Unlike Cronos, Aphria (NYSE: APHA) is surprisingly undervalued, trading at only 3.1 times its P/S ratio. While there are a couple of reasons why people think the stock price has stayed so low (such as a previous scandal regarding its Latin American acquisitions), the fundamentals behind the stock remain solid.
For one, Aphria is one of the few pot stocks that frequently reports a quarterly profit. Over the past six-month period, Aphria has reported CA$8.5 million in revenue, even after considering the CA$7.9 million net loss reported in its most recent fiscal second quarter, which ended Nov. 30.
However, it's the company's international operations where things look really good. Aphria acquired a German-based pharmaceutical distributor, CC Pharma, to distribute its medical marijuana products in the country. As a separate business, CC Pharma has been a major driver of Aphria's revenue, bringing in CA$86.4 million in sales over the quarter in comparison to CA$39.8 million from Aphria's Canadian pot business.
Should you avoid large-cap pot stocks?
There aren't many large-cap pot stocks I'd recommend at this time, with Aphria perhaps being the main exception. Most other companies are struggling to keep their losses under control while also commanding unusually hefty premiums despite their sub-par performance to date.
In the current market climate, investors need to be very specific about which pot stocks they choose to invest in right now. Large-cap pot stocks, based on what we've just gone over, have a lot of problems going for them, and could very well post continued losses in the weeks and months to come as they work on sorting out their issues.
10 stocks we like better than Aurora Cannabis Inc.
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Aurora Cannabis Inc. wasn't one of them! That's right -- they think these 10 stocks are even better buys.
See the 10 stocks
*Stock Advisor returns as of December 1, 2019
Mark Prvulovic has no position in any of the stocks mentioned. The Motley Fool recommends Constellation Brands and HEXO. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Image source: Getty Images Aurora Cannabis Aurora Cannabis (NYSE: ACB) stated last week it was laying off 10% of its workforce to cut costs. To make things worse, the company announced the departure of its longtime CEO Terry Booth as well as a CA$1 billion goodwill adjustment, a charge that will erase a major chunk of Aurora's value from its accounting books. Canopy's biggest investor, Constellation Brands, has been exerting its influence in an effort to turn things around, making a number of senior leadership changes in the process. | Image source: Getty Images Aurora Cannabis Aurora Cannabis (NYSE: ACB) stated last week it was laying off 10% of its workforce to cut costs. Image source: Getty Images Tilray Tilray (NASDAQ: TLRY) also announced major layoffs last week, cutting 10% of its workforce to help reduce costs. Price-to-sales (P/S) ratio 8.2x 25.6x 12.0x 77.8x 3.1x Market cap (CA$) $2.3 billion $8.9 billion $2.1 billion $3.1 billion $1.4 billion Quarterly sales $70.8 million $76.6 million $51 million $12.7 million $120.6 million Data source: YCharts, Aurora, Canopy Growth, Tilray, Cronos Group, Aphria. | Image source: Getty Images Aurora Cannabis Aurora Cannabis (NYSE: ACB) stated last week it was laying off 10% of its workforce to cut costs. Net revenue for Aurora is down a fair bit over the past quarter, falling 25% from the CA$94.6 million reported in the fourth quarter of 2019 to just CA$70.8 million in the first quarter of 2020. Net losses for Canopy reached CA$374.6 million, a fair bit higher than the CA$330.6 million reported a year ago, although notably smaller than the CA$1 billion-plus loss reported back in the company's fiscal first quarter in August 2019. | Image source: Getty Images Aurora Cannabis Aurora Cannabis (NYSE: ACB) stated last week it was laying off 10% of its workforce to cut costs. Price-to-sales (P/S) ratio 8.2x 25.6x 12.0x 77.8x 3.1x Market cap (CA$) $2.3 billion $8.9 billion $2.1 billion $3.1 billion $1.4 billion Quarterly sales $70.8 million $76.6 million $51 million $12.7 million $120.6 million Data source: YCharts, Aurora, Canopy Growth, Tilray, Cronos Group, Aphria. Cronos has a market cap of CA$3.1 billion, with its CA$2 billion cash position accounting for 63.7% of the business's net worth. |
37669.0 | 2020-02-13 00:00:00 UTC | 4 Ways "Cannabis 2.0" Will Be an Early Disappointment in Canada | ACB | https://www.nasdaq.com/articles/4-ways-cannabis-2.0-will-be-an-early-disappointment-in-canada-2020-02-13 | nan | nan | The stage appeared to be set in 2019 for marijuana stocks to thrive, but this didn't prove to be the case. When the year ended, most cannabis stocks had logged big-time losses for the year, with Canadian pot stocks leading the way to the downside. A combination of supply concerns and a resilient black-market presence have made it very difficult for Canadian growers to thrive.
But throughout 2019, the launch of derivative pot products, such as vape, edibles, infused beverages, concentrates, and topicals, was viewed as the light at the end of the tunnel. Affably known as "Cannabis 2.0," these alternative pot products offer substantially higher margins than traditional dried flower, making them a must-have for any grower's portfolio.
Image source: Getty Images.
Sorry, folks, but the launch of derivatives hasn't gone as planned
However, little has been heard about the sale of derivative cannabis products following their launch in mid-December. Although we'll have to wait a few months to receive accurate sales data from Statistics Canada, it looks safe to say that Cannabis 2.0 has been a disappointment, at least in the early going.
Why? Look no further than the following four reasons.
1. Ontario's licensing woes
Perhaps the most damning issue for the entire Canadian pot industry has been Ontario's inability to license dispensaries. Until the end of 2019, Ontario's retail licenses were awarded via a lottery system, with a meager 24 stores open as of the one-year anniversary of adult-use sales commencing (sales began Oct. 17, 2018). This is a problem considering that Ontario is home to 38% of Canada's population, and it could likely house up to 1,000 retail stores. As a result of too few open dispensaries, supply bottlenecks have ensued.
The good news is that Ontario has abandoned its lottery system in favor of a more traditional licensing process where applications will be received, vetted, and awarded on a regular basis. The hope is that Canada's most populous province will award around 20 dispensaries per month, beginning in April, ultimately pushing the retail store count up to 250 by the end of 2020.
The issue is that this ramp-up will take time. In the meanwhile, Ontario's dispensary count remains low, thereby significantly limiting access to higher-margin Cannabis 2.0 products to roughly two-fifths of the country.
Image source: Getty Images.
2. Alberta's ban on vapes
Another problem for the Cannabis 2.0 movement is that the most popular derivative of all, vapes, has been temporarily banned in Alberta, a province of almost 4.4 million people, or 11.6% of Canada's population.
According to a government spokesperson in Alberta, regulators have no plans to allow vaping products onto dispensary shelves before it completes the Tobacco and Smoking Reduction Act review. This was expected to be completed by the end of 2019, with the results leading to amendments of the Tobacco Act by the spring of 2020.
In particular, physicians are concerned about the health effects associated with vaping. This comes after more than 2,700 confirmed cases of vape-related lung illnesses in the U.S., and 60 deaths, since this past summer.
Quite a few Canadian pot stocks are banking heavily on vapes to drive their business. Cronos Group (NASDAQ: CRON), as an example, received a $1.8 billion equity investment from tobacco giant Altria Group last March. The expectation has long been that Altria would use its expertise in marketing smokable products, as well as its connection with Juul as an equity holder, to aid Cronos in its launch and marketing of vape products throughout Canada. However, with health concerns cropping up in the U.S., and Alberta regulators taking a cautious approach, Cronos is likely to see a weaker-than-expected uptake of vapes in the early going.
Image source: Getty Images.
3. Funding/operational issues with certain growers
A third issue is that a number of growers -- even brand-name pot stocks -- aren't truly ready to meet Cannabis 2.0 demand.
In some respects, the reason for this is entirely procedural. Canopy Growth (NYSE: CGC), for example, stated in January that it was withholding the launch of its suite of infused beverage products. Canopy is expected to be a major player in the infused beverage arena given that Constellation Brands holds a greater than 35% stake in the company and is the perfect partner to provide its expertise on a beverage launch. However, Canopy simply hasn't had enough time to complete its beverage production line since receiving its licenses in November. As such, the company's beverage product launch will be later than anticipated.
The other factor here may have to do with funding. Although investors haven't heard of any specific instances where Cannabis 2.0 product launches were delayed by funding concerns, there's no denying that quite a few cannabis stocks are in need of financing to ensure they're around for the long haul. Examples might include Aurora Cannabis (NYSE: ACB) and HEXO, both of which have instituted significant cost cuts in recent months.
Image source: Getty Images.
4. Taxation
Lastly, go ahead and place at least some of the blame on taxation. Although Canada's tax rate on legal marijuana is significantly lower than in a number of recreationally legal U.S. states, the fact remains that any notable level of taxation on legal pot products, whether it's traditional flower or derivatives, makes it difficult for those products to compete with black-market pricing.
"Too high a level of taxation at the inception of a legal consumer system can be a disincentive for consumers to make that move from black market to legal market," according to Aurora Cannabis' now-former Chief Corporate Officer Cam Battley, via Reuters. Mind you, Aurora has a multitude of problems, including financing concerns, an ugly balance sheet that's buried under goodwill, and has been hampered badly by Ontario's slow retail store rollout. But before his departure, Battley made a great point that competing with black-market producers becomes less likely if tax rates are too high.
With supply still problematic, and the price for Cannabis 2.0 products significantly higher than black market marijuana (including taxes), it would be no surprise if the black market continued to hold significant market share in Canada and pressured early stage derivative sales.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Sean Williams has no position in any of the stocks mentioned. The Motley Fool recommends Constellation Brands and HEXO. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Examples might include Aurora Cannabis (NYSE: ACB) and HEXO, both of which have instituted significant cost cuts in recent months. Affably known as "Cannabis 2.0," these alternative pot products offer substantially higher margins than traditional dried flower, making them a must-have for any grower's portfolio. The good news is that Ontario has abandoned its lottery system in favor of a more traditional licensing process where applications will be received, vetted, and awarded on a regular basis. | Examples might include Aurora Cannabis (NYSE: ACB) and HEXO, both of which have instituted significant cost cuts in recent months. Until the end of 2019, Ontario's retail licenses were awarded via a lottery system, with a meager 24 stores open as of the one-year anniversary of adult-use sales commencing (sales began Oct. 17, 2018). Although Canada's tax rate on legal marijuana is significantly lower than in a number of recreationally legal U.S. states, the fact remains that any notable level of taxation on legal pot products, whether it's traditional flower or derivatives, makes it difficult for those products to compete with black-market pricing. | Examples might include Aurora Cannabis (NYSE: ACB) and HEXO, both of which have instituted significant cost cuts in recent months. Although investors haven't heard of any specific instances where Cannabis 2.0 product launches were delayed by funding concerns, there's no denying that quite a few cannabis stocks are in need of financing to ensure they're around for the long haul. Although Canada's tax rate on legal marijuana is significantly lower than in a number of recreationally legal U.S. states, the fact remains that any notable level of taxation on legal pot products, whether it's traditional flower or derivatives, makes it difficult for those products to compete with black-market pricing. | Examples might include Aurora Cannabis (NYSE: ACB) and HEXO, both of which have instituted significant cost cuts in recent months. Ontario's licensing woes Perhaps the most damning issue for the entire Canadian pot industry has been Ontario's inability to license dispensaries. The expectation has long been that Altria would use its expertise in marketing smokable products, as well as its connection with Juul as an equity holder, to aid Cronos in its launch and marketing of vape products throughout Canada. |
37670.0 | 2020-02-13 00:00:00 UTC | 3 Potential Surprises to Watch For in Canopy Growth's Q3 Results | ACB | https://www.nasdaq.com/articles/3-potential-surprises-to-watch-for-in-canopy-growths-q3-results-2020-02-13 | nan | nan | No matter how you look at it, Canopy Growth (NYSE: CGC) has lost a lot of its luster. Sure, the Canadian cannabis producer still claims the largest market cap in the cannabis industry. But Canopy has repeatedly disappointed investors with its financial performance, including reporting downright miserable results in its fiscal 2020 second quarter.
The company is scheduled to announce its third-quarter results before the market opens on Friday, Feb. 14. Here are three potential surprises to watch for with Canopy's Q3 update.
Image source: Getty Images.
1. Relatively strong international sales
Canopy reported 72% year-over-year sales growth in international medical cannabis markets in Q2. Much of this growth was fueled by the company's May 2019 acquisition of German cannabinoid drugmaker C3. In addition, Canopy's German medical cannabis business performed well after the company resolved supply constraints that had dampened sales in previous quarters.
But Canopy warned in November that although it's "very confident in the sustained growth of the German market over the long term, management does not expect this level of growth to repeat in Q3 2020." Because of this cautionary note, you might think that Canopy's international sales in the third quarter will be underwhelming.
However, I suspect that Canopy just might post relatively strong international sales that are better than many expect. Why? I think that Canopy could have benefited from Aurora Cannabis' (NYSE: ACB) embarrassing temporary suspension of its medical cannabis license in Germany. Aurora didn't have the required permit to distribute irradiated medical cannabis products in the country but had used radiation to prevent microbial contamination without the permit.
My back-of-the-envelope calculation is that this snafu likely cost Aurora in the ballpark of $2 million. It's not a stretch to think that Canopy Growth could have claimed its fair share of Aurora's lost German revenue during the third quarter.
2. A longer-than-anticipated delay for beverages
One of David Klein's first jobs as Canopy's new CEO wasn't a pleasant task. Only a few days after taking the helm, Klein had to announce that Canopy was delaying the launches for its cannabis-infused beverages in the Canadian Cannabis 2.0 cannabis derivatives market.
The reason behind the unexpected pushback was that the final details of the scaling process for producing cannabis-infused beverages weren't worked out. Canopy said in a press release that it would provide an update when it announces its Q3 results. This is pure speculation, but I wouldn't be shocked if Canopy says on Friday that the delay for launching its new beverage products will be longer than most people anticipated.
Canopy didn't give any clues about how long it would take to resolve the remaining issues when it initially announced the delay. However, it did state that the pushback wasn't expected to materially impact revenue in fiscal year 2020.
But the fiscal year ends on March 31. I doubt that Canopy was counting on huge sales from its beverage products in the first couple of months on the market anyway. I could be totally wrong on this one, but Canopy's nuanced wording in its initial announcement of the delay seemed like a yellow flag to me.
3. A production slowdown
Even with the postponement of the launch of its cannabis-infused beverages, it seems reasonable to expect that Canopy would be cranking up production with the Cannabis 2.0 market picking up momentum. However, I think there's a not-so-insignificant chance that Canopy could instead say that it's slowing down production.
That might sound crazy but bear with me. Canopy Growth CFO Mike Lee said in the company's Q2 conference call that Canopy's "demand projections assume 40 new stores opening per month in Ontario starting in January." That's not happening. It's not even close. Ontario expects to issue 20 new licenses each month -- beginning in March.
If Canopy truly scaled up its cultivation operations in anticipation of Ontario opening a lot more stores than will really be the case, the company is going to have more inventory on its hands than it wanted. Sure, Canopy can use some of this cannabis to extract CBD and THC to use in its cannabis derivatives products. But, remember, the launch of beverages has been delayed, so Canopy won't need tremendous quantities of cannabinoids just yet.
I wouldn't bet on Canopy announcing a production slowdown in its Q3 update. On the other hand, I wouldn't bet against it, either.
No surprise
What won't be surprising in Canopy Growth's Q3 results is that it will post another big operating loss. Investing in marijuana stocks, including big players like Canopy, will continue to come with super-high volatility until the cannabis companies are profitable.
David Klein was brought in to put Canopy Growth on a solid path to profitability. The most interesting part of the company's Q3 update will be what he plans to do to achieve this goal. If Klein doesn't spend time discussing how Canopy will progress toward making a profit, it will be the biggest surprise of all.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | I think that Canopy could have benefited from Aurora Cannabis' (NYSE: ACB) embarrassing temporary suspension of its medical cannabis license in Germany. In addition, Canopy's German medical cannabis business performed well after the company resolved supply constraints that had dampened sales in previous quarters. If Canopy truly scaled up its cultivation operations in anticipation of Ontario opening a lot more stores than will really be the case, the company is going to have more inventory on its hands than it wanted. | I think that Canopy could have benefited from Aurora Cannabis' (NYSE: ACB) embarrassing temporary suspension of its medical cannabis license in Germany. Relatively strong international sales Canopy reported 72% year-over-year sales growth in international medical cannabis markets in Q2. Only a few days after taking the helm, Klein had to announce that Canopy was delaying the launches for its cannabis-infused beverages in the Canadian Cannabis 2.0 cannabis derivatives market. | I think that Canopy could have benefited from Aurora Cannabis' (NYSE: ACB) embarrassing temporary suspension of its medical cannabis license in Germany. Only a few days after taking the helm, Klein had to announce that Canopy was delaying the launches for its cannabis-infused beverages in the Canadian Cannabis 2.0 cannabis derivatives market. A production slowdown Even with the postponement of the launch of its cannabis-infused beverages, it seems reasonable to expect that Canopy would be cranking up production with the Cannabis 2.0 market picking up momentum. | I think that Canopy could have benefited from Aurora Cannabis' (NYSE: ACB) embarrassing temporary suspension of its medical cannabis license in Germany. Only a few days after taking the helm, Klein had to announce that Canopy was delaying the launches for its cannabis-infused beverages in the Canadian Cannabis 2.0 cannabis derivatives market. I wouldn't bet on Canopy announcing a production slowdown in its Q3 update. |
37671.0 | 2020-02-12 00:00:00 UTC | Canopy Growth Stock Remains a Long-Term Buy Ahead of Earnings | ACB | https://www.nasdaq.com/articles/canopy-growth-stock-remains-a-long-term-buy-ahead-of-earnings-2020-02-12 | nan | nan | Canopy Growth (NYSE:) stock remains one of my top picks as a long-term winner in the cannabis space. But in the short term, Canopy and other cannabis stocks continue to struggle.
Source: Shutterstock
ThatâÂÂs not terribly surprising. Recent fears of the coronavirus from China have rattled the markets. Before that, a slower-than-expected rollout of recreational products in Canada led to disappointing growth â and a massive selloff in cannabis names.
But even the recent volatility provides an opportunity. As regular readers of my know, weâÂÂve been selling covered calls on CGC stock and other cannabis plays. Higher volatility means higher premiums â and higher returns.
Nimble trading can create opportunities in almost any environment. With Canopy Growth earnings due on Friday morning, investors need to stay on their toes.
Two Big Days for Cannabis Stocks
Since stabilizing in November, cannabis stocks have tried to rally. I use the ETFMG Alternative Harvest ETF (NYSEARCA:) as a proxy for the sector. After bouncing in January, that exchange-traded fund once again is testing short-term support:
Source: Provided by Finviz
The ETF actually sits a few pennies below November lows. ThatâÂÂs not enough to predict another leg down for the sector â yet. But certainly sentiment toward the sector remains bearish.
Two industry leaders have a chance to reverse that sentiment this week. Aurora Cannabis (NYSE:) reports earnings on Thursday morning, and Canopy the following day.
It remains to be seen whether the two companies finally can drive optimism toward the sector. in Canada represent a significant growth opportunity, and should contribute modestly to fourth-quarter results. Earnings reports last month from Aphria (NYSE:) and OrganiGram (NASDAQ:) led the sector to bounce. ThereâÂÂs hope for a repeat this week and next.
But there are reasons for caution as well. Aurora has . Canopy announced that its cannabis-infused beverages would be late to market. Neither move suggests blowout earnings are on the way. And so investors waiting for a big rally in cannabis names may have to wait a little longer.
The Long-Term Case for CGC Stock
Of course, thatâÂÂs not a bad thing. My longer-term outlook toward cannabis is extremely bullish. But investors need to pay attention to short-term factors as well â and capitalize on them.
So weâÂÂve looked to sell covered calls on CGC stock. The strategy results in either positive short-term gains if the stocks are called away, or a reduced cost basis if theyâÂÂre not.
Covered calls allow investors to play the short-term trading weâÂÂve seen in recent months while maintaining flexibility toward the long-term opportunity. And from a long-term standpoint, Canopy Growth remains the stock to own.
The from Constellation Brands (NYSE:, NYSE:STZ.B) gives Canopy a sizable war chest. ItâÂÂs also allowed Canopy to develop a vertically integrated model that spans everything from production to retail.
Brands like Tweed and Tokyo Smoke will drive consumer sales with higher profit margins. Spectrum Therapeutics offers exposure to worldwide growth in medicinal marijuana.
Simply put, Canopy Growth is the industry leader in an industry that will, over the long term, grow exponentially. Investors canâÂÂt ask for anything more.
Matthew McCall left Wall Street to actually help investors â by getting them into the worldâÂÂs biggest, most revolutionary trends BEFORE anyone else. The power of being âÂÂfirstâ gave MattâÂÂs readers the chance to bank +2,438% in Stamps.com (STMP), +1,523% in Ulta Beauty (ULTA) and +1,044% in Tesla (TSLA), just to name a few. .àMatt does not directly own the aforementioned securities.
More From InvestorPlace
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Before that, a slower-than-expected rollout of recreational products in Canada led to disappointing growth â and a massive selloff in cannabis names. After bouncing in January, that exchange-traded fund once again is testing short-term support: Source: Provided by Finviz The ETF actually sits a few pennies below November lows. Covered calls allow investors to play the short-term trading weâÂÂve seen in recent months while maintaining flexibility toward the long-term opportunity. | Canopy Growth (NYSE:) stock remains one of my top picks as a long-term winner in the cannabis space. Aurora Cannabis (NYSE:) reports earnings on Thursday morning, and Canopy the following day. Covered calls allow investors to play the short-term trading weâÂÂve seen in recent months while maintaining flexibility toward the long-term opportunity. | Canopy Growth (NYSE:) stock remains one of my top picks as a long-term winner in the cannabis space. Two Big Days for Cannabis Stocks Since stabilizing in November, cannabis stocks have tried to rally. Aurora Cannabis (NYSE:) reports earnings on Thursday morning, and Canopy the following day. | Two Big Days for Cannabis Stocks Since stabilizing in November, cannabis stocks have tried to rally. Aurora Cannabis (NYSE:) reports earnings on Thursday morning, and Canopy the following day. Covered calls allow investors to play the short-term trading weâÂÂve seen in recent months while maintaining flexibility toward the long-term opportunity. |
37672.0 | 2020-02-12 00:00:00 UTC | Did Aurora Cannabis Just Check Off 1 Box Needed for Its Stock to Double? | ACB | https://www.nasdaq.com/articles/did-aurora-cannabis-just-check-off-1-box-needed-for-its-stock-to-double-2020-02-12 | nan | nan | Aurora Cannabis (NYSE: ACB) is a train wreck waiting to happen. That's the opinion of many investors. It's even the opinion of some analysts. But not all of them.
Cantor Fitzgerald's Pablo Zuanic stands out from the crowd of Aurora Cannabis skeptics. Even after Aurora's horrible 2019 performance and its mess-up with licensing in Germany that caused it to temporarily lose its medical cannabis license, Zuanic remained optimistic, saying in January that the cannabis producer could enjoy a "fantastic 2020" and that its stock could double over the next 12 months. | Aurora Cannabis (NYSE: ACB) is a train wreck waiting to happen. Cantor Fitzgerald's Pablo Zuanic stands out from the crowd of Aurora Cannabis skeptics. Even after Aurora's horrible 2019 performance and its mess-up with licensing in Germany that caused it to temporarily lose its medical cannabis license, Zuanic remained optimistic, saying in January that the cannabis producer could enjoy a "fantastic 2020" and that its stock could double over the next 12 months. | Aurora Cannabis (NYSE: ACB) is a train wreck waiting to happen. Cantor Fitzgerald's Pablo Zuanic stands out from the crowd of Aurora Cannabis skeptics. Even after Aurora's horrible 2019 performance and its mess-up with licensing in Germany that caused it to temporarily lose its medical cannabis license, Zuanic remained optimistic, saying in January that the cannabis producer could enjoy a "fantastic 2020" and that its stock could double over the next 12 months. | Aurora Cannabis (NYSE: ACB) is a train wreck waiting to happen. That's the opinion of many investors. It's even the opinion of some analysts. | Aurora Cannabis (NYSE: ACB) is a train wreck waiting to happen. That's the opinion of many investors. It's even the opinion of some analysts. |
37673.0 | 2020-02-12 00:00:00 UTC | Aurora Cannabis Takes a Huge Writedown, and These Pot Stocks May Follow Suit | ACB | https://www.nasdaq.com/articles/aurora-cannabis-takes-a-huge-writedown-and-these-pot-stocks-may-follow-suit-2020-02-12 | nan | nan | Last year was an eye-opener for marijuana stock investors. While the prospect of big-time growth very much remains on the table over the long run, as evidenced by the tens of billions of dollars in sales conducted in the black market every year, 2019 was a reminder that growing pains are a given with every industry. Even one that's existed in the shadows for decades.
As a result of supply issues in Canada, high tax rates in select U.S. states, and a resilient black market, marijuana stocks have had to make aggressive changes to their business models, and even balance sheets, to better align themselves with current market demand. Perhaps no company stands out more for its recently announced changes than Aurora Cannabis (NYSE: ACB).
Image source: Getty Images.
Aurora Cannabis finally faces the facts about its ugly balance sheet
Last week, the world's most popular marijuana stock announced a major overhaul to its corporate strategy and balance sheet. Longtime CEO and co-founder Terry Booth tendered his resignation, with the company announcing a host of plans designed to reduce spending in an effort to generate positive EBITDA. This includes focusing only on domestic and international opportunities that could immediately contribute revenue for the company.
Furthermore, Aurora Cannabis amended a number of terms to its secured debt, which included the removal of EBITDA ratio covenants, but now requires the company to generate positive EBITDA by the fiscal first quarter of 2021. Aurora's total credit facility was also reduced by $141.5 million Canadian, meaning it'll likely be even more reliant on stock issuances, should it need to raise capital.
But what stood out most in the company's corporate update was the admission that certain assets on its balance sheet no longer reflected fair-market value. As such, Aurora Cannabis is planning to take impairment charges of CA$190 to CA$225 million on certain property, plant and equipment, and CA$740 million to CA$775 million on its goodwill, mostly originating from its Denmark and South American assets.
Chances are that this isn't Aurora's last writedown, either. This is a company that's racked up CA$3.17 billion in goodwill from grossly overpaying for more than a dozen acquisitions since Aug. 2016. The writedown announced by Aurora only accounts for about a quarter of the company's existing goodwill.
Image source: Getty Images.
Writedowns may be brewing for these pot stocks, too
With Aurora finally coming to terms with its gross overpayment for its acquisitions, it's only a matter of time before other pot stocks do the same. The following three marijuana stocks are all prime examples of writedowns waiting to happen.
Canopy Growth
Behind Aurora's CA$3.17 billion in goodwill (as of Q1 2020) is Canopy Growth (NYSE: CGC), which clocks in at CA$1.91 billion in goodwill. Unlike Aurora, which logged most of its goodwill from a single transaction (MedReleaf), Canopy's goodwill has built up over time from a number of acquisitions.
What's particularly worrisome in Canopy's case is that its goodwill as a percentage of total assets has climbed over time. Although this is a company that closed the largest equity investment in history in Nov. 2018 (a roughly CA$5 billion investment from Constellation Brands), Canopy's cash, cash equivalents, and short-term investments have shrunk by nearly half over the past three quarters to CA$2.74 billion. As operating losses continue, goodwill as a percentage of total assets is liable to climb. For context, goodwill ended the previous quarter at 23% of total assets.
What looks to be most at risk for Canopy are any dollars it's spent internationally that have found their way to goodwill. Most medical marijuana-legal overseas markets are still in the process of formulating their policies and import rules, which means international assets are a ways away from paying dividends for Canopy Growth.
Image source: Getty Images.
iAnthus Capital Holdings
It's not just Canadian pot stocks that are at high risk of a writedown. Vertically integrated multistate operator iAnthus Capital Holdings (OTC: ITHUF) might just be the prime candidate to write off a good chunk of its goodwill, which stood at north of $440 million (U.S.) at the end of its most recent quarter.
Similar to Aurora Cannabis, iAnthus' goodwill is primarily tied to a single acquisition: its purchase of MPX Bioceutical, which was completed a year-ago this February. The problem here is that, at 53% of total assets, it's possible iAnthus never recoups anywhere close to $440.4 million in goodwill as MPX's assets and patents are developed and leaned on over time.
While it is worth noting that acquisitions are the name of the game for U.S. multistate operators given that waiting for licensing in certain states can be costly and time-consuming, iAnthus' situation is further magnified by the value of its goodwill being higher than its market cap. At this point, at least a modest impairment charge on its goodwill should be expected.
Image source: Getty Images.
Aphria
Lastly, don't be surprised if Canadian grower Aphria (NYSE: APHA) is among the next pot stocks to write down the value of its goodwill, which stood at CA$669.7 million, as of the end of its November quarter.
For those who may not recall, Aphria has already taken a writedown on a small percentage of its goodwill. Last year, it wrote off CA$50 million tied to its Latin American assets purchase following a request from the Ontario Securities Commission to perform an impairment test on these assets. Since Aphria paid CA$195 million for these Latin American assets, more than a quarter of the value of the deal has already been chalked up as an overpayment.
The remainder of Aphria's goodwill is primarily derived from its 2018 Nuuvera acquisition, which gave it access to more than a half-dozen foreign markets. Once again, given the slow progress of medical marijuana import needs in overseas markets, at least a partial writedown on the value of Aphria's goodwill, which represents 27% of total assets, seems more likely than not at this point.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Sean Williams has no position in any of the stocks mentioned. The Motley Fool recommends Constellation Brands. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Perhaps no company stands out more for its recently announced changes than Aurora Cannabis (NYSE: ACB). While the prospect of big-time growth very much remains on the table over the long run, as evidenced by the tens of billions of dollars in sales conducted in the black market every year, 2019 was a reminder that growing pains are a given with every industry. Longtime CEO and co-founder Terry Booth tendered his resignation, with the company announcing a host of plans designed to reduce spending in an effort to generate positive EBITDA. | Perhaps no company stands out more for its recently announced changes than Aurora Cannabis (NYSE: ACB). Canopy Growth Behind Aurora's CA$3.17 billion in goodwill (as of Q1 2020) is Canopy Growth (NYSE: CGC), which clocks in at CA$1.91 billion in goodwill. Although this is a company that closed the largest equity investment in history in Nov. 2018 (a roughly CA$5 billion investment from Constellation Brands), Canopy's cash, cash equivalents, and short-term investments have shrunk by nearly half over the past three quarters to CA$2.74 billion. | Perhaps no company stands out more for its recently announced changes than Aurora Cannabis (NYSE: ACB). As such, Aurora Cannabis is planning to take impairment charges of CA$190 to CA$225 million on certain property, plant and equipment, and CA$740 million to CA$775 million on its goodwill, mostly originating from its Denmark and South American assets. Canopy Growth Behind Aurora's CA$3.17 billion in goodwill (as of Q1 2020) is Canopy Growth (NYSE: CGC), which clocks in at CA$1.91 billion in goodwill. | Perhaps no company stands out more for its recently announced changes than Aurora Cannabis (NYSE: ACB). Writedowns may be brewing for these pot stocks, too With Aurora finally coming to terms with its gross overpayment for its acquisitions, it's only a matter of time before other pot stocks do the same. Canopy Growth Behind Aurora's CA$3.17 billion in goodwill (as of Q1 2020) is Canopy Growth (NYSE: CGC), which clocks in at CA$1.91 billion in goodwill. |
37674.0 | 2020-02-11 00:00:00 UTC | The Fate of Aurora Cannabis (ACB) Stock Remains Up in the Air | ACB | https://www.nasdaq.com/articles/the-fate-of-aurora-cannabis-acb-stock-remains-up-in-the-air-2020-02-11 | nan | nan | While the cannabis market enters 2020 with tons of promise, the year is turning into one of whether companies can operate within the current scope of the market. Aurora Cannabis (ACB) is no exception with the September quarter producing a C$40 million EBITDA loss and the near-term revenue boosts highly in doubt. In response, the company cut costs via restructuring and the CEO retired in order to generate a path towards EBITDA profits.
With at least 1.2 billion shares outstanding, the stock has a market value of ~$1.84 billion. The guidance for quarterly revenues of only C$64 million isn’t going to inspire investors to hold the sock. The company needs to generate some decent revenue growth starting with the June quarter to justify the current market valuation.
Good Start
In the September quarter alone, the Canadian cannabis company reported an EBITDA loss of C$39.7 million on revenues of only C$75.6 million. In the course of the year, Aurora Cannabis has substantially reduced the production output to only ~150,000 kg according to the February presentation. The company will need to spend a great deal of the FQ2 earnings materials and conference call rationalizing the current business prospects despite an intention to exist some international operations.
The company has far reduced the ability to increase production beyond current capacity without substantial capital expenses. The main two facilities will require a combined C$190 million in capital spending to complete and the third forecasted greenhouse with the potential for over 100,000 kg in annual capacity is being sold for a pittance.
The big story is the plan to restructure operations to reduce the operating expense base of C$45 million after the December quarterly expenses surged to ~C$100 million. Aurora Cannabis already has solid gross margins near 60%, so the key to success is matching the expense side of the equation with gross profits limited by disappointing sales in Canada and around the globe.
Aurora Cannabis has to generate C$80 million in quarterly sales to just reach EBITDA break even, if it can truly cut quarterly operating expenses to below C$45 million. This amount doesn’t even cover financing costs and depreciation expenses, though the latter is a non-cash expense.
Grand Scale Hit
The biggest problem facing Aurora Cannabis is any reduction in the grand scale of the company will trigger less interest in the stock. Unfortunately, the best way to reduce operating expenses is cutting the global scale of operations.
In the latest presentation, Aurora Cannabis still lists operations in more than 20 countries. The list is uninspiring with countries like Estonia, Latvia and Uruguay.
Despite these issues and the clearly planned reorg, Aurora Cannabis announced the certification of the Aurora River production facility for EU GMP needed to export medical cannabis. In addition, the Germany regulators removed the sales suspension on their medical cannabis products suggesting the Canadian cannabis company is still moving forward with some global expansion.
Takeaway
While the embattled cannabis company has a lot of positive catalysts to play out in 2020, it still needs to reduce the grand aspirations of the cannabis business. Aurora is headed full speed into areas like CBD in the U.S. and some promising international locations while liquidity questions still persist.
Investors should avoid the stock until a better valuation appears and the company is able to squeeze out EBITDA profits.
To find good ideas for cannabis stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Disclosure: No position.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Aurora Cannabis (ACB) is no exception with the September quarter producing a C$40 million EBITDA loss and the near-term revenue boosts highly in doubt. The company will need to spend a great deal of the FQ2 earnings materials and conference call rationalizing the current business prospects despite an intention to exist some international operations. The main two facilities will require a combined C$190 million in capital spending to complete and the third forecasted greenhouse with the potential for over 100,000 kg in annual capacity is being sold for a pittance. | Aurora Cannabis (ACB) is no exception with the September quarter producing a C$40 million EBITDA loss and the near-term revenue boosts highly in doubt. Good Start In the September quarter alone, the Canadian cannabis company reported an EBITDA loss of C$39.7 million on revenues of only C$75.6 million. The big story is the plan to restructure operations to reduce the operating expense base of C$45 million after the December quarterly expenses surged to ~C$100 million. | Aurora Cannabis (ACB) is no exception with the September quarter producing a C$40 million EBITDA loss and the near-term revenue boosts highly in doubt. Good Start In the September quarter alone, the Canadian cannabis company reported an EBITDA loss of C$39.7 million on revenues of only C$75.6 million. The big story is the plan to restructure operations to reduce the operating expense base of C$45 million after the December quarterly expenses surged to ~C$100 million. | Aurora Cannabis (ACB) is no exception with the September quarter producing a C$40 million EBITDA loss and the near-term revenue boosts highly in doubt. Aurora Cannabis has to generate C$80 million in quarterly sales to just reach EBITDA break even, if it can truly cut quarterly operating expenses to below C$45 million. Unfortunately, the best way to reduce operating expenses is cutting the global scale of operations. |
37675.0 | 2020-02-11 00:00:00 UTC | 2020 Now Looks Even Uglier for Aurora Cannabis Stock | ACB | https://www.nasdaq.com/articles/2020-now-looks-even-uglier-for-aurora-cannabis-stock-2020-02-11 | nan | nan | Aurora Cannabisà(NYSE:) somehow got even uglier at the start ofà2020. But with earnings on tap this week, is there a light at the end of the tunnel for Aurora stock? LetâÂÂs examine whatâÂÂs driving the price action and technical picture. And then IâÂÂll recommend a stronger risk-adjusted strategy for investors.
Source: Shutterstock
Almost any investor with even a passing interest in the stock market knows last year was a painful one for Aurora Cannabis. Shares were down nearly 70% in 2019 â not that CanadaâÂÂs second-largest cannabis producer was alone in that regard.
Bearish industry conditions backed by overzealous forecasts, oversupply, distribution delays and regulatory red tape took its toll on almost every cannabis producer. From one-time untouchable Tilray (NASDAQ:) to the industryâÂÂs current top dog Canopy Growth (NYSE:CGC), no company was immune to last yearâÂÂs bear market. And 2020 hasnâÂÂt been any easier for Aurora shareholders.
Ominous cash flow and from Wall StreetâÂÂs analyst community which weighed on shares in early January found fresh strength this past Friday. Aurora Cannabis tumbled roughly 15% and back toward its year-to-date low. The drop followed a preemptive strike from the companyâÂÂs management in front of ThursdayâÂÂs earnings release.
In a nutshell, AuroraâÂÂs brass issued a sales warning, a significant restructuring plan and the departure of its CEO amid âÂÂsweeping changesâ for the company. The included sizable layoffs and a massive write-off tied to the companyâÂÂs South American and European operations. The moves are expected to help Aurora remain debt compliant in the near term, to focus on its core Canadian recreational and medicinal businesses and improve the companyâÂÂs longer-term financial prospects.
Aurora StockâÂÂs Monthly Chart
Source: Chart by
The monthly chart continues to support Wall StreetâÂÂs bearish sell-side analysts. Following FridayâÂÂs news, this group now includes two more brokers reiterating sell recommendations and fresh, below-market price targets on Aurora.
Technically, Aurora Cannabis is fast approaching its 2017 low of $1.40. This level marks the bottom after investorsâ first bullish whiff of the cannabis market in 2016. It could prove important. However, I wouldnâÂÂt recommend long exposure in front of this weekâÂÂs earnings report. With some analysts aggressively forecasting an even weaker $1 in shares, conditions could get a lot uglier.
IâÂÂd recommend AuroraâÂÂs âÂÂsweeping changesâ need to be accompanied by real improvements prior to shares being offered as an investment for anyone other than the most speculative of risk accounts. And to be certain, that enthusiasm isnâÂÂt going to happen overnight. It might not even come in 2020.
Investment accounts under Christopher TylerâÂÂs management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher TylerâÂÂs observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional options-based strategies and related musings, follow Chris on Twitter and StockTwits.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Bearish industry conditions backed by overzealous forecasts, oversupply, distribution delays and regulatory red tape took its toll on almost every cannabis producer. From one-time untouchable Tilray (NASDAQ:) to the industryâÂÂs current top dog Canopy Growth (NYSE:CGC), no company was immune to last yearâÂÂs bear market. The moves are expected to help Aurora remain debt compliant in the near term, to focus on its core Canadian recreational and medicinal businesses and improve the companyâÂÂs longer-term financial prospects. | Aurora StockâÂÂs Monthly Chart Source: Chart by The monthly chart continues to support Wall StreetâÂÂs bearish sell-side analysts. Technically, Aurora Cannabis is fast approaching its 2017 low of $1.40. Investment accounts under Christopher TylerâÂÂs management do not currently own positions in any securities mentioned in this article. | Source: Shutterstock Almost any investor with even a passing interest in the stock market knows last year was a painful one for Aurora Cannabis. Aurora StockâÂÂs Monthly Chart Source: Chart by The monthly chart continues to support Wall StreetâÂÂs bearish sell-side analysts. Following FridayâÂÂs news, this group now includes two more brokers reiterating sell recommendations and fresh, below-market price targets on Aurora. | Source: Shutterstock Almost any investor with even a passing interest in the stock market knows last year was a painful one for Aurora Cannabis. Bearish industry conditions backed by overzealous forecasts, oversupply, distribution delays and regulatory red tape took its toll on almost every cannabis producer. With some analysts aggressively forecasting an even weaker $1 in shares, conditions could get a lot uglier. |
37676.0 | 2020-02-11 00:00:00 UTC | This Is the Next Cannabis Stock CEO Who Needs to Go | ACB | https://www.nasdaq.com/articles/this-is-the-next-cannabis-stock-ceo-who-needs-to-go-2020-02-11 | nan | nan | Just when you thought things couldn't get any wilder for cannabis stocks, it does.
Following a miserable 2019 that saw the North American marijuana industry succumb to a combination of supply issues (both shortages and bottlenecks), high tax rates, and a resilient black market that is unwilling to give up market share, 2020 has begun with a number of key management changes. Within just the past two weeks, two CEOs of brand-name pot stocks have headed for the exit.
Image source: Getty Images.
Two brand-name pot stock CEOs are now gone
It began on Jan. 31, when MedMen Enterprises (OTC: MMNFF) CEO and co-founder Adam Bierman announced that he'd be stepping down. This was a move that was considered long overdue by Wall Street and shareholders, with MedMen's valuation having plunged by well over 90% since October 2018.
Although the vertically integrated multistate operator has offered glimpses of success, such as its longest-operating Southern California locations, which have rivaled Apple stores in terms of sales per square foot, MedMen's overzealous expansion efforts have led to ballooning operating expenses and unsustainable losses. In fiscal 2019, MedMen wound up losing almost $232 million on an operating basis -- and that was after a 30% reduction in selling, general, and administrative expenses between the beginning and end of the fiscal year.
MedMen is also facing a serious cash crunch. The company recently admitted to attempting to pay off its vendors with its own common stock. This comes after management noted that the final $115 million in financing of the up to $280 million pledged from private equity firm Gotham Green Partners is no longer accessible. It was definitely time for Bierman to step aside.
Next, on Feb. 6, we witnessed Aurora Cannabis (NYSE: ACB) CEO Terry Booth announce his plans to step down and retire. The most popular pot stock may not be in dire straits like MedMen, but its share price has declined by well over 80% since mid-March 2019.
Image source: Getty Images.
Booth led an aggressive campaign that saw Aurora Cannabis snatch up more than a dozen companies over a three-year stretch and become a leader in both peak estimated output and international presence. However, with supply issues rearing their head in Canada, Aurora is having to backpedal on its expansion plans at a breakneck pace. It's idled construction at both Aurora Sun in Alberta and Aurora Nordic 2 in Denmark, intends to sell its Exeter greenhouse, and announced plans to take major property & plant equipment and goodwill writedowns.
There are also genuine concerns that Aurora's overextended balance sheet may not be able to recover from its overzealous spending. Even with its debt covenants now restructured, achieving positive EBITDA by fiscal Q1 2021 is no guarantee. Booth's departure is something Aurora Cannabis (and its shareholders) definitely needed.
This marijuana stock CEO should be next to step down
With all of this being said, there's one more brand-name cannabis stock CEO who needs to go: HEXO's (NYSE: HEXO) Sebastien St-Louis.
My opinion of St-Louis's performance as CEO isn't nearly as harsh as that of Booth or Bierman. HEXO wasn't exactly spending at a frivolous pace, although it likely overpaid for its Newstrike Brands acquisition in 2019. HEXO also made a number of impressive deals, including a joint venture with Molson Coors Brewing (known as Truss) to develop cannabis-infused beverages.
Image source: Getty Images.
But as MKM Partners' analyst Bill Kirk recently noted when downgrading HEXO and slashing his firm's price target on the company by 70%, HEXO's management is notorious for making positive statements that never come to fruition. Said Kirk in the note released to clients, "Of 104 positive predictions made by HEXO over the last two years, just 3 of 48 resolved were correct." It's this inability to follow through and build trust with investors that has me believing St-Louis needs to go.
Additionally, there are other problems. Financing, for one, is a pretty sizable short- and long-term concern for HEXO. Through a combination of stock issuances and convertible note offerings, the company raised about 100 million Canadian dollars (about $75.2 million U.S.) since October. But this may not prove to be enough, with HEXO continuing to lose money, traditional forms of financing essentially closed off, and St-Louis proclaiming in the company's most recent conference call that 20% market share would be needed throughout Canada to be profitable. Here's a news flash: No cannabis grower is anywhere near 20% market share throughout Canada, let alone HEXO.
As noted, HEXO is also nowhere near profitability, despite getting very aggressive on the cost-cutting front. It has completely idled the Niagara facility, acquired with the Newstrike Brands purchase, as well as 200,000 square feet of its flagship Gatineau facility. I suspect this takes about a third of HEXO's 150,000 kilos of peak annual output offline, for the time being. HEXO also shed 200 jobs from a variety of departments.
Put plainly, St-Louis has lost the confidence of shareholders, and his departure would be a stepping stone to, hopefully, rebuilding faith with investors.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Sean Williams has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple. The Motley Fool recommends HEXO. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Next, on Feb. 6, we witnessed Aurora Cannabis (NYSE: ACB) CEO Terry Booth announce his plans to step down and retire. Booth led an aggressive campaign that saw Aurora Cannabis snatch up more than a dozen companies over a three-year stretch and become a leader in both peak estimated output and international presence. HEXO also made a number of impressive deals, including a joint venture with Molson Coors Brewing (known as Truss) to develop cannabis-infused beverages. | Next, on Feb. 6, we witnessed Aurora Cannabis (NYSE: ACB) CEO Terry Booth announce his plans to step down and retire. This marijuana stock CEO should be next to step down With all of this being said, there's one more brand-name cannabis stock CEO who needs to go: HEXO's (NYSE: HEXO) Sebastien St-Louis. But as MKM Partners' analyst Bill Kirk recently noted when downgrading HEXO and slashing his firm's price target on the company by 70%, HEXO's management is notorious for making positive statements that never come to fruition. | Next, on Feb. 6, we witnessed Aurora Cannabis (NYSE: ACB) CEO Terry Booth announce his plans to step down and retire. This marijuana stock CEO should be next to step down With all of this being said, there's one more brand-name cannabis stock CEO who needs to go: HEXO's (NYSE: HEXO) Sebastien St-Louis. But as MKM Partners' analyst Bill Kirk recently noted when downgrading HEXO and slashing his firm's price target on the company by 70%, HEXO's management is notorious for making positive statements that never come to fruition. | Next, on Feb. 6, we witnessed Aurora Cannabis (NYSE: ACB) CEO Terry Booth announce his plans to step down and retire. Booth's departure is something Aurora Cannabis (and its shareholders) definitely needed. This marijuana stock CEO should be next to step down With all of this being said, there's one more brand-name cannabis stock CEO who needs to go: HEXO's (NYSE: HEXO) Sebastien St-Louis. |
37677.0 | 2020-02-10 00:00:00 UTC | Weekly Cannabis Stock News: Aurora Cannabis and Tilray Slice Their Workforces | ACB | https://www.nasdaq.com/articles/weekly-cannabis-stock-news%3A-aurora-cannabis-and-tilray-slice-their-workforces-2020-02-10 | nan | nan | Last week in the marijuana industry, news was dominated by the human factor. Several of the most high-profile companies in the business announced significant personnel departures, bringing up questions about the state of their morale and even their long-term viability.
Not all happenings last week in the sector had to do with subtractions, though. One long-germinating acquisition finally closed, giving a noted cannabis company an important new asset.
Image source: Getty Images.
Tilray's layoffs, and Aurora CEO exits
Although it's not entirely their fault -- we can also blame factors like bureaucratic incompetence and high taxation -- cannabis companies have by and large been money losers for quite some time. And while they've done their best to secure new funds, few companies can stay intact while constantly in the red -- hence several culls in the marijuana industry that were formally announced only last week.
Tilray (NASDAQ: TLRY) and Aurora Cannabis (NYSE: ACB) both announced a raft of job cuts. Tilray let go of around 10% of its global workforce, roughly 140 people. This is apparently part of a broader restructuring effort, but as yet details are sparse.
It's essentially the same for Aurora, which at least provided more information about its own program. As part of a set of what it accurately calls "sweeping changes" to its business, the company has released nearly 500 "full-time equivalent staff." Other measures include impairment charges and a writedown of the company's considerable goodwill.
On top of that, Aurora's CEO Terry Booth stepped down, to be replaced on an interim basis by executive chairman Michael Singer. Booth will still be influential to some degree, having been named a senior strategic advisor to the company. He'll also continue to occupy his seat on the board of directors.
Job cuts in the marijuana space are nothing new, of course. We've seen rounds of them before. But two news items on the subject from a pair of name companies within a week is a stark illustration of the struggles of this business, and a reminder of the human cost of those difficulties.
Curaleaf's Select acquisition finally closes
No, it's not your imagination -- deals in the cannabis industry really do take an awfully long time to close. Exhibit A: Curaleaf's (OTC: CURLF) acquisition of Cura Partners, owner of the Select brand, was finalized last week. That makes it over nine months since Curaleaf's rather straightforward buyout was first announced.
Regardless of speed, Cura Partners/Select is a typically pricey acquisition in the marijuana world. Even after Curaleaf got the terms of the deal modified (and considering it's being paid in stock rather than precious cash), the company is still paying a pretty penny for its new asset.
It'll pony up 55 million of its subordinate voting shares as an upfront payment, with another 40 million-plus on the hook if certain incentives are met. The phase one stock handover was valued at nearly $286 million at the time of said modification; meanwhile, the company's total revenue barely topped $60 million in its most recently reported quarter.
All that said, Cura Partners/Select is one of the better assets to be scooped up by an ambitious cannabis company. Cura Partners booked almost $118 million in sales in 2018, giving it a two-year growth rate of over 1,000%. And the Select brand is a highly visible and clearly popular brand on the market.
Yes, the pot business is growing fast, but even considering this, Cura Partners' growth is impressive -- particularly given the many challenges of the legal marijuana market in its native U.S. The Select brand has obviously found its niche among America's pot cognoscenti. We'll soon see whether Curaleaf can keep at least some of this momentum going.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Tilray (NASDAQ: TLRY) and Aurora Cannabis (NYSE: ACB) both announced a raft of job cuts. Tilray's layoffs, and Aurora CEO exits Although it's not entirely their fault -- we can also blame factors like bureaucratic incompetence and high taxation -- cannabis companies have by and large been money losers for quite some time. But two news items on the subject from a pair of name companies within a week is a stark illustration of the struggles of this business, and a reminder of the human cost of those difficulties. | Tilray (NASDAQ: TLRY) and Aurora Cannabis (NYSE: ACB) both announced a raft of job cuts. One long-germinating acquisition finally closed, giving a noted cannabis company an important new asset. Curaleaf's Select acquisition finally closes No, it's not your imagination -- deals in the cannabis industry really do take an awfully long time to close. | Tilray (NASDAQ: TLRY) and Aurora Cannabis (NYSE: ACB) both announced a raft of job cuts. Tilray's layoffs, and Aurora CEO exits Although it's not entirely their fault -- we can also blame factors like bureaucratic incompetence and high taxation -- cannabis companies have by and large been money losers for quite some time. And while they've done their best to secure new funds, few companies can stay intact while constantly in the red -- hence several culls in the marijuana industry that were formally announced only last week. | Tilray (NASDAQ: TLRY) and Aurora Cannabis (NYSE: ACB) both announced a raft of job cuts. Last week in the marijuana industry, news was dominated by the human factor. Exhibit A: Curaleaf's (OTC: CURLF) acquisition of Cura Partners, owner of the Select brand, was finalized last week. |
37678.0 | 2020-02-10 00:00:00 UTC | Aurora Cannabis Plans to Complete Construction of Aurora Sun Despite Layoffs | ACB | https://www.nasdaq.com/articles/aurora-cannabis-plans-to-complete-construction-of-aurora-sun-despite-layoffs-2020-02-10 | nan | nan | Aurora Cannabis (NYSE: ACB) confirmed last week that the company is not abandoning the development of its Aurora Sun facility in Medicine Hat, Alberta. Despite announcing that it was laying off 500 employees and that its CEO Terry Boot was resigning, Medicine Hat's Mayor Ted Clugston said he spoke with the company and that the facility is still a priority for Aurora.
Aurora did not offer an update via press release on the facility but the mayor said in a news report, "The place still is under construction and they do intend to finish the six bays that they always intended to finish which was in their November announcement."
Aurora initially announced in November that it would halt construction on two of its facilities in order to save cash. The company expected to save as much as 110 million Canadian dollars by deferring the construction of Aurora Sun and another CA$80 million from halting construction on Aurora Nordic 2 in Denmark.
Image source: Getty Images.
Construction is now just a fraction of the initial size
Aurora initially planned for Aurora Sun to reach 1.6 million square feet in size with a production capacity of more than 230,000 kg per year.
With just six growing rooms now planned, only 238,000 square feet of the greenhouse space will likely be operational this year. However, the company hasn't ruled out developing the remaining space but it will depend on demand.
The cannabis company was expecting things to have gone better but in September, after failing to reach its goal of being profitable by the fourth quarter of fiscal 2019, Aurora pushed those targets back until fiscal 2020, blaming its disappointing results on the lack of pot shops in Canada.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
David Jagielski has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Aurora Cannabis (NYSE: ACB) confirmed last week that the company is not abandoning the development of its Aurora Sun facility in Medicine Hat, Alberta. Despite announcing that it was laying off 500 employees and that its CEO Terry Boot was resigning, Medicine Hat's Mayor Ted Clugston said he spoke with the company and that the facility is still a priority for Aurora. Aurora initially announced in November that it would halt construction on two of its facilities in order to save cash. | Aurora Cannabis (NYSE: ACB) confirmed last week that the company is not abandoning the development of its Aurora Sun facility in Medicine Hat, Alberta. The company expected to save as much as 110 million Canadian dollars by deferring the construction of Aurora Sun and another CA$80 million from halting construction on Aurora Nordic 2 in Denmark. Construction is now just a fraction of the initial size Aurora initially planned for Aurora Sun to reach 1.6 million square feet in size with a production capacity of more than 230,000 kg per year. | Aurora Cannabis (NYSE: ACB) confirmed last week that the company is not abandoning the development of its Aurora Sun facility in Medicine Hat, Alberta. The company expected to save as much as 110 million Canadian dollars by deferring the construction of Aurora Sun and another CA$80 million from halting construction on Aurora Nordic 2 in Denmark. Construction is now just a fraction of the initial size Aurora initially planned for Aurora Sun to reach 1.6 million square feet in size with a production capacity of more than 230,000 kg per year. | Aurora Cannabis (NYSE: ACB) confirmed last week that the company is not abandoning the development of its Aurora Sun facility in Medicine Hat, Alberta. Aurora initially announced in November that it would halt construction on two of its facilities in order to save cash. And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution. |
37679.0 | 2020-02-10 00:00:00 UTC | Aurora Cannabis (ACB): With CEO Stepping Down, All Eyes Are on Nelson Peltz | ACB | https://www.nasdaq.com/articles/aurora-cannabis-acb%3A-with-ceo-stepping-down-all-eyes-are-on-nelson-peltz-2020-02-10 | nan | nan | Aurora Cannabis (ACB) announced it was going to cut 500 jobs, with 25 percent of them being corporate positions, while taking impairment charges of about $752.79 million. It also announced CEO Terry Booth would be stepping down from his position, with executive chairman Michael Singer taking over leadership of the company until a new CEO is found.
In this article we'll look at what Booth stepping down could mean for the strategy of the company going forward.
Long-Term Position on Cash Infusion
The position of Aurora Cannabis for some time has been to resist the idea of getting a huge cash infusion from a larger firm, which would result in losing control of company.
With Chief Commercial Officer Cam Battley being forced to step down in December, this could result in significant changes to its former resistance to losing some, if not all control, of the company going forward, assuming a large suitor takes in interest in the company while it has lost a lot of its valuation; it could take a position and control for a lot less than it could have even a couple of months ago.
I think the key there will be how Nelson Peltz feels about the future prospects of Aurora, and if it remains viable or desirable to continue to go it alone.
Nelson Peltz Factor
In March 2019, Nelson Peltz was taken on as a strategic adviser by Aurora, which also granted him 20 million stock options he can acquire at C$10.34 each.
The assumed primary purpose in bringing on Peltz was to help open doors for partnerships with larger consumer packaged-goods companies, without giving up control via large cash infusions.
One of the major disappointments for Aurora since that announcement has been the failure of Peltz to deliver any type of deal that would have changed the performance of the company, even as the Canadian government dropped the ball on rolling out retail stores.
The big question in the months ahead is whether or not Peltz changes his mind concerning the control factor and decides to push for an agreement with a large company interested in taking a significant position in Aurora at a bargain price.
It wouldn't even surprise me if a company, knowing the future prospects for Aurora, were to make a bid to acquire it altogether.
Some may think of the debacle surrounding Constellation Brand's investment in Canopy Growth, citing resistance to acquiring Aurora because of the write-downs Constellation has had to take because of the weakness now inherent in the cannabis market.
The point is, with Battley and Booth out of the way, it's almost certainly on Peltz as to whether or not the company is going to change its mind on seeking an investment from another firm, or believes it can continue to go it alone.
Peltz can be aggressive, and if he doesn't want it to happen, I don't think it will. On the other hand, if he pushes for it, the doors will open for a perspective suitor.
The main issue here is if things don't go the way Peltz wants them to, it could result in litigation that few companies would want to engage in, taking into consideration it could take several quarters before Aurora starts to turn around in a meaningful way.
Consensus Verdict
Caution roars loud on Wall Street analysts surveying the challenged cannabis giant’s prospects. Out of 16 analysts tracked in the last 3 months, only 2 are bullish, while 9 remain sidelined and 5 say "sell." Yet, the stock’s consensus price target stands tall at $2.34, which implies about 50% upside from current levels. (See Aurora stock analysis on TipRanks)
Conclusion
No investor should consider taking a position in Aurora because of a possible acquisition, or even a potential partnership deal with some packaged-goods companies.
Under current Canadian cannabis market conditions, it would be best to wait until anything like that is announced, than to take on the risk in the short term. The short-term risk/reward isn't worth it at this time.
We still have to wait and see if Ontario really does aggressively roll out stores in the last three quarters of 2020, as it has stated it will. If it doesn't, there really isn't much Aurora can do to turn things around this year.
Selling derivatives will help some, but until the new stores are rolled out, the company is only selling into the existing Canadian market. More stores to sell in, along with the potential of derivative sales and new customers, is the key to its success until the international medical cannabis market increases in size.
For these reasons, I remain bullish on Aurora Cannabis over the long term, but will wait until the earnings report for the first calendar quarter of 2020 to see how derivatives are doing for the company, and in the second calendar quarter, whether or not Ontario is starting to add a lot more retail outlets.
If the company does publicly signal a willingness to listen to offers from companies wanting to take a large position in it in exchange for cash, it could be a huge catalyst beyond its general performance.
The company is in a holding pattern until the above questions are answered.
To find better ideas for cannabis stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Aurora Cannabis (ACB) announced it was going to cut 500 jobs, with 25 percent of them being corporate positions, while taking impairment charges of about $752.79 million. The assumed primary purpose in bringing on Peltz was to help open doors for partnerships with larger consumer packaged-goods companies, without giving up control via large cash infusions. One of the major disappointments for Aurora since that announcement has been the failure of Peltz to deliver any type of deal that would have changed the performance of the company, even as the Canadian government dropped the ball on rolling out retail stores. | Aurora Cannabis (ACB) announced it was going to cut 500 jobs, with 25 percent of them being corporate positions, while taking impairment charges of about $752.79 million. Long-Term Position on Cash Infusion The position of Aurora Cannabis for some time has been to resist the idea of getting a huge cash infusion from a larger firm, which would result in losing control of company. With Chief Commercial Officer Cam Battley being forced to step down in December, this could result in significant changes to its former resistance to losing some, if not all control, of the company going forward, assuming a large suitor takes in interest in the company while it has lost a lot of its valuation; it could take a position and control for a lot less than it could have even a couple of months ago. | Aurora Cannabis (ACB) announced it was going to cut 500 jobs, with 25 percent of them being corporate positions, while taking impairment charges of about $752.79 million. Long-Term Position on Cash Infusion The position of Aurora Cannabis for some time has been to resist the idea of getting a huge cash infusion from a larger firm, which would result in losing control of company. With Chief Commercial Officer Cam Battley being forced to step down in December, this could result in significant changes to its former resistance to losing some, if not all control, of the company going forward, assuming a large suitor takes in interest in the company while it has lost a lot of its valuation; it could take a position and control for a lot less than it could have even a couple of months ago. | Aurora Cannabis (ACB) announced it was going to cut 500 jobs, with 25 percent of them being corporate positions, while taking impairment charges of about $752.79 million. Long-Term Position on Cash Infusion The position of Aurora Cannabis for some time has been to resist the idea of getting a huge cash infusion from a larger firm, which would result in losing control of company. The assumed primary purpose in bringing on Peltz was to help open doors for partnerships with larger consumer packaged-goods companies, without giving up control via large cash infusions. |
37680.0 | 2020-02-10 00:00:00 UTC | Big Change Is Coming, So What’s Next For Aurora Stock? | ACB | https://www.nasdaq.com/articles/big-change-is-coming-so-whats-next-for-aurora-stock-2020-02-10 | nan | nan | Just when investors thought it couldnâÂÂt get any worse, shares of one of CanadaâÂÂs largest cannabis producers, Aurora (NYSE:), plunged to multi-year lows on a slew of not-so-great updates from the company.
Source: Shutterstock
As of this writing, Aurora stock is down 15% to $1.70. AuroraâÂÂs Chief Executive Officer, Terry Booth, is stepping down amid a slew of operational changes, including significant cost reductions via the layoffs of 500 employees (including about 25% of the companyâÂÂs corporate positions).
Aurora also announced huge asset impairments and credit facility changes, as well as deep cuts to capital expenditure. Management also reported preliminary second quarter numbers, which were awful (sales dropped about 10% from the first quarter), as well as preliminary third quarter guidance, which was also awful (sales are expected to be flat quarter-over-quarter).
In short, things donâÂÂt look good for Aurora right now. Demand trends are weak. Sales are dropping. Cash is being burnt, management is in all-out cost-cutting mode and the balance sheet is under pressure.
So investors are throwing in the towel and Aurora stock is tanking.
To be sure, thereâÂÂs still an opportunity for Aurora to turn things around via cost rationalization and improving Canadian demand trends. In fact, IâÂÂm still cautiously optimistic that Aurora stock can explode higher from current levels.
But at this point in time, that bull thesis lacks visibility. Until clarity and stability are injected into the growth narrative, the best place to hangout is on the sidelines.
Lots of Changes
One thing is for sure: lots of changes are happening at Aurora, and the Aurora of 2020 will look almost nothing like the Aurora of 2019.
In 2019, Aurora was in âÂÂspend at all costs to growâ mode as they positioned their business for what management thought would be explosive growth. They aggressively tapped into the debt markets to expand production capacity, spend an arm and a leg on sales and marketing, and increase their payroll, all in anticipation of huge demand growth in CanadaâÂÂs legal cannabis market.
But that huge growth never showed up. Or, it did, but only for a few quarters. Then demand trends in Canada stalled out for various reasons, growth dried up, and Aurora was left with a ton of unsold weed, a bunch of overproducing growing centers, a hefty operating expense base and an over-levered balance sheet.
In 2020, Aurora is trying to reset its business for more moderate growth expectations. TheyâÂÂre gutting the expense model through more focused investment and huge payroll reductions. TheyâÂÂre rolling back on production capacity expansion. TheyâÂÂve restructured their credit facility and tried to shore up the balance sheet.
Some of these changes are good. Lower operating and capital expenses should translate into improved profitability and healthier cash flows. But some of these changes are bad, because they are a recognition that Aurora isnâÂÂt growing like it was supposed to. Indeed, itâÂÂs hardly growing at all anymore, with second quarter sales down 10% from the first quarter and third quarter sales guided to be flat sequentially.
WhatâÂÂs Next for Aurora Stock
At this point in time, Aurora stock looks like a case of near-term pain and long-term gain.
In the near-term, thereâÂÂs simply too much instability and too little visibility to warrant anything other than prolonged weakness in the stock. Investors wonâÂÂt buy the dip here until management shows that they can stabilize sales while gutting the expense base, and management wonâÂÂt be able to prove that with numbers for another few months. Until then investors will remain dubious and the stock will remain weak.
But in the long-term, IâÂÂm cautiously optimistic that Aurora stock can explode higher.
Why? Because over the next few quarters, I see AuroraâÂÂs sales moving higher, its expenses moving lower, and its losses significantly narrowing â a dynamic which should shoot the stock higher.
In short, Canadian cannabis demand trends will improve in 2020 thanks to a ton of retail store openings and new edibles, drinks, and vapes product launches. This will provide a boost to AuroraâÂÂs presently depressed sales trends. Concurrently, Aurora will remain focused on gutting the expense model, so the opex base will drop significantly. Rising revenues plus falling expenses equals narrowing losses. Narrowing losses should be enough to push Aurora stock way higher from here.
Bottom Line
In the long run, I still think Aurora stock can run way higher. But recently announced changes imply that things will get worse before they get better.
So itâÂÂs best to remain on the sidelines for now. Let all these changes create a ton of uncertainty, and let than uncertainty weigh on the stock. Then, if demand trends start to pick up later this year and expenses start to fall, buy the stock. ThatâÂÂs when shares will start moving higher.
Until then, donâÂÂt try to catch this falling knife.
As of this writing, Luke Lango did not hold a position in any of the aforementioned securities.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Just when investors thought it couldnâÂÂt get any worse, shares of one of CanadaâÂÂs largest cannabis producers, Aurora (NYSE:), plunged to multi-year lows on a slew of not-so-great updates from the company. Then demand trends in Canada stalled out for various reasons, growth dried up, and Aurora was left with a ton of unsold weed, a bunch of overproducing growing centers, a hefty operating expense base and an over-levered balance sheet. In short, Canadian cannabis demand trends will improve in 2020 thanks to a ton of retail store openings and new edibles, drinks, and vapes product launches. | But in the long-term, IâÂÂm cautiously optimistic that Aurora stock can explode higher. Because over the next few quarters, I see AuroraâÂÂs sales moving higher, its expenses moving lower, and its losses significantly narrowing â a dynamic which should shoot the stock higher. In short, Canadian cannabis demand trends will improve in 2020 thanks to a ton of retail store openings and new edibles, drinks, and vapes product launches. | Lots of Changes One thing is for sure: lots of changes are happening at Aurora, and the Aurora of 2020 will look almost nothing like the Aurora of 2019. WhatâÂÂs Next for Aurora Stock At this point in time, Aurora stock looks like a case of near-term pain and long-term gain. Because over the next few quarters, I see AuroraâÂÂs sales moving higher, its expenses moving lower, and its losses significantly narrowing â a dynamic which should shoot the stock higher. | In 2019, Aurora was in âÂÂspend at all costs to growâ mode as they positioned their business for what management thought would be explosive growth. But that huge growth never showed up. Because over the next few quarters, I see AuroraâÂÂs sales moving higher, its expenses moving lower, and its losses significantly narrowing â a dynamic which should shoot the stock higher. |
37681.0 | 2020-02-10 00:00:00 UTC | Aurora Cannabis Cleans House, but the Worst Is Yet to Come | ACB | https://www.nasdaq.com/articles/aurora-cannabis-cleans-house-but-the-worst-is-yet-to-come-2020-02-10 | nan | nan | The North American marijuana industry was widely expected to be the greatest thing since sliced bread. But over the past 10 months we've learned that no industry, not even one that existed in the shadows for decades before Canada legalized recreational weed, is immune to growing pains.
In the U.S., the most lucrative pot market in the world, high tax rates and a persistent black market presence have hampered growers and retailers. Meanwhile, in Canada, the only industrialized country in the modern era to have legalized adult-use cannabis, regulatory-based issues have stymied supply, creating either shortages or bottlenecks.
As these issues have befallen the marijuana space, it's pot stock investors who've paid the price. Following a year of constantly cautioning and warning investors that Aurora Cannabis (NYSE: ACB), the most popular of all marijuana stocks, was bad news, the you-know-what has finally hit the fan.
Image source: Getty Images.
Aurora comes clean about its cost-cutting efforts, financing, and management changes
Following the closing bell on Thursday, Feb. 6, Aurora Cannabis wound up coming clean about a number of problems facing the company and outlined its plans to right the ship, so to speak.
The first order of business was to announce the departure of Terry Booth as CEO, a move that I'd portended happening just hours before it was announced. Considering that Aurora Cannabis' stock lost more than half of its value in 2019, and Booth has been unable to push Aurora toward profitability or secure a brand-name partnership bigger than a vape deal with PAX Labs, the writing was on the wall that it was time for him to step aside. Executive Chairman Michael Singer will step in as interim CEO until a permanent replacement is found.
Next, Aurora Cannabis outlined a major cost-cutting initiative. For starters, the company plans to reduce its selling, general and administrative expenses to a range of $40 million Canadian to CA$45 million. It'll do this by focusing solely on the Canadian consumer and medical markets (not on wholesale), as well as established international medical pot markets (ahem, Germany). For context, SG&A expenses topped CA$59 million in Q1 2020, so costs need to be cut considerably.
Image source: Getty Images.
The company is also shedding 500 full-time employees (nearly 15% of its workforce), which is well over the 10% figure BNNBloomberg had opined was on tap on Wednesday, Feb. 5. A number of one-time severance charges are to be expected during the fiscal second and third quarters.
Aurora also announced it would restructure spending plans on information technology projects, professional services, and other non-revenue generating third-party costs, in an effort to reduce its expenditures and focus solely on ventures that could immediately generate revenue.
Moving down the line, Aurora Cannabis also made a number of amendments to its secured credit facilities. While the EBITDA ratio covenants were removed, the size of the total credit facility was also reduced by CA$141.5 million.
Lastly, the company noted that, as part of "thorough review of all business operations," it would take impairment charges of between CA$190 million and CA$225 million on property, plant, and equipment, and CA$740 million to CA$775 million in goodwill in the fiscal second quarter. A major writedown is something I've been expecting out of Aurora for at least a year.
Now, go ahead and take a breath, because that's a lot of information to process.
Image source: Getty Images.
The worst may be yet to come
After being far too overzealous with its domestic and international expansion plans, it's not the least bit surprising to see the company's CEO step down, for the company to outline aggressive cost-cutting initiatives, or for a massive writedown to be undertaken. What you might find surprising is that things are likely to get much worse before they get better.
To be clear, I don't disagree with Terry Booth's stepping down, the company's move to rein in costs, or its decision to write down close to a quarter of its CA$3.17 billion in goodwill, as of Q1 2020. But I don't believe these announcements necessarily alleviate the company's numerous issues.
For example, even with the removal of EBITDA ratio covenants, Aurora is no lock to push toward positive EBITDA by fiscal Q1 2020, as required under the new amended covenant rules. Sure, Aurora will be able to reduce expenses by laying off workers, halting a number of core projects, and idling expansion efforts into quite a few international markets, but this doesn't guarantee that supply issues in Canada, or the regulatory framework regarding imports in overseas markets, will be worked out within the next six-to-nine months. Essentially, Aurora may have merely kicked the can on a breach of its covenant just a few months further down the road.
Financing also remains a real concern. The company detailed that its $400 million (that's U.S. dollars) in at-the-market offerings is down to about $200 million. At the same time, CA$141.5 million has been removed from its available credit line. With Aurora's share price sinking, the only means this company has to access cash is to sell its common stock and continue diluting its investors into oblivion. As of Dec. 31, Aurora only had CA$156 million in cash, and this is after selling CA$325 million in stock over a six-month period.
Image source: Getty Images.
In addition, while I'm glad to see Aurora Cannabis somewhat coming to terms with its ugly balance sheet via writedowns, the corporate update notes these impairment charges primarily reflect its Denmark and South American assets. Thus, the company doesn't appear to be admitting defeat on its CA$2.64 billion acquisition of MedReleaf, which I've labeled the worst cannabis deal of all time.
With Aurora trying to sell the Exeter greenhouse for a meager CA$17 million, the end result could be a CA$2.62 billion price tag for 35,000 kilos in annual output from Bradford and Markham combined, and MedReleaf's brands. There's zero chance in my mind that these assets come anywhere close to CA$2.62 billion (assuming CA$17 from the future sale of Exeter) in value. Roughly CA$2 billion of the company's existing goodwill is from this deal, and it's my suspicion that a major portion of this amount still needs to be written off.
The point is that, while management is finally getting real about the issues the company is facing, there's no guarantee Aurora Cannabis hasn't already passed the point of no return. My suggestion would be to continue avoiding Aurora Cannabis like the plague in 2020.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Sean Williams has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Following a year of constantly cautioning and warning investors that Aurora Cannabis (NYSE: ACB), the most popular of all marijuana stocks, was bad news, the you-know-what has finally hit the fan. To be clear, I don't disagree with Terry Booth's stepping down, the company's move to rein in costs, or its decision to write down close to a quarter of its CA$3.17 billion in goodwill, as of Q1 2020. In addition, while I'm glad to see Aurora Cannabis somewhat coming to terms with its ugly balance sheet via writedowns, the corporate update notes these impairment charges primarily reflect its Denmark and South American assets. | Following a year of constantly cautioning and warning investors that Aurora Cannabis (NYSE: ACB), the most popular of all marijuana stocks, was bad news, the you-know-what has finally hit the fan. Aurora comes clean about its cost-cutting efforts, financing, and management changes Following the closing bell on Thursday, Feb. 6, Aurora Cannabis wound up coming clean about a number of problems facing the company and outlined its plans to right the ship, so to speak. Next, Aurora Cannabis outlined a major cost-cutting initiative. | Following a year of constantly cautioning and warning investors that Aurora Cannabis (NYSE: ACB), the most popular of all marijuana stocks, was bad news, the you-know-what has finally hit the fan. Aurora comes clean about its cost-cutting efforts, financing, and management changes Following the closing bell on Thursday, Feb. 6, Aurora Cannabis wound up coming clean about a number of problems facing the company and outlined its plans to right the ship, so to speak. Lastly, the company noted that, as part of "thorough review of all business operations," it would take impairment charges of between CA$190 million and CA$225 million on property, plant, and equipment, and CA$740 million to CA$775 million in goodwill in the fiscal second quarter. | Following a year of constantly cautioning and warning investors that Aurora Cannabis (NYSE: ACB), the most popular of all marijuana stocks, was bad news, the you-know-what has finally hit the fan. Lastly, the company noted that, as part of "thorough review of all business operations," it would take impairment charges of between CA$190 million and CA$225 million on property, plant, and equipment, and CA$740 million to CA$775 million in goodwill in the fiscal second quarter. A major writedown is something I've been expecting out of Aurora for at least a year. |
37682.0 | 2020-02-09 00:00:00 UTC | Aurora Cannabis and Canopy Growth: Avoid These 2 Pot Stocks This Week | ACB | https://www.nasdaq.com/articles/aurora-cannabis-and-canopy-growth%3A-avoid-these-2-pot-stocks-this-week-2020-02-09 | nan | nan | Marijuana stocks have officially turned into a factory of sadness. Over the past 10 months, valuations have crumbled across the legal pot landscape because of gross mismanagement, scandals, bureaucratic red tape, sky-high tax rates, extremely poor cost controls, poor internal forecasts in regard to real-world demand for both dried flower varieties and derivative products, instability within the C-suite of several industrywide trendsetters, and, worst of all, a sea of earnings reports awash in red ink, instead of profits.
What's left is a highly fragmented industry that's clearly ripe for a wave of mergers, bankruptcies, and even some tough love from investors. Several pot companies, after all, still sport valuations that are wildly out of line with the current state of play. Put more succintly, this industrywide downward trend seems poised to accelerate in the coming weeks and months.
Image source: Getty Images.
Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC) -- the two biggest names among Canadian cannabis cultivators -- could spark the next heavy wave of selling as soon as this week. In short, Aurora and Canopy are both slated to release their latest earnings reports over the next few days. In all likelihood, these earnings reports won't contain much in the way of good news. So here's why investors may want to stay far away from these two top pot stocks this week.
A canary in the coalmine
Aurora is set to announce its second-quarter fiscal 2020 financial results on Thursday, Feb. 13. Canopy will follow suit with the release of its third-quarter fiscal 2020 financial results on Friday, Feb. 14. These back-to-back earnings reports will surely have a major impact on the industry's near-term fate. Unfortunately, Aurora has already signaled that its second-quarter results will be a huge disappointment. Worse still, the company also stated that its core problems are likely to be endemic to the industry as a whole -- a fact that doesn't bode well for Canopy.
Last week, Aurora prepped the market for a dreadful Q2 report with a preliminary peek. Two items in particular should concern investors:
Aurora said it will miss FactSet's consensus revenue estimate for the quarter by around 18.7%. What's more, the company expects revenue to decline for the third straight quarter. That's a deeply concerning trend for a company that's supposed to be growing by leaps and bounds at the moment.
Second, Aurora also said that fiscal third-quarter revenue is likely to exhibit "little to no growth relative to fiscal Q2's" because of industrywide headwinds. That forecast should absolutely shock cannabis investors. Most onlookers expected the introduction of high-margin derivative products such as edibles, vapes, and beverages to boost sales across the space. Aurora, for its part, is flat telling investors that the anticipated benefits of Cannabis 2.0 won't start showing up on earnings reports anytime soon.
Now, Canopy hasn't released any financial figures that should necessarily unnerve investors. But the pot titan did recently announce plans to delay the launch of its cannabis-infused beverages. That's not the end of the world, but it's yet another headwind set to slow its march toward profitability.
Why you should sit tight if these two stocks fall on earnings
While it might be tempting to buy on any further weakness, the wise decision is arguably to sit tight. Aurora's stock could be trading at over seven times next year's sales right now, which is a rather spicy valuation for either a consumer-goods or a healthcare stock -- whichever you think is the most appropriate peer group for a cannabis company.
Canopy's stock, on the other hand, might even be trading at an astronomical 18 times next year's sales. That's way out of step with historical norms for the consumer-goods space, as well as the healthcare sector -- at least for a company that doesn't sell treatments for rare diseases or cancer.
Fortunately, we'll have a much better understanding of their true valuation metrics after their respective earnings reports this week. Regardless, there's a good chance that Aurora and Canopy will both continue to trend downward for a long time to come, thanks to the harsh realities of the woefully underdeveloped legal cannabis industry.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
George Budwell has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC) -- the two biggest names among Canadian cannabis cultivators -- could spark the next heavy wave of selling as soon as this week. Over the past 10 months, valuations have crumbled across the legal pot landscape because of gross mismanagement, scandals, bureaucratic red tape, sky-high tax rates, extremely poor cost controls, poor internal forecasts in regard to real-world demand for both dried flower varieties and derivative products, instability within the C-suite of several industrywide trendsetters, and, worst of all, a sea of earnings reports awash in red ink, instead of profits. Aurora, for its part, is flat telling investors that the anticipated benefits of Cannabis 2.0 won't start showing up on earnings reports anytime soon. | Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC) -- the two biggest names among Canadian cannabis cultivators -- could spark the next heavy wave of selling as soon as this week. In all likelihood, these earnings reports won't contain much in the way of good news. A canary in the coalmine Aurora is set to announce its second-quarter fiscal 2020 financial results on Thursday, Feb. 13. | Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC) -- the two biggest names among Canadian cannabis cultivators -- could spark the next heavy wave of selling as soon as this week. Over the past 10 months, valuations have crumbled across the legal pot landscape because of gross mismanagement, scandals, bureaucratic red tape, sky-high tax rates, extremely poor cost controls, poor internal forecasts in regard to real-world demand for both dried flower varieties and derivative products, instability within the C-suite of several industrywide trendsetters, and, worst of all, a sea of earnings reports awash in red ink, instead of profits. Aurora's stock could be trading at over seven times next year's sales right now, which is a rather spicy valuation for either a consumer-goods or a healthcare stock -- whichever you think is the most appropriate peer group for a cannabis company. | Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC) -- the two biggest names among Canadian cannabis cultivators -- could spark the next heavy wave of selling as soon as this week. In all likelihood, these earnings reports won't contain much in the way of good news. What's more, the company expects revenue to decline for the third straight quarter. |
37683.0 | 2020-02-09 00:00:00 UTC | Ranking Canada's Top Marijuana Growers | ACB | https://www.nasdaq.com/articles/ranking-canadas-top-marijuana-growers-2020-02-09 | nan | nan | To say that there have been big changes in the Canadian cannabis landscape in recent months would be a major understatement. Although Canada was expected to be a global marijuana pioneer given that it was the first industrialized country in the modern era to green-light recreational pot, a number of regulatory issues have stymied growth. As a result, most Canadian pot stocks continue to lose money, and many have needed to adjust their game plans, accordingly.
Perhaps the magnitude of these changes is best served by comparing peak production estimates for Canada's top-tier growers in early June 2019 to what those peak output estimates look like in February 2020, inclusive of pending asset sales and construction project halts.
Image source: Getty Images.
Ranking Canada's top cannabis growers
Back in June, I ranked Canada's growers by peak production, which looked like this:
Aurora Cannabis (NYSE: ACB): 662,000 kilos.
Canopy Growth (NYSE: CGC): 500,000 to 550,000 kilos.
Aphria (NYSE: APHA): 255,000 kilos.
CannTrust Holdings (NYSE: CTST): 200,000 to 300,000 kilos.
The Green Organic Dutchman (OTC: TGODF): 219,000 kilos.
HEXO: 150,000 kilos.
Aleafia Health: 138,000 kilos.
Zenabis Global: 131,300 kilos.
Cronos Group: 117,500 kilos.
OrganiGram Holdings: 113,000 kilos.
Today, just eight months later, the top five Canadian marijuana growers by peak production have changed considerably:
Canopy Growth: 500,000 to 550,000 kilos.
Flowr Corp. (OTC: FLWPF): 500,000+ kilos.
Aphria: 255,000 kilos.
Aurora Cannabis: Approximately 230,000 kilos.
Aleafia Health: 129,500 kilos.
In short, the previous projected leader has fallen to No. 4, a grower that wasn't even in the top 10 in June is likely to now be a core producer, and a number of major growers have fallen way down the list for a variety of reasons.
Image source: Getty Images.
What happened to previously top-tier growers?
As you've probably noticed, Aurora Cannabis had one of the more notable descents among Canadian marijuana growers by peak production. This decline has to do with a combination of more accurately matching output with market demand, as well as conserving cash. Aurora Cannabis announced in November that it would immediately halt construction at its 1.62-million-square-foot Aurora Sun facility in Alberta, and its 1-million-square-foot Aurora Nordic 2 campus in Denmark. With the exception of utilizing 238,000 square feet of cultivation space at Aurora Sun, this effectively idles around 325,000 kilos of annual run-rate output.
But that's not all for Aurora. It also recently put the 1-million-square-foot Exeter greenhouse up for sale. Exeter will need to be retrofitted to grow cannabis and is projected to yield 105,000 kilos at peak operating capacity. With these cultivation assets stripped from the equation, Aurora Cannabis only has the potential to produce around 230,000 kilos a year. As long as financing remains a concern, don't expect Aurora Cannabis to expand its output anytime soon.
You're probably also wondering what on Earth happened to CannTrust and Green Organic Dutchman? As for TGOD, as Green Organic Dutchman is known, it was the first to announce a significant cutback in output to match Canada's subdued launch and supply problems. Instead of aiming for 219,000 kilos in peak output, TGOD's fiscal 2020 production is expected to target only 20,000 to 22,000 kilos for the year.
Then there's CannTrust, which had its cultivation and sales licenses suspended by Health Canada in September. This follows an admission that the company had illegally grown weed in five unlicensed rooms over a period of six months between October 2018 and March 2019. With no guarantee that it regains its licenses, or is able to expand its outdoor cultivation assets, CannTrust's 200,000 to 300,000 kilos is a big zero for the moment.
A number of other growers, including OrganiGram, HEXO, and Cronos, have also halted construction on expansion projects or repurposed existing space that had been used for cultivation.
Image source: Getty Images.
A select few growers have stood firm on production
On the flipside, a small number of growers have held firm on their peak production estimates, or perhaps even increased their capacity.
For example, you probably noted Flowr at No. 2, and you may not have even heard of the company before. As of June, Flowr was entirely focused on its Kelowna campus in British Columbia, which is capable of around 50,000 kilos of premium and ultra-premium cannabis products. It also envisioned another 300,000-plus square feet of outdoor and greenhouse grow adjacent to Kelowna. But none of this made it anything more than a mid-tier producer. What vaulted Flowr into the spotlight was its acquisition of Holigen last year, giving it ownership of the Aljustrel outdoor grow farm in Portugal, capable of up to 500,000 kilos of peak annual output. This added production makes Flowr a logical player in the burgeoning EU medical marijuana market.
You'll also note that estimates for Canopy Growth and Aphria haven't changed since June. Canopy Growth tends to keep a very tight lid on its growth projections, so this has more to do with not getting any specific company updates on output than any direct commentary from management.
Meanwhile, Aphria (finally) received its cultivation license for Aphria Diamond in November. This joint venture cultivation project should account for 140,000 kilos of Aphria's 255,000 kilos in peak annual output. Though it remains to be seen if all of this production is actually needed, Canopy Growth and Aphria appear to have dug in their heels as leading marijuana growers in Canada.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Sean Williams owns shares of CannTrust Holdings Inc. The Motley Fool recommends CannTrust Holdings Inc, HEXO., and OrganiGram Holdings. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Ranking Canada's top cannabis growers Back in June, I ranked Canada's growers by peak production, which looked like this: Aurora Cannabis (NYSE: ACB): 662,000 kilos. Although Canada was expected to be a global marijuana pioneer given that it was the first industrialized country in the modern era to green-light recreational pot, a number of regulatory issues have stymied growth. What vaulted Flowr into the spotlight was its acquisition of Holigen last year, giving it ownership of the Aljustrel outdoor grow farm in Portugal, capable of up to 500,000 kilos of peak annual output. | Ranking Canada's top cannabis growers Back in June, I ranked Canada's growers by peak production, which looked like this: Aurora Cannabis (NYSE: ACB): 662,000 kilos. Perhaps the magnitude of these changes is best served by comparing peak production estimates for Canada's top-tier growers in early June 2019 to what those peak output estimates look like in February 2020, inclusive of pending asset sales and construction project halts. Today, just eight months later, the top five Canadian marijuana growers by peak production have changed considerably: Canopy Growth: 500,000 to 550,000 kilos. | Ranking Canada's top cannabis growers Back in June, I ranked Canada's growers by peak production, which looked like this: Aurora Cannabis (NYSE: ACB): 662,000 kilos. Today, just eight months later, the top five Canadian marijuana growers by peak production have changed considerably: Canopy Growth: 500,000 to 550,000 kilos. This joint venture cultivation project should account for 140,000 kilos of Aphria's 255,000 kilos in peak annual output. | Ranking Canada's top cannabis growers Back in June, I ranked Canada's growers by peak production, which looked like this: Aurora Cannabis (NYSE: ACB): 662,000 kilos. 4, a grower that wasn't even in the top 10 in June is likely to now be a core producer, and a number of major growers have fallen way down the list for a variety of reasons. A number of other growers, including OrganiGram, HEXO, and Cronos, have also halted construction on expansion projects or repurposed existing space that had been used for cultivation. |
37684.0 | 2020-02-09 00:00:00 UTC | Better Buy: Aurora Cannabis vs. Canopy Growth | ACB | https://www.nasdaq.com/articles/better-buy%3A-aurora-cannabis-vs.-canopy-growth-2020-02-09 | nan | nan | Business history is full of epic battles between the top two players in an industry. Coca-Cola vs. Pepsi. Ford vs. GM. Avis vs. Hertz. It's a similar story in the Canadian cannabis industry, with Aurora Cannabis (NYSE: ACB) battling Canopy Growth (NYSE: CGC).
Based on their historical stock performances and current market caps, Canopy Growth stands as the winner over Aurora Cannabis so far. But which of these two stocks is the better pick over the long run? | It's a similar story in the Canadian cannabis industry, with Aurora Cannabis (NYSE: ACB) battling Canopy Growth (NYSE: CGC). Business history is full of epic battles between the top two players in an industry. Based on their historical stock performances and current market caps, Canopy Growth stands as the winner over Aurora Cannabis so far. | It's a similar story in the Canadian cannabis industry, with Aurora Cannabis (NYSE: ACB) battling Canopy Growth (NYSE: CGC). Business history is full of epic battles between the top two players in an industry. Based on their historical stock performances and current market caps, Canopy Growth stands as the winner over Aurora Cannabis so far. | It's a similar story in the Canadian cannabis industry, with Aurora Cannabis (NYSE: ACB) battling Canopy Growth (NYSE: CGC). Ford vs. GM. Based on their historical stock performances and current market caps, Canopy Growth stands as the winner over Aurora Cannabis so far. | It's a similar story in the Canadian cannabis industry, with Aurora Cannabis (NYSE: ACB) battling Canopy Growth (NYSE: CGC). Business history is full of epic battles between the top two players in an industry. Coca-Cola vs. Pepsi. |
37685.0 | 2020-02-08 00:00:00 UTC | 4 Brand-Name Cannabis Stocks Laying Off Workers | ACB | https://www.nasdaq.com/articles/4-brand-name-cannabis-stocks-laying-off-workers-2020-02-08 | nan | nan | As recently as early 2019, the marijuana industry was viewed as the greatest job creator on this planet. According to cannabis review and rating website Leafly, there were more than 211,000 jobs in the U.S. tied to the marijuana industry, with 64,000 jobs having been added in 2018 alone.
Furthermore, with job growth of 21% in 2017, 44% in 2018, and an estimated 20% in 2019, Leafly's projection implied cannabis employment growth of 110%, in aggregate, over a three-year span.
While this job growth appeared as if it could continue for some time to come throughout North America, the cannabis industry hit numerous snags in 2019. In Canada, regulatory-based supply issues stymied growth, while in the U.S., a combination of high tax rates in recreationally legal states and a resilient black market hampered expansion. As a result, we've gone from hyper-expansion mode to actually witnessing brand-name cannabis stocks laying off workers.
Here are four well-known pot stocks that have recently eliminated jobs.
Image source: Getty Images.
1. HEXO
Though the marijuana job market is liable to remain fluid for the foreseeable future, no job cuts were more pronounced than HEXO's (NYSE: HEXO) elimination of 200 jobs from a variety of divisions in October. These cuts from HEXO follow other cost-cutting initiatives, including the idling of 200,000 square feet of cultivation space at the flagship Gatineau facility, as well as the shutdown of the Niagara campus, which was acquired with the Newstrike Brands acquisition.
HEXO, which had been on track for 150,000 kilos of peak annual production and had forecast $400 million Canadian in sales for fiscal 2020, completely pulled its sales forward sales guidance and looks to have reduced its peak output potential by a third.
This is all in an effort to reduce the company's cash burn. Then again, with CEO Sebastien St-Louis suggesting in the company's fiscal fourth quarter conference call that HEXO would need 20% market share throughout Canada to be profitable, it's opened some eyes to just how shaky the company's long-term outlook might be.
2. MedMen Enterprises
In mid-November, vertically integrated dispensary operator MedMen Enterprises (OTC: MMNFF) announced that, among a cadre of cost-cutting moves, it would be laying off more than 190 employees from its workforce of 1,300-plus. The move is expected to save MedMen roughly $10 million a year, and the company didn't rule out additional job cuts in the future. The company also offered up a plan to sell a number of non-core assets to raise capital at the same time it announced its headcount reduction.
Among cannabis stock, none are arguably in worse shape, financially, than MedMen. This is a company that recently admitted to offering its own common stock to pay off vendors, and in October shelved the all-stock acquisition of multistate operator PharmaCann, likely because it didn't have the capital to take on PharmaCann's existing locations or its expansion plans. With limited access to traditional forms of financing, MedMen looks to be in serious trouble.
Image source: Getty Images.
3. CannTrust Holdings
The writing was absolutely on the wall when embattled Canadian pot grower CannTrust Holdings (NYSE: CTST) announced that it would be laying off up to 140 of its employees in late October. The move comes after the company's cultivation and sales licenses were suspended by regulatory agency Health Canada in September for illegally growing cannabis in five unlicensed rooms for a period of six months.
Following the headcount adjustment, CannTrust noted that it hopes to rehire these workers within a year. But in order to so, it's going to need to regain compliance with Health Canada, which won't be an easy task.
To date, CannTrust has destroyed $58 million worth of illicitly grown inventory from these unlicensed rooms, and has taken steps to demonstrate to Health Canada that it's following all applicable laws tied to the Cannabis Act. It remains to be seen if CannTrust will get its licenses back.
4. Tilray
The latest cannabis stock to announce job cuts is Tilray (NASDAQ: TLRY), with the British Columbia-based company noting its intent last week to shed 10% of its headcount. With 1,443 employees, this puts Tilray's layoffs on par with those of CannTrust.
Last March, Tilray completely shifted its game plan by de-emphasizing future investments in Canada in favor of pushing into the EU and United States. While the EU and U.S. should have higher long-term sales appeal, the move was a bit confusing, considering that Canadian weed sales are just getting off the ground.
Nevertheless, beginning its strategy anew means spending fairly aggressively in foreign markets to establish a presence. This has, unfortunately, led to widening operating expenses and a shrinking cash position. In my view, additional cost-cutting may be necessary.
Image source: Getty Images.
Bonus: Aurora Cannabis may be next
It's also possible Aurora Cannabis (NYSE: ACB), the most popular cannabis stock in the world, may be next to shed jobs. According to a BNNBloomberg report on Feb. 5 from an unnamed source directly familiar with the matter, Aurora Cannabis is planning to cut up to 10% of its approximately 3,400-strong workforce.
For those who may recall, Aurora Cannabis has been especially aggressive in the cost-cutting department of late, with the company completely idling construction at Aurora Nordic 2 in Denmark and Aurora Sun in Alberta. These halted projects, along with putting the one-million-square-foot Exeter greenhouse up for sale, should remove well over 400,000 kilos of run-rate output from the equation. With possible cash concerns on the horizon, it wouldn't be surprising if these rumors eventually turn out to be true.
It's time to face the facts: the green rush is encountering some serious growing pains.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Sean Williams owns shares of CannTrust Holdings Inc. The Motley Fool recommends CannTrust Holdings Inc and HEXO. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Bonus: Aurora Cannabis may be next It's also possible Aurora Cannabis (NYSE: ACB), the most popular cannabis stock in the world, may be next to shed jobs. These cuts from HEXO follow other cost-cutting initiatives, including the idling of 200,000 square feet of cultivation space at the flagship Gatineau facility, as well as the shutdown of the Niagara campus, which was acquired with the Newstrike Brands acquisition. The move comes after the company's cultivation and sales licenses were suspended by regulatory agency Health Canada in September for illegally growing cannabis in five unlicensed rooms for a period of six months. | Bonus: Aurora Cannabis may be next It's also possible Aurora Cannabis (NYSE: ACB), the most popular cannabis stock in the world, may be next to shed jobs. The move is expected to save MedMen roughly $10 million a year, and the company didn't rule out additional job cuts in the future. CannTrust Holdings The writing was absolutely on the wall when embattled Canadian pot grower CannTrust Holdings (NYSE: CTST) announced that it would be laying off up to 140 of its employees in late October. | Bonus: Aurora Cannabis may be next It's also possible Aurora Cannabis (NYSE: ACB), the most popular cannabis stock in the world, may be next to shed jobs. Though the marijuana job market is liable to remain fluid for the foreseeable future, no job cuts were more pronounced than HEXO's (NYSE: HEXO) elimination of 200 jobs from a variety of divisions in October. Tilray The latest cannabis stock to announce job cuts is Tilray (NASDAQ: TLRY), with the British Columbia-based company noting its intent last week to shed 10% of its headcount. | Bonus: Aurora Cannabis may be next It's also possible Aurora Cannabis (NYSE: ACB), the most popular cannabis stock in the world, may be next to shed jobs. Though the marijuana job market is liable to remain fluid for the foreseeable future, no job cuts were more pronounced than HEXO's (NYSE: HEXO) elimination of 200 jobs from a variety of divisions in October. CannTrust Holdings The writing was absolutely on the wall when embattled Canadian pot grower CannTrust Holdings (NYSE: CTST) announced that it would be laying off up to 140 of its employees in late October. |
37686.0 | 2020-02-07 00:00:00 UTC | HEXO Director Resigns | ACB | https://www.nasdaq.com/articles/hexo-director-resigns-2020-02-08 | nan | nan | Capping a week notable for the departure of several executives and other high-ranking figures, plus a set of layoffs, the marijuana industry saw another departure late Friday afternoon. HEXO (NYSE: HEXO) said a member of its board of directors, Nathalie Bourque, has resigned from that body, effective today.
HEXO did not give a reason or reasons for Bourque's move. It also did not say whether it had tapped a replacement for her. The six-member board included both Bourque and the company's co-founder and CEO, Sebastien St-Louis.
Image source: Getty Images.
In the press release covering the matter, HEXO lavished praise on its now-departed director. It wrote that her "extensive experience in communications, public affairs and investor relations across financial, biopharmaceutical, retail and entertainment industries were an invaluable contribution to HEXO as we entered the legal adult-use market and grew exponentially."
Bourque is a veteran of the communications industry, having served in a variety of executive-level positions at several Canadian companies. These include CAE, which describes itself as "a worldwide leader in training for the civil aviation, defense and security, and healthcare markets," and NATIONAL Public Relations.
The day previous to Bourque's exit from HEXO, fellow big Canadian marijuana company Aurora Cannabis (NYSE: ACB) announced that its CEO, Terry Booth, had stepped down from his post. Like Bourque, Booth's goodbye was effective immediately; Aurora tapped its executive chairman, Michael Singer, to serve as interim CEO until a more permanent replacement is found.
HEXO's stock closed down nearly 4% in trading on Friday. At least investors aren't bailing from the stock as much as they have with Aurora -- that company's shares cratered by 15% on the day.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends HEXO. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | The day previous to Bourque's exit from HEXO, fellow big Canadian marijuana company Aurora Cannabis (NYSE: ACB) announced that its CEO, Terry Booth, had stepped down from his post. It wrote that her "extensive experience in communications, public affairs and investor relations across financial, biopharmaceutical, retail and entertainment industries were an invaluable contribution to HEXO as we entered the legal adult-use market and grew exponentially." Like Bourque, Booth's goodbye was effective immediately; Aurora tapped its executive chairman, Michael Singer, to serve as interim CEO until a more permanent replacement is found. | The day previous to Bourque's exit from HEXO, fellow big Canadian marijuana company Aurora Cannabis (NYSE: ACB) announced that its CEO, Terry Booth, had stepped down from his post. HEXO (NYSE: HEXO) said a member of its board of directors, Nathalie Bourque, has resigned from that body, effective today. Like Bourque, Booth's goodbye was effective immediately; Aurora tapped its executive chairman, Michael Singer, to serve as interim CEO until a more permanent replacement is found. | The day previous to Bourque's exit from HEXO, fellow big Canadian marijuana company Aurora Cannabis (NYSE: ACB) announced that its CEO, Terry Booth, had stepped down from his post. HEXO (NYSE: HEXO) said a member of its board of directors, Nathalie Bourque, has resigned from that body, effective today. Here's The Marijuana Stock You've Been Waiting For A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom. | The day previous to Bourque's exit from HEXO, fellow big Canadian marijuana company Aurora Cannabis (NYSE: ACB) announced that its CEO, Terry Booth, had stepped down from his post. It wrote that her "extensive experience in communications, public affairs and investor relations across financial, biopharmaceutical, retail and entertainment industries were an invaluable contribution to HEXO as we entered the legal adult-use market and grew exponentially." Bourque is a veteran of the communications industry, having served in a variety of executive-level positions at several Canadian companies. |
37687.0 | 2020-02-07 00:00:00 UTC | Why Aurora Cannabis Is Getting Hammered Today | ACB | https://www.nasdaq.com/articles/why-aurora-cannabis-is-getting-hammered-today-2020-02-07 | nan | nan | What happened
Shares of Aurora Cannabis (NYSE: ACB) are printing fresh multiyear lows in premarket trading this morning. Specifically, the cannabis giant's stock dropped by as much as 17% in premarket activity Friday morning in response to the news that longtime CEO Terry Booth will step down. Making matters worse, Aurora also announced a broad cost-cutting plan revolving around job cuts and the revaluation of certain assets acquired during the company's recent expansion phase.
So what
Not even a year and a half ago, Aurora was approaching large-cap status. It had the largest projected production capacity by a country mile, as well as one of the broadest global footprints in the nascent cannabis industry. Then everything fell apart. Booth's hyperaggressive growth-by-acquisition strategy flat-out backfired. Canada's legal cannabis industry simply couldn't overcome the entrenched competition from illicit sales, and the global march toward widespread legalization never made the kinds of gains many anticipated two years ago.
Image Source: Getty Images.
The United States, for instance, isn't any closer to legalizing cannabis at the federal level than it was back in 2018. As a result, Booth's serial acquisition strategy slowly but surely morphed into a boondoggle, putting the company in serious financial peril. Aurora, in fact, is facing a cash crunch right now, necessitating steep cuts to both its workforce and its production capacity.
Now what
Is Aurora's stock a contrarian buy? At this point, investors probably want to stick to the safety of the sidelines. A new management team could facilitate a turnaround. But there's no guarantee at this stage. Aurora expanded too quickly, wasted far too much capital, and is now struggling simply to remain in the game. That's not an attractive set of circumstances for potential investors. Moreover, there are other beaten-down pot stocks that arguably offer a far more compelling risk-to-reward ratio.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
George Budwell has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | What happened Shares of Aurora Cannabis (NYSE: ACB) are printing fresh multiyear lows in premarket trading this morning. Specifically, the cannabis giant's stock dropped by as much as 17% in premarket activity Friday morning in response to the news that longtime CEO Terry Booth will step down. Making matters worse, Aurora also announced a broad cost-cutting plan revolving around job cuts and the revaluation of certain assets acquired during the company's recent expansion phase. | What happened Shares of Aurora Cannabis (NYSE: ACB) are printing fresh multiyear lows in premarket trading this morning. Canada's legal cannabis industry simply couldn't overcome the entrenched competition from illicit sales, and the global march toward widespread legalization never made the kinds of gains many anticipated two years ago. Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018. | What happened Shares of Aurora Cannabis (NYSE: ACB) are printing fresh multiyear lows in premarket trading this morning. Canada's legal cannabis industry simply couldn't overcome the entrenched competition from illicit sales, and the global march toward widespread legalization never made the kinds of gains many anticipated two years ago. Here's The Marijuana Stock You've Been Waiting For A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom. | What happened Shares of Aurora Cannabis (NYSE: ACB) are printing fresh multiyear lows in premarket trading this morning. Canada's legal cannabis industry simply couldn't overcome the entrenched competition from illicit sales, and the global march toward widespread legalization never made the kinds of gains many anticipated two years ago. And make no mistake – it is coming. |
37688.0 | 2020-02-07 00:00:00 UTC | Does Aurora Cannabis' Staff Downsizing Upsize the Pot Stock's Appeal? | ACB | https://www.nasdaq.com/articles/does-aurora-cannabis-staff-downsizing-upsize-the-pot-stocks-appeal-2020-02-07 | nan | nan | Heads are about to roll at Aurora Cannabis (NYSE: ACB). Bloomberg reported earlier this week that the Canadian cannabis producer plans to slash 10% of its workforce. The report was based on an unnamed source who said that the cuts were intended to help the company in its goal to achieve profitability.
Aurora officially confirmed a staff reduction on Thursday, announcing that it had "eliminated close to 500 full-time equivalent staff across the company, including approximately 25% of corporate positions." This move isn't surprising. Other Canadian cannabis producers have also taken steps to lower their headcount, with Tilray announcing on Tuesday that it's laying off 10% of its workforce as part of a restructuring.
Does Aurora Cannabis' staff downsizing actually upsize the appeal of this beaten-down pot stock?
Image source: Getty Images.
Every penny counts
Few Canadian cannabis producers are consistently profitable. Aurora Cannabis certainly isn't. And every penny counts with the company's effort to reach breakeven and ultimately generate profits.
A significant staff reduction should make a big impact on Aurora's bottom line. The company spent over 81 million Canadian dollars in its fiscal 2020 first quarter on general and administration and sales and marketing costs. It intends to reduce those costs to between CA$40 million and CA$45 million per quarter by the end of the current fiscal year.
Aurora's move would be consistent with the company's previous actions to exercise increased fiscal discipline. Aurora said in its first-quarter update that it plans to hold off on completing construction at its Aurora Nordic 2 and Aurora Sun facilities. The company stated that this will save around CA$190 million in cash over the next few quarters.
Don't expect Aurora's capital expenditures to be dramatically lower when it reports its fiscal 2020 Q2 results, though. Even with the construction delays, the company's capex in Q2 is likely to be in line with the CA$108 million in the first quarter. Over the next few quarters, however, Aurora's capex should gradually decline.
A long way to go
There's no question that investors would find Aurora Cannabis a much more appealing stock if it achieved profitability. But make no mistake: Cutting nearly 500 workers won't make Aurora profitable.
Aurora's operating loss in the first quarter totaled CA$77.4 million. A staff downsizing by the company on the scale of what has been reported could help reduce Aurora's loss, but there would still be a long way to go for Aurora to reach breakeven, much less profitability.
Cantor Fitzgerald analyst Pablo Zuanic is one of the most optimistic analysts in his views about Aurora's prospects. Zuanic predicts that the company will generate positive adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) by the end of June.
That forecast is even rosier than what Aurora itself will state publicly. CFO Glen Ibbott expects adjusted EBITDA to improve but says that it will be "highly dependent" on the Cannabis 2.0 market and how quickly the retail environment in Ontario improves.
However, the early signs are that the Cannabis 2.0 market might not deliver on lofty expectations, at least not in the first half of 2020. And while Ontario is issuing more retail licenses, the process isn't moving as quickly as cannabis producers would like.
More importantly, positive adjusted EBITDA isn't the same thing as real profitability. In particular, the "I" and the "T" in EBITDA -- interest and taxes -- involve cash paid out that Aurora won't be able to use in other ways.
Down on downsizing
So will Aurora Cannabis be a more attractive marijuana stock to buy with the company reducing its workforce? I don't think so.
My rationale is partially based on the fact that Aurora will still not be anywhere close to profitability even with steep staffing cuts. And I'm also not convinced that slashing jobs helps very much over the long run. A 2017 analysis published in Harvard Business Review cast doubt on the wisdom of downsizing, stating:
While downsizing may be capable of producing positive outcomes, such as saving money in the short term, it puts firms on a negative path that makes bankruptcy more likely. While not always fatal, downsizing does increase the chances that a firm will declare bankruptcy in the future.
Although I'm not more bullish on Aurora as a result of reports that it will restructure its workforce, I'm not nearly as bearish as some are about the beaten-down stock. Aurora has plenty of problems, for sure, but it also has plenty of opportunities.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Heads are about to roll at Aurora Cannabis (NYSE: ACB). Other Canadian cannabis producers have also taken steps to lower their headcount, with Tilray announcing on Tuesday that it's laying off 10% of its workforce as part of a restructuring. Zuanic predicts that the company will generate positive adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) by the end of June. | Heads are about to roll at Aurora Cannabis (NYSE: ACB). Every penny counts Few Canadian cannabis producers are consistently profitable. It intends to reduce those costs to between CA$40 million and CA$45 million per quarter by the end of the current fiscal year. | Heads are about to roll at Aurora Cannabis (NYSE: ACB). Aurora said in its first-quarter update that it plans to hold off on completing construction at its Aurora Nordic 2 and Aurora Sun facilities. A staff downsizing by the company on the scale of what has been reported could help reduce Aurora's loss, but there would still be a long way to go for Aurora to reach breakeven, much less profitability. | Heads are about to roll at Aurora Cannabis (NYSE: ACB). Aurora Cannabis certainly isn't. The company stated that this will save around CA$190 million in cash over the next few quarters. |
37689.0 | 2020-02-06 00:00:00 UTC | Aurora Cannabis' CEO Reportedly Out As the Company Cuts Staff | ACB | https://www.nasdaq.com/articles/aurora-cannabis-ceo-reportedly-out-as-the-company-cuts-staff-2020-02-06 | nan | nan | Aurora Cannabis' (NYSE: ACB) longtime CEO Terry Booth is stepping down from his role at the Canadian cannabis producer at the same time the company plans to slash its workforce, according to multiple reports. Executive Chairman Michael Singer will reportedly take over as interim CEO, while Booth will remain on the company's board of directors.
Booth co-founded Aurora Cannabis in 2006. Singer served as Aurora's chairman of the board for several years before being named Executive Chairman in February 2019.
Image source: Getty Images.
No big surprises
Neither Booth's departure nor the staff reductions at Aurora are big surprises. After Aurora's announcement in December 2019 that former Chief Corporate Officer Cam Battley was leaving the company, Cantor Fitzgerald analyst Pablo Zuanic predicted that Aurora would likely soon look for a new CEO as well.
On Wednesday, reports surfaced that Aurora was planning to downsize its workforce. This news followed Tilray's announcement earlier this week that it was cutting its staff by 10%.
The layoffs and probably Booth stepping down appear to be the result of Aurora's precarious financial position. The company continues to lose money. Its only options to raise cash are public stock offerings and issuing senior convertible notes, both of which lead to the dilution in the value of existing shares.
The road ahead
Aurora will likely follow in Canopy Growth's footsteps by trying to find a new CEO who will implement fiscal discipline within the company. Landing a highly regarded top executive could provide a much-needed catalyst for the beaten-down marijuana stock. In the meantime, it's likely that Aurora's shares will be very volatile.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Aurora Cannabis' (NYSE: ACB) longtime CEO Terry Booth is stepping down from his role at the Canadian cannabis producer at the same time the company plans to slash its workforce, according to multiple reports. Its only options to raise cash are public stock offerings and issuing senior convertible notes, both of which lead to the dilution in the value of existing shares. The road ahead Aurora will likely follow in Canopy Growth's footsteps by trying to find a new CEO who will implement fiscal discipline within the company. | Aurora Cannabis' (NYSE: ACB) longtime CEO Terry Booth is stepping down from his role at the Canadian cannabis producer at the same time the company plans to slash its workforce, according to multiple reports. Executive Chairman Michael Singer will reportedly take over as interim CEO, while Booth will remain on the company's board of directors. Singer served as Aurora's chairman of the board for several years before being named Executive Chairman in February 2019. | Aurora Cannabis' (NYSE: ACB) longtime CEO Terry Booth is stepping down from his role at the Canadian cannabis producer at the same time the company plans to slash its workforce, according to multiple reports. After Aurora's announcement in December 2019 that former Chief Corporate Officer Cam Battley was leaving the company, Cantor Fitzgerald analyst Pablo Zuanic predicted that Aurora would likely soon look for a new CEO as well. Here's The Marijuana Stock You've Been Waiting For A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom. | Aurora Cannabis' (NYSE: ACB) longtime CEO Terry Booth is stepping down from his role at the Canadian cannabis producer at the same time the company plans to slash its workforce, according to multiple reports. The layoffs and probably Booth stepping down appear to be the result of Aurora's precarious financial position. Here's The Marijuana Stock You've Been Waiting For A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom. |
37690.0 | 2020-02-06 00:00:00 UTC | 2 Ultra-Risky Stocks That Could Make You Filthy Rich | ACB | https://www.nasdaq.com/articles/2-ultra-risky-stocks-that-could-make-you-filthy-rich-2020-02-06 | nan | nan | The brave souls who were wise enough to buy shares of the sustainable energy juggernaut Tesla (NASDAQ: TSLA) or the streaming entertainment behemoth Netflix (NASDAQ: NFLX) early on have amassed some truly staggering gains over the past decade. An initial $1,000 investment into Tesla's IPO roughly 10 years ago, for instance, would now be worth a healthy $29,800. Likewise, a similarly sized investment in Netflix over the same time period would currently be worth $22,800. The point is that "big idea" stocks like Tesla and Netflix, while extremely risky during their formative years, can produce life-changing gains within a relatively short time frame.
Which big-idea stocks might be worth the risk right now? The struggling marijuana titan Aurora Cannabis (NYSE: ACB) and the unproven gene-editing company CRISPR Therapeutics (NASDAQ: CRSP) both sport jaw-dropping risk profiles as things now stand. If these fledgling innovators can validate their business models, however, their stock would undoubtedly make their early bird investors filthy rich. Here's what investors need to know about these two high-risk, high-reward companies.
Image source: Getty Images.
Aurora: Boom or bust
Aurora is a top-tier Canadian cannabis cultivator with aspirations of one day morphing into a multinational mega-giant. To achieve this, Aurora went on a merger and acquisition spree over the past two years, transforming itself into a one-stop shop for all things cannabis related. The bad news is that the global cannabis market flat-out failed to grow in lockstep with the company's enormous ambitions. The net result is that it has had to idle grow facilities, cut its workforce, repeatedly dilute shareholders, and take on far too much debt to keep the dream alive.
The ugly consequence of all these hurricane-force headwinds is that Aurora's equity has now lost 73% of its value over the previous 12 months, making it one of the worst-performing mid-cap healthcare stocks during this period. What's more, the company may still be a few more years away from achieving consistent profitability. Even more shareholder dilution may be on the way as a result.
That's particularly bad news for current shareholders, given that Aurora's share price isn't far off from violating the minimum-bid requirement for the New York Stock Exchange. That means that a dreaded reverse split (reducing the number of outstanding shares in order to boost the price per share) might be necessary in the near future.
Aurora, in short, is one seriously risky equity.
The pot titan's upside, though, is equally impressive. The global cannabis market has the potential to rise at a compound annual growth rate of 27% for the next decade, according to a report by Arcview Market Research. So if Aurora can simply hold on and edge out its closest competitors, it could be worth tens of billions of dollars by the end of the decade. That kind of exponential growth could even top that of superstar growth stocks like Netflix and Tesla. Of course, the clear and present danger here is that Aurora may never live up to the hype.
CRISPR Therapeutics: A biotech with unlimited upside
CRISPR Therapeutics is the clear front-runner in the race to bring a CRISPR/Cas9 gene-edited product to market. The company, along with partner Vertex Pharmaceuticals (NASDAQ: VRTX), has already revealed some encouraging preliminary data for their first gene-edited therapy, CTX001, as a cure for the rare blood disorders sickle cell disease and beta thalassemia. Even though this first set of indications carries a billion-dollar peak sales estimate, CRISPR Therapeutics' market cap is currently a mere $3 billion. In short, the market is far from persuaded that its novel therapeutic platform will indeed bear fruit.
But the biotech's present valuation arguably represents a once-in-a-lifetime buying opportunity for aggressive investors. The lowdown is that CRISPR Therapeutics' goal is to develop groundbreaking therapies for a wide variety of high-value indications, and perhaps in record time to boot. In brief, this mid-cap biotech could one day be a prime figure in the fields of rare diseases, hematology, and oncology. We're talking about a potential for hundreds of billions in annual sales.
What's the risk? the company's entire platform could amount to nothing more than an interesting science experiment at the end of the day. In that case, its stock would basically be worthless. So this probably isn't a name that investors will want to own in a retirement portfolio. On the flip side, Vertex has a proven track record for picking winners in the clinic. That speaks volumes about the potential of CRISPR Therapeutics' novel gene-editing platform.
10 stocks we like better than CRISPR Therapeutics
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and CRISPR Therapeutics wasn't one of them! That's right -- they think these 10 stocks are even better buys.
See the 10 stocks
*Stock Advisor returns as of December 1, 2019
George Budwell has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends CRISPR Therapeutics, Netflix, and Tesla. The Motley Fool recommends Vertex Pharmaceuticals. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | The struggling marijuana titan Aurora Cannabis (NYSE: ACB) and the unproven gene-editing company CRISPR Therapeutics (NASDAQ: CRSP) both sport jaw-dropping risk profiles as things now stand. The point is that "big idea" stocks like Tesla and Netflix, while extremely risky during their formative years, can produce life-changing gains within a relatively short time frame. The company, along with partner Vertex Pharmaceuticals (NASDAQ: VRTX), has already revealed some encouraging preliminary data for their first gene-edited therapy, CTX001, as a cure for the rare blood disorders sickle cell disease and beta thalassemia. | The struggling marijuana titan Aurora Cannabis (NYSE: ACB) and the unproven gene-editing company CRISPR Therapeutics (NASDAQ: CRSP) both sport jaw-dropping risk profiles as things now stand. The Motley Fool owns shares of and recommends CRISPR Therapeutics, Netflix, and Tesla. The Motley Fool recommends Vertex Pharmaceuticals. | The struggling marijuana titan Aurora Cannabis (NYSE: ACB) and the unproven gene-editing company CRISPR Therapeutics (NASDAQ: CRSP) both sport jaw-dropping risk profiles as things now stand. CRISPR Therapeutics: A biotech with unlimited upside CRISPR Therapeutics is the clear front-runner in the race to bring a CRISPR/Cas9 gene-edited product to market. 10 stocks we like better than CRISPR Therapeutics When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. | The struggling marijuana titan Aurora Cannabis (NYSE: ACB) and the unproven gene-editing company CRISPR Therapeutics (NASDAQ: CRSP) both sport jaw-dropping risk profiles as things now stand. CRISPR Therapeutics: A biotech with unlimited upside CRISPR Therapeutics is the clear front-runner in the race to bring a CRISPR/Cas9 gene-edited product to market. * David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and CRISPR Therapeutics wasn't one of them! |
37691.0 | 2020-02-06 00:00:00 UTC | MedMen's CEO Resigned, and These Pot Stock CEOs Could Be Next | ACB | https://www.nasdaq.com/articles/medmens-ceo-resigned-and-these-pot-stock-ceos-could-be-next-2020-02-06 | nan | nan | Marijuana stock investors were supposed to clean up in 2019. Canada had recently legalized adult-use cannabis sales, high-margin derivatives were months away from hitting dispensary shelves, and state-level legalization momentum appeared strong in the United States. Yet when the year ended, pot stocks were a disappointment across the board.
To our north, regulatory issues have stymied the ability of growers to get product in front of customers. Health Canada delayed the launch of derivatives until mid-December, while Ontario, the nation's largest province by population, had only 24 open dispensaries as of the one-year anniversary of adult-use sales beginning. Meanwhile, in the U.S., a combination of high tax rates and supply problems has allowed the black market to thrive.
After such a miserable year, the expectation now is that pot stocks will rebound as they mature. But for one well-known cannabis stock, this hasn't been the case through the first month of 2020.
Image source: Getty Images.
The CEO of struggling multistate operator MedMen steps down
Late last week, vertically integrated multistate operator MedMen Enterprises (OTC: MMNFF) announced that CEO and co-founder Adam Bierman would be stepping down from his role as CEO, effective Feb. 1. Ryan Lissack, MedMen's COO and chief technology officer, will temporarily fill the role as CEO until a long-term replacement is found.
Additionally, Bierman agreed to surrender all of his Class A super voting shares, which is something that co-founder Andrew Modlin agreed to do in December. In other words, the only remaining class of shares left is MedMen's Class B common stock, with one share equating to one vote. Bierman's and Modlin's Class A shares had previously represented more than enough weight to overrule MedMen's common stockholders, but that won't be the case any longer.
Bierman's departure was viewed by many, including myself, as long overdue. MedMen is, arguably, in worse financial shape than any other cannabis stock. Management recently confirmed that, as part of its restructuring, the company has been attempting to pay off some of its vendors in common stock. This strategy is being employed by MedMen in an effort to conserve its capital, and it comes just over three months after MedMen called off its all-stock acquisition of privately held multistate operator PharmaCann. Though it was noted that completing the acquisition would have placed MedMen into a number of noncore markets, the reality looks to be that MedMen simply didn't have the cash to take on new stores and PharmaCann's expansion strategy.
Making matters worse, despite working out up to $280 million in financing from private equity firm Gotham Green Partners, MedMen no longer has access to the final $115 million in financing it hadn't accessed. At this point, the company's long-term future is very much in doubt, which is all the more reason Bierman had to go.
Image source: Getty Images.
These marijuana CEOs should resign, too
The thing is, Bierman isn't the only marijuana CEO who should resign or be shown the door. There are two other popular pot stocks whose CEOs have done them no favors of late.
One is Terry Booth, the CEO of Aurora Cannabis (NYSE: ACB), the most-held stock on millennial-focused investment app Robinhood. Aurora certainly looked to have a number of competitive advantages with regard to peak production potential and international expansion, but Canada's regulatory issues, along with the company's own overzealous expansion, have put it in a serious bind.
More specifically, Aurora Cannabis' balance sheet is a disaster. On the one hand, some Wall Street analysts question whether Aurora has the capital to meet its debt obligations. Even with $400 million in at-the-market offerings at its disposal (a fancy way of saying that Aurora could sell up to $400 million in stock), there aren't any guarantees it'll be able to pay for its ongoing expenses and debt obligations.
On the other hand, Aurora looks to have grossly overpaid for its more than one dozen acquisitions completed over a three-year stretch. Now lugging around 3.17 billion Canadian dollars in goodwill, representing 57% of total assets, Aurora appears to be inching closer to a massive writedown.
As the icing on the cake, Aurora Cannabis' share count has grown by more than 1 billion shares over the past 5.5 years, and hiring billionaire activist investor Nelson Peltz as a strategic advisor hasn't landed the company any equity investors or jaw-dropping deals. In my view, it's time for Terry Booth to step aside.
Image source: Getty Images.
The other cannabis CEO who should have the sense to step down is HEXO's (NYSE: HEXO) Sebastien St-Louis. Like Aurora, HEXO looked to be in position to succeed heading into the launch of recreational marijuana in Canada. But with the exception of signing a five-year wholesale supply agreement with its home province of Quebec for 200,000 kilos-in-aggregate, little has gone right.
Since October, HEXO's chief financial officer has resigned, the company pulled its guidance that called for CA$400 million in 2020 sales, production has been completely idled at the Niagara grow farm and in parts of the flagship Gatineau facility, and it laid off 200 workers. Worse yet, following the release of HEXO's fiscal fourth-quarter results, St-Louis noted that his company would need to achieve 20% market share throughout Canada to become profitable, which looks to be an impossible task given its current problems.
Interestingly, when MKM Partners chose to downgrade HEXO and slash its price target last week, covering analyst Bill Kirk noted that HEXO has a particularly poor track record of making statements that come true. My expectation is that HEXO will spend most of 2020 reducing its costs and backpedaling on its operating performance.
HEXO is a mess, and if the ship isn't righted soon, it could be delisted from the New York Stock Exchange. With faith in management seriously compromised, it's time for HEXO's board to consider looking beyond St-Louis for answers.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Sean Williams has no position in any of the stocks mentioned. The Motley Fool recommends HEXO. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | One is Terry Booth, the CEO of Aurora Cannabis (NYSE: ACB), the most-held stock on millennial-focused investment app Robinhood. Health Canada delayed the launch of derivatives until mid-December, while Ontario, the nation's largest province by population, had only 24 open dispensaries as of the one-year anniversary of adult-use sales beginning. Since October, HEXO's chief financial officer has resigned, the company pulled its guidance that called for CA$400 million in 2020 sales, production has been completely idled at the Niagara grow farm and in parts of the flagship Gatineau facility, and it laid off 200 workers. | One is Terry Booth, the CEO of Aurora Cannabis (NYSE: ACB), the most-held stock on millennial-focused investment app Robinhood. Canada had recently legalized adult-use cannabis sales, high-margin derivatives were months away from hitting dispensary shelves, and state-level legalization momentum appeared strong in the United States. The CEO of struggling multistate operator MedMen steps down Late last week, vertically integrated multistate operator MedMen Enterprises (OTC: MMNFF) announced that CEO and co-founder Adam Bierman would be stepping down from his role as CEO, effective Feb. 1. | One is Terry Booth, the CEO of Aurora Cannabis (NYSE: ACB), the most-held stock on millennial-focused investment app Robinhood. The CEO of struggling multistate operator MedMen steps down Late last week, vertically integrated multistate operator MedMen Enterprises (OTC: MMNFF) announced that CEO and co-founder Adam Bierman would be stepping down from his role as CEO, effective Feb. 1. These marijuana CEOs should resign, too The thing is, Bierman isn't the only marijuana CEO who should resign or be shown the door. | One is Terry Booth, the CEO of Aurora Cannabis (NYSE: ACB), the most-held stock on millennial-focused investment app Robinhood. These marijuana CEOs should resign, too The thing is, Bierman isn't the only marijuana CEO who should resign or be shown the door. In my view, it's time for Terry Booth to step aside. |
37692.0 | 2020-02-06 00:00:00 UTC | Aurora Cannabis Stock Is Losing Cash and Liquidity Options | ACB | https://www.nasdaq.com/articles/aurora-cannabis-stock-is-losing-cash-and-liquidity-options-2020-02-06 | nan | nan | In short, Aurora Cannabis (NYSE:) is running out of cash â and Aurora stock is taking the hits.
Source: Shutterstock
At the end of its ending Sept. 30, 2019, Aurora had just 152.5 million CAD.
That said, the company is bleeding cash, and I expect that by now Aurora has more or less used up most of its remaining cash. Last quarter, Aurora burned 94 million in cash from operating activities and had an additional 108 million in capital expenses (capex).
If those trends continued by the end of the year and into the beginning of this calendar year (its fiscal third quarter), the total amount of cash remaining may be little â if any. Overall, it depends on how fast the company spends cash and how much is spent on capex.
Liquidity Options for Aurora Cannabis
We wonâÂÂt know the cash balance until the morning of Feb. 11 when the company releases its .
However, it seems Aurora likely has two options: It can raise equity from new share sales to existing or potential new investors, or sell remaining assets. It may also have to shut down operations in order to conserve its cash.
I have already written about the companyâÂÂs and its options in that regard. Cornerstone Investments recently wrote an article where they estimate that the total realizable amount from asset sales is just 75 million CAD.
But, that will not be enough to cover the ongoing losses at Aurora Cannabis if last quarterâÂÂs cash burn continued to the end of the year and into 2020.
Equity Raise Options for Aurora Stock
It seems more likely that Aurora will devise a plan to raise equity either in a rights issue with existing investors or from a potential third party.
Most of the larger third-party investments in the Canadian cannabis space are from beverage companies. For example, Constellation Brands (NYSE:) invested 5 billion CAD in Canopy Growth (NYSE:) in 2018. Furthermore, Molson Coors (NYSE:) started a joint venture with Hexo (NYSE:) â and both beverage companies are looking to start cannabis-infused drinks with their Canadian partners.
An exception to this is the U.S. tobacco company Altria (NYSE:), which invested $1.8 billion USD in Cronos (NASDAQ:).
With all of that in mind, it seems more likely that another beverage company would potentially choose Aurora. According to Cornerstone Investments, though, the investor is not likely to be a pharma or consumer beverage company.
Cantor Fitzgerald Thinks Aurora Stock Is a Buy
Despite all the bad noise surrounding Aurora stock, Cantor Fitzgerald analyst Pablo Zuanic believes that the shares . Zuanic wrote that Aurora will have positive EBITDA to the tune of 132 million CAD by mid-year, while consensus estimates are much lower at around 77 million CAD.
Additionally, Zuanic believes that AuroraâÂÂs sales in the second half of 2020 will be greatly increased due to derivative products like cannabis edibles and vapes. In turn, operating expenses will come down as a percentage of sales.
So, maybe this contrarian analyst will be right. Maybe Aurora can basically raise the cash it needs from its own internal sources.
Keep in mind, however, that many other analysts believe that Aurora will continue to fall to below $1 per share â as I discussed .
What Should Investors in Aurora Stock Do?
Collectively, I would suggest that investors might want to wait until earnings for the year-end quarter are released next week.
At that time, Aurora will have to detail just how much cash it has left. Then, it will then have to face analystsâ questions about its ongoing liquidity and related issues.
If the company can come up with plausible financing options, then Aurora stock might be worth investing in. This would be a potential turnaround play for investors who are willing to take on speculative and risky investments.
As of this writing, Mark Hake, CFA does not hold a position in any of the aforementioned securities. Mark Hake runs theÃÂ ÃÂ which you can reviewÃÂ here.ÃÂ TheÃÂ GuideÃÂ focuses on high total yield value stocks. Subscribers get a two-week free trial.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | However, it seems Aurora likely has two options: It can raise equity from new share sales to existing or potential new investors, or sell remaining assets. Cornerstone Investments recently wrote an article where they estimate that the total realizable amount from asset sales is just 75 million CAD. Additionally, Zuanic believes that AuroraâÂÂs sales in the second half of 2020 will be greatly increased due to derivative products like cannabis edibles and vapes. | Last quarter, Aurora burned 94 million in cash from operating activities and had an additional 108 million in capital expenses (capex). However, it seems Aurora likely has two options: It can raise equity from new share sales to existing or potential new investors, or sell remaining assets. Cantor Fitzgerald Thinks Aurora Stock Is a Buy Despite all the bad noise surrounding Aurora stock, Cantor Fitzgerald analyst Pablo Zuanic believes that the shares . | In short, Aurora Cannabis (NYSE:) is running out of cash â and Aurora stock is taking the hits. Equity Raise Options for Aurora Stock It seems more likely that Aurora will devise a plan to raise equity either in a rights issue with existing investors or from a potential third party. Cantor Fitzgerald Thinks Aurora Stock Is a Buy Despite all the bad noise surrounding Aurora stock, Cantor Fitzgerald analyst Pablo Zuanic believes that the shares . | Last quarter, Aurora burned 94 million in cash from operating activities and had an additional 108 million in capital expenses (capex). Liquidity Options for Aurora Cannabis We wonâÂÂt know the cash balance until the morning of Feb. 11 when the company releases its . What Should Investors in Aurora Stock Do? |
37693.0 | 2020-02-05 00:00:00 UTC | Why Marijuana Stock Innovative Industrial Properties Popped 18% in January | ACB | https://www.nasdaq.com/articles/why-marijuana-stock-innovative-industrial-properties-popped-18-in-january-2020-02-05 | nan | nan | What happened
Shares of Innovative Industrial Properties (NYSE: IIPR), a cannabis sector-focused real estate investment trust (REIT), jumped 18% last month, according to data from S&P Global Market Intelligence. That's a great start to 2020 for a stock that returned 72.5% last year.
For context, the S&P 500 index was essentially flat in January, while shares of the three largest cannabis growers by market cap, Canopy Growth, Cronos Group, and Aurora Cannabis, rose 6.9%, declined 6.4%, and fell 12.5%, respectively.
Image source: Innovative Industrial Properties.
So what
We can probably attribute the stock's robust January performance in part to two catalysts: its secondary stock offering and strength in the cannabis group following an analyst upgrade of Canopy stock.
On January 23, IIP announced a secondary offering of 2 million shares of its common stock to the public. The next day, it announced that it had priced the offering and had considerably increased the size of its sale. This was followed by news on Jan. 28 that the company had sold nearly 3 million shares to the public. Shares popped 8.7% that day.
Typically, a company's stock will decline on news of a secondary offering because such an offering dilutes existing investors' ownership. My colleague Keith Speights has opined that a main reason for investors' positive reaction here was that "they're confident that the company will put the $250 million that it's raising to good use." That seems a reasonable explanation, as IIP is scooping up properties at a fast pace and is quite profitable. In the third quarter, its revenue soared 201% year over year, earnings per share surged 162%, and adjusted funds from operations (FFO) per share jumped 126%. (FFO is a closely watched metric for REITs, as it's the driver of dividend changes.).
It's likely, however, that there was also another catalyst behind IIP stock's Jan. 28 move. On that date, Canadian banker BMO raised its rating on Canopy Growth stock from "market perform" to "outperform." Not only did Canopy stock get a boost -- to the tune of 11% -- but other cannabis stocks rose that day as well, with Cronos and Aurora tacking on 6.3% and 4.2%, respectively. (The S&P 500 gained 1%.) Canopy is often considered the bellwether in the cannabis space because it has the largest market cap, so positive news relating to it will frequently lift other stocks in the group. So it seems probable that IIP stock owes a portion of its nearly 9% gain on Jan. 28 to the Canopy stock upgrade.
Now what
IIP hasn't yet announced a date for the release of its fourth-quarter and full-year 2019 results.
The company doesn't provide guidance. For the fourth quarter, Wall Street expects EPS of $0.57 on revenue of $14.4 million, representing growth of 138% and 200%, respectively, year over year.
10 stocks we like better than Innovative Industrial Properties
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Innovative Industrial Properties wasn't one of them! That's right -- they think these 10 stocks are even better buys.
See the 10 stocks
*Stock Advisor returns as of December 1, 2019
Beth McKenna owns shares of Canopy Growth. The Motley Fool recommends Innovative Industrial Properties. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | What happened Shares of Innovative Industrial Properties (NYSE: IIPR), a cannabis sector-focused real estate investment trust (REIT), jumped 18% last month, according to data from S&P Global Market Intelligence. My colleague Keith Speights has opined that a main reason for investors' positive reaction here was that "they're confident that the company will put the $250 million that it's raising to good use." Canopy is often considered the bellwether in the cannabis space because it has the largest market cap, so positive news relating to it will frequently lift other stocks in the group. | For context, the S&P 500 index was essentially flat in January, while shares of the three largest cannabis growers by market cap, Canopy Growth, Cronos Group, and Aurora Cannabis, rose 6.9%, declined 6.4%, and fell 12.5%, respectively. On January 23, IIP announced a secondary offering of 2 million shares of its common stock to the public. Canopy is often considered the bellwether in the cannabis space because it has the largest market cap, so positive news relating to it will frequently lift other stocks in the group. | So what We can probably attribute the stock's robust January performance in part to two catalysts: its secondary stock offering and strength in the cannabis group following an analyst upgrade of Canopy stock. So it seems probable that IIP stock owes a portion of its nearly 9% gain on Jan. 28 to the Canopy stock upgrade. See the 10 stocks *Stock Advisor returns as of December 1, 2019 Beth McKenna owns shares of Canopy Growth. | So what We can probably attribute the stock's robust January performance in part to two catalysts: its secondary stock offering and strength in the cannabis group following an analyst upgrade of Canopy stock. * David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Innovative Industrial Properties wasn't one of them! The Motley Fool recommends Innovative Industrial Properties. |
37694.0 | 2020-02-05 00:00:00 UTC | Aurora Cannabis to Cut 10% of Its Workforce, According to Source | ACB | https://www.nasdaq.com/articles/aurora-cannabis-to-cut-10-of-its-workforce-according-to-source-2020-02-05 | nan | nan | Major cannabis companies have been struggling to turn a profit, and many have gone so far as to lay off large numbers of employees in their efforts to stem their losses. It now appears that Aurora Cannabis (NYSE: ACB) will be the next to announce layoffs: According to Bloomberg, an unnamed source with direct knowledge of the company's plans has said it will cut its workforce by 10%.
Bloomberg's source said Aurora, which employs around 3,400 employees across 20 countries, will publicly announce the job cuts in the next few days. Significant numbers of those cuts are expected to fall on consultants working for the cannabis giant as contractors.
Image source: Getty Images.
The news came just a day after peer Tilray announced it would cut 10% of its 1,440-plus employees worldwide. Other cannabis companies such as CannTrust and HEXO announced major staff reductions in 2019.
An ongoing trend
Few cannabis companies managed to report profits in the past year. Aurora, in particular, has had to resort to drastic measures to find new sources of financing and try to stem its losses. Those moves included the decision to halt construction of its newest cultivation facility, Aurora Sun, allowing it to avoid, for now, around C$110 million in construction costs. The facility was expected to create 650 jobs near Medicine Hat, Alberta.
One of the few pieces of good news that Aurora has received recently concerned its international business. After a two-month suspension over a permit issue, the company announced on Monday that its medical marijuana products can be sold in Germany again.
10 stocks we like better than Aurora Cannabis Inc.
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Aurora Cannabis Inc. wasn't one of them! That's right -- they think these 10 stocks are even better buys.
See the 10 stocks
*Stock Advisor returns as of December 1, 2019
Mark Prvulovic has no position in any of the stocks mentioned. The Motley Fool recommends CannTrust Holdings Inc and HEXO. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | It now appears that Aurora Cannabis (NYSE: ACB) will be the next to announce layoffs: According to Bloomberg, an unnamed source with direct knowledge of the company's plans has said it will cut its workforce by 10%. Major cannabis companies have been struggling to turn a profit, and many have gone so far as to lay off large numbers of employees in their efforts to stem their losses. After a two-month suspension over a permit issue, the company announced on Monday that its medical marijuana products can be sold in Germany again. | It now appears that Aurora Cannabis (NYSE: ACB) will be the next to announce layoffs: According to Bloomberg, an unnamed source with direct knowledge of the company's plans has said it will cut its workforce by 10%. Major cannabis companies have been struggling to turn a profit, and many have gone so far as to lay off large numbers of employees in their efforts to stem their losses. Other cannabis companies such as CannTrust and HEXO announced major staff reductions in 2019. | It now appears that Aurora Cannabis (NYSE: ACB) will be the next to announce layoffs: According to Bloomberg, an unnamed source with direct knowledge of the company's plans has said it will cut its workforce by 10%. * David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Aurora Cannabis Inc. wasn't one of them! See the 10 stocks *Stock Advisor returns as of December 1, 2019 Mark Prvulovic has no position in any of the stocks mentioned. | It now appears that Aurora Cannabis (NYSE: ACB) will be the next to announce layoffs: According to Bloomberg, an unnamed source with direct knowledge of the company's plans has said it will cut its workforce by 10%. Major cannabis companies have been struggling to turn a profit, and many have gone so far as to lay off large numbers of employees in their efforts to stem their losses. Bloomberg's source said Aurora, which employs around 3,400 employees across 20 countries, will publicly announce the job cuts in the next few days. |
37695.0 | 2020-02-05 00:00:00 UTC | 3 Top Marijuana Stocks to Watch in February | ACB | https://www.nasdaq.com/articles/3-top-marijuana-stocks-to-watch-in-february-2020-02-05 | nan | nan | There should be a lot packed into the shortest month of the year for cannabis investors. Several important quarterly updates are on the way. Other key developments could be in store as well. And thanks to 2020 being a leap year, we have an extra day in February to make the month a little longer than it usually is.
Three top marijuana stocks for investors to watch in February are Aurora Cannabis (NYSE: ACB), Canopy Growth (NYSE: CGC), and Charlotte's Web Holdings (OTC: CWBHF). Here's what to be on the lookout for with these three stocks.
Image source: Getty Images.
1. Aurora Cannabis
Aurora Cannabis hasn't stated yet exactly when its fiscal 2020 second-quarter results will be announced. But since the Canadian cannabis producer reported its Q1 results on Nov. 14, look for the next quarterly update in mid-February.
There are several reasons to expect another dismal quarter for Aurora. In the company's Q2 conference call, now-departed Chief Corporate Officer Cam Battley wouldn't say whether or not Aurora anticipated revenue growth in the second quarter. But CFO Glen Ibbott did state that capital expenditures would be similar to the Q1 level even though Aurora is putting the construction at its Aurora Nordic 2 and Aurora Sun facilities on hold.
One area that will almost certainly look worse for Aurora is its international sales. In December, Germany suspended Aurora's medical cannabis license because the company didn't have a required permit to distribute irradiated medical cannabis products. Aurora's license was reinstated in early February 2020, but the company lost two months of sales in Germany.
Cantor Fitzgerald analyst Pablo Zuanic thinks that Aurora might replace CEO Terry Booth and secure a big consumer packaged goods partner thanks to the efforts of billionaire investor Nelson Peltz. Investors will definitely want to watch and listen for any signals that either development is a possibility.
2. Canopy Growth
Canopy Growth already named a new CEO in December. David Klein took the helm at Canopy after serving for several years as the CFO for the company's biggest shareholder, Constellation Brands. Klein had also been a member of Canopy Growth's board of directors.
Like Aurora Cannabis, Canopy Growth hasn't said when it will report its next quarterly results but is likely to do so in the middle of this month. This will be Klein's first quarterly conference call as Canopy's CEO, so it will be interesting to hear what he ways about what's next for the company.
Investors especially hope to hear about a plan for Canopy to achieve profitability -- or at least hear a reason to think that a plan will be on the way soon. Canopy Growth has been spending heavily for a long time. The appointment of Klein as CEO increased optimism that the company would be more fiscally disciplined going forward.
The company should also provide an update on when it expects to launch its cannabis-infused beverages. Canopy originally planned to begin introducing its new beverage products in January. However, it announced that the launches were being delayed because more work was needed to finalize the process of scaling up to commercial production levels.
3. Charlotte's Web Holdings
Let's make it three in a row: Charlotte's Web could also announce its results for the 2019 fourth quarter later this month but hasn't scheduled the earnings release yet. Those results could be pretty good due to a couple of key factors.
First, Charlotte's Web usually experiences its strongest sales in the last quarter of the year. A big reason for this is that Q4 tends to have higher direct-to-consumer sales of the company's CBD products.
Second, the greatest number of retail locations in the company's history carried Charlotte's Web's products in the fourth quarter. At the end of Q3, more than 9,000 stores stocked the company's CBD products, up from 3,680 at the end of 2019.
It's possible, though, that Charlotte's Web's Q4 update could slip into March as it did last year. Even if that happens, there's still an important development to watch with the company. Legislation has been introduced in the U.S. House of Representatives to make CBD foods and dietary supplements legal in the U.S., eliminating the need to wait a long time for the FDA to take action. Any progress on this bill would be great news for Charlotte's Web.
Biggest winner?
My hunch is that Charlotte's Web could be the biggest winner in February. I don't expect either Aurora Cannabis or Canopy Growth to post impressive quarterly results. Charlotte's Web stock is down nearly as much as Aurora's shares over the past six months, but I think the outlook is more positive than it's been in a while for the company.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Keith Speights has no position in any of the stocks mentioned. The Motley Fool recommends Charlotte's Web. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Three top marijuana stocks for investors to watch in February are Aurora Cannabis (NYSE: ACB), Canopy Growth (NYSE: CGC), and Charlotte's Web Holdings (OTC: CWBHF). In the company's Q2 conference call, now-departed Chief Corporate Officer Cam Battley wouldn't say whether or not Aurora anticipated revenue growth in the second quarter. Cantor Fitzgerald analyst Pablo Zuanic thinks that Aurora might replace CEO Terry Booth and secure a big consumer packaged goods partner thanks to the efforts of billionaire investor Nelson Peltz. | Three top marijuana stocks for investors to watch in February are Aurora Cannabis (NYSE: ACB), Canopy Growth (NYSE: CGC), and Charlotte's Web Holdings (OTC: CWBHF). Aurora Cannabis Aurora Cannabis hasn't stated yet exactly when its fiscal 2020 second-quarter results will be announced. In December, Germany suspended Aurora's medical cannabis license because the company didn't have a required permit to distribute irradiated medical cannabis products. | Three top marijuana stocks for investors to watch in February are Aurora Cannabis (NYSE: ACB), Canopy Growth (NYSE: CGC), and Charlotte's Web Holdings (OTC: CWBHF). Like Aurora Cannabis, Canopy Growth hasn't said when it will report its next quarterly results but is likely to do so in the middle of this month. Charlotte's Web Holdings Let's make it three in a row: Charlotte's Web could also announce its results for the 2019 fourth quarter later this month but hasn't scheduled the earnings release yet. | Three top marijuana stocks for investors to watch in February are Aurora Cannabis (NYSE: ACB), Canopy Growth (NYSE: CGC), and Charlotte's Web Holdings (OTC: CWBHF). Aurora Cannabis Aurora Cannabis hasn't stated yet exactly when its fiscal 2020 second-quarter results will be announced. Like Aurora Cannabis, Canopy Growth hasn't said when it will report its next quarterly results but is likely to do so in the middle of this month. |
37696.0 | 2020-02-05 00:00:00 UTC | There’s Only One Bull Case Left for Aurora Cannabis Stock | ACB | https://www.nasdaq.com/articles/theres-only-one-bull-case-left-for-aurora-cannabis-stock-2020-02-05 | nan | nan | Cannabis stocks like Aurora Cannabis (NYSE:) are starting to stabilize. Aurora stock has bounced over 40% from last monthâÂÂs lows, and has managed to hold early December lows. Canopy Growth (NYSE:), still the sectorâÂÂs most valuable play, has rallied over 50% since selling off following earnings in November.
Source: ElRoi / Shutterstock.com
To be sure, pot stocks still sit well below past highs, and itâÂÂs possible recent trading is a so-called âÂÂdead cat bounce.â But at the least sentiment toward the sector doesnâÂÂt seem quite as negative as it was just a few months ago. Expectations may be more reasonable, with a better understanding that the Canadian market alone canâÂÂt drive the upside investors modeled in at the highs.
The problem for Aurora stock is even that outlook isnâÂÂt quite bright enough. A slow, measured recovery simply may not come quickly enough â and likely would be more beneficial for other major cannabis companies. The case for buying ACB stock at this point, and choosing it over other cannabis plays, requires a much steeper recovery in sentiment and in sales. And IâÂÂm skeptical a recovery of that kind is on the way.
Are Cannabis Stocks Bottoming?
Again, there is at least a hint of optimism toward the cannabis sector at the moment. The relentless pot stock selloff that began last spring has ended. Executive and investor focus has turned away from plunging production margins to products like vapes and edibles. The regulatory backlog at Health Canada is starting to ease.
2020 should at worst be a better year for the industry, and its stocks, even if that admittedly is a low bar to clear. Looking further out, the long-term opportunity remains expansive. Legalization at the federal level in the U.S. could arrive at some point. Aurora Cannabis itself has an .
To be sure, risks remain. Valuations in the sector may be cheaper â but theyâÂÂre not cheap. Cannabis companies as a whole still have tens of billions in combined market capitalization. Price-to-revenue multiples remain dear: ACB stock, including debt, trades around 5x the fiscal 2021 consensus revenue estimate.
Still, thereâÂÂs a sense both in the stock market and in listening to cannabis executives that normalcy has returned. Investors arenâÂÂt expecting cannabis names to triple in a matter of months. Executives are adapting to the new reality on the ground: Tilray (NASDAQ:) even announced layoffs this week. A recovery, if it comes, will take some time, but industry participants at least have hope for a recovery after a difficult 2019.
The Problem for Aurora Stock
The catch for Aurora stock, however, is that hopes for a modest recovery simply arenâÂÂt good enough. This still is a company with significant . And though IâÂÂve argued that dilution, not bankruptcy, is the key risk, Aurora will need capital to get by in a slow-recovery scenario. That probably suggests more share issuances â and further pressure on the ACB stock price.
Meanwhile, rivals have that capital â and plenty of it. Canopy raised billions from Constellation Brands (NYSE:,NYSE:STZ.B), and Cronos (NASDAQ:) received a huge infusion from Altria (NYSE:).
In a scenario where cannabis revenues grow at a reasonable pace, and profitability is a few years out, those majors have the edge. Their capital may allow them to buy assets of smaller distressed or bankrupt producers. Instead of focusing on cost-cutting, Canopy and Cronos can ramp marketing spending to capture share in higher-margin branded products. Capital allows for flexibility â and flexibility will be valuable in a market that takes years to develop.
The Case for ACB
There is one case for Aurora stock, however. In an environment where cannabis sales, and cannabis stocks, soar, ACB is the play.
After all, that leveraged balance sheet amplifies both downside and upside. AuroraâÂÂs debt is a key reason why Aurora shares have fallen even further than those of most peers. But in an upside scenario, ACB stock should outperform.
A similar dynamic applies to AuroraâÂÂs business. Few companies have AuroraâÂÂs existing reach. If sales suddenly take off â in the recreational market in Canada or in medical markets overseas â Aurora is best-positioned to capitalize.
For those investors still hugely bullish on cannabis â and bullish on the near-term opportunity in particular â Aurora stock is the right choice. A rally in its stock can ease financing worries. A spike in Canadian demand will improve margins and get the company closer to profitability quicker. At this point, thatâÂÂs the only case left. Personally, I donâÂÂt think itâÂÂs near enough.
As of this writing, Vince Martin has no positions in any securities mentioned.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | The case for buying ACB stock at this point, and choosing it over other cannabis plays, requires a much steeper recovery in sentiment and in sales. Price-to-revenue multiples remain dear: ACB stock, including debt, trades around 5x the fiscal 2021 consensus revenue estimate. That probably suggests more share issuances â and further pressure on the ACB stock price. | But in an upside scenario, ACB stock should outperform. The case for buying ACB stock at this point, and choosing it over other cannabis plays, requires a much steeper recovery in sentiment and in sales. Price-to-revenue multiples remain dear: ACB stock, including debt, trades around 5x the fiscal 2021 consensus revenue estimate. | The case for buying ACB stock at this point, and choosing it over other cannabis plays, requires a much steeper recovery in sentiment and in sales. Price-to-revenue multiples remain dear: ACB stock, including debt, trades around 5x the fiscal 2021 consensus revenue estimate. That probably suggests more share issuances â and further pressure on the ACB stock price. | The case for buying ACB stock at this point, and choosing it over other cannabis plays, requires a much steeper recovery in sentiment and in sales. Price-to-revenue multiples remain dear: ACB stock, including debt, trades around 5x the fiscal 2021 consensus revenue estimate. That probably suggests more share issuances â and further pressure on the ACB stock price. |
37697.0 | 2020-02-05 00:00:00 UTC | Finally, Some Good News for Aurora Cannabis | ACB | https://www.nasdaq.com/articles/finally-some-good-news-for-aurora-cannabis-2020-02-05 | nan | nan | In case you haven't noticed, it's been tough to be a marijuana stock investor over the past 10 months. Following a blazing-hot first quarter that saw over a dozen pot stocks gain in excess of 70%, cannabis stocks have spent much of the past 10 months in a steep downtrend, with some pushing to multiyear lows.
This weakness has been precipitated by regulatory-based supply issues in Canada, exorbitant tax rates in a number of recreationally legal U.S. states, and a resilient black market presence throughout North America that's thrived off of the industry's early stage miscues.
Investors have been looking for any sort of good news to latch onto, and Aurora Cannabis (NYSE: ACB), the undisputed most-popular pot stock, looks to have finally provided such news on Monday, Feb. 3.
Image source: Getty Images.
Is Aurora's international business (finally) about to pick up?
First of all, the company announced that, following a two-month suspension of medical marijuana sales in Germany, its products are once again available for sale.
For those who may not recall, Aurora announced in late November that its medical pot products would be unavailable while health authorities conducted a review of the company's cannabis production process. More specifically, German pharmacies noted that the review had to do with a method Aurora used to ensure the shelf life of its cannabis flower, according to Marijuana Business Daily. Although the company stood behind the quality of its product and its manufacturing process, this was just another pain in the neck for investors toward the end of 2019.
However, considering Germany is probably the most lucrative medical cannabis opportunity in the European Union (EU), the ability to once again sell medical cannabis is a clear step in the right direction.
What's more, Aurora Cannabis also, separately, announced that it had received EU Good Manufacturing Practice certification for its Aurora River facility. If the name doesn't sound all too familiar, that's because this campus used to be called Bradford when MedReleaf owned it. The Bradford facility offers 28,000 kilos of peak annual production capacity, and it marks the third of the company's 10 domestic cultivation campuses to get the thumbs-up from EU regulators. With Aurora River now receiving the A-OK from a quality standpoint to export to the EU, Aurora's ability to send cannabis to international medical marijuana markets has grown by more than 230%.
Image source: Getty Images.
This approval is particularly important because Aurora Cannabis has arguably banked on overseas markets more so than on any other marijuana stock. Yet, to date, international sales have been paltry, with only $5 million Canadian in recognized international revenue in the fiscal first quarter. With higher-margin extract sales somewhat recently commencing in some overseas markets, Aurora Cannabis may finally have an opportunity to realize dividends from its overseas expansion strategy.
One step forward, but a mile to go
While this represents an important step forward for the company, it's also just one step of many it'll need to take to prove to Wall Street that it has long-term potential.
For instance, Aurora Cannabis spent aggressively to up its production capacity and supply chain capabilities, and it looks to have seriously compromised its balance sheet in the process. Despite ending the fiscal first quarter with what seems like a sufficient amount of cash, cash equivalents, and marketable securities on hand (almost CA$192 million), this could prove insufficient, considering its existing borrowings and its ongoing operating expenses. Even with Aurora Cannabis halting construction at two of its largest cultivation farms and putting another 1 million-square-foot greenhouse up for sale, there are no guarantees that it has the capital to survive long term.
Furthermore, the only way Aurora has easy access to capital right now is by selling its stock. Since June 2014, the company's share count has ballooned from 16 million to probably close to 1.1 billion. Such mammoth amounts of dilution have been difficult for investors to absorb.
This overspending has also driven up the company's goodwill. Although goodwill is pretty common following an acquisition, Aurora's CA$3.17 billion in goodwill accounts for 57% of its total assets, as of the end of September. This figure suggests that Aurora grossly overpaid for the companies it purchased and that there's little hope of recouping a significant portion of this goodwill in the future. At this point, a future writedown might actually be larger than Aurora's current market cap.
Image source: Getty Images.
There are other concerns beyond just the company's balance sheet. The noted supply issues in Canada, such as Ontario's inability to open an adequate number of dispensaries, will not be an overnight fix. Thankfully, Ontario is abandoning its lottery system in favor of a more traditional retail licensing system. Nevertheless, it's going to take numerous quarters before the most populous province has a sufficient retail presence. That means ongoing supply bottlenecks for dried flower and high-margin derivatives for Aurora and its peers.
It's also highly unlikely that profitability is anywhere on the horizon. With sales growth stymied in Canada and international sales generating just peanuts of their envisioned potential, Wall Street doesn't envision Aurora Cannabis delivering a recurring profit until at least fiscal 2022 (Aurora's fiscal year ends June 30).
There's no doubt that Aurora Cannabis' shareholders needed something good to happen, and Monday's announcements hit the spot. But on a big-picture basis, Aurora still has the look of a company that's unproven, and therefore potentially dangerous to investors.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
Sean Williams has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Investors have been looking for any sort of good news to latch onto, and Aurora Cannabis (NYSE: ACB), the undisputed most-popular pot stock, looks to have finally provided such news on Monday, Feb. 3. This weakness has been precipitated by regulatory-based supply issues in Canada, exorbitant tax rates in a number of recreationally legal U.S. states, and a resilient black market presence throughout North America that's thrived off of the industry's early stage miscues. The Bradford facility offers 28,000 kilos of peak annual production capacity, and it marks the third of the company's 10 domestic cultivation campuses to get the thumbs-up from EU regulators. | Investors have been looking for any sort of good news to latch onto, and Aurora Cannabis (NYSE: ACB), the undisputed most-popular pot stock, looks to have finally provided such news on Monday, Feb. 3. What's more, Aurora Cannabis also, separately, announced that it had received EU Good Manufacturing Practice certification for its Aurora River facility. With Aurora River now receiving the A-OK from a quality standpoint to export to the EU, Aurora's ability to send cannabis to international medical marijuana markets has grown by more than 230%. | Investors have been looking for any sort of good news to latch onto, and Aurora Cannabis (NYSE: ACB), the undisputed most-popular pot stock, looks to have finally provided such news on Monday, Feb. 3. For those who may not recall, Aurora announced in late November that its medical pot products would be unavailable while health authorities conducted a review of the company's cannabis production process. With Aurora River now receiving the A-OK from a quality standpoint to export to the EU, Aurora's ability to send cannabis to international medical marijuana markets has grown by more than 230%. | Investors have been looking for any sort of good news to latch onto, and Aurora Cannabis (NYSE: ACB), the undisputed most-popular pot stock, looks to have finally provided such news on Monday, Feb. 3. Is Aurora's international business (finally) about to pick up? This figure suggests that Aurora grossly overpaid for the companies it purchased and that there's little hope of recouping a significant portion of this goodwill in the future. |
37698.0 | 2020-02-04 00:00:00 UTC | Why Aurora Cannabis Shares Dropped by 12.5% in January | ACB | https://www.nasdaq.com/articles/why-aurora-cannabis-shares-dropped-by-12.5-in-january-2020-02-04 | nan | nan | What happened
Shares of Canadian pot titan Aurora Cannabis (NYSE: ACB) not only failed to break out of their nearly yearlong funk last month, but they also fell by another 12.5% over the course of January, according to data from S&P Global Market Intelligence.
Why is Aurora's stock failing to find a bottom? While some top pot stocks like Canopy Growth and OrganiGram Holdings actually posted gains last month, Aurora's shares continued to move lower over growing concerns that the company will face a cash crunch in the not-so-distant future.
Image source: Getty Images.
So what
Aurora's dwindling cash position and highly uncertain growth outlook haven't gone unnoticed on Wall Street. On Jan. 10, for instance, Piper Sandler slashed its 12-month price target on the stock from $3 to $1. In effect, the investment bank is calling for the company's shares to shed another 50% of their value by the end of 2020.
That's a rather dire take -- especially in light of the fact that the stock has already fallen by 61% over the prior 12 months. Nonetheless, GLJ Research is even more pessimistic about Aurora. Last December, GLJ analyst Gordon Johnson rolled out a controversial $0 price target on the pot stock. In his view, Aurora is flat-out worthless.
Now what
Is Wall Street wrong about this top pot stock? Aurora definitely has some serious issues to contend with this year. The company has to clean up its balance sheet, find sources of capital other than simply selling shares, and capitalize on the recent legalization of high-margin derivatives like edibles, vapes, and beverages. Unfortunately, Aurora may not be able to achieve any of these key operational goals anytime soon. Investors, in turn, would probably be wise to avoid this name in 2020.
10 stocks we like better than Aurora Cannabis Inc.
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Aurora Cannabis Inc. wasn't one of them! That's right -- they think these 10 stocks are even better buys.
See the 10 stocks
*Stock Advisor returns as of December 1, 2019
George Budwell has no position in any of the stocks mentioned. The Motley Fool recommends OrganiGram Holdings. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | What happened Shares of Canadian pot titan Aurora Cannabis (NYSE: ACB) not only failed to break out of their nearly yearlong funk last month, but they also fell by another 12.5% over the course of January, according to data from S&P Global Market Intelligence. While some top pot stocks like Canopy Growth and OrganiGram Holdings actually posted gains last month, Aurora's shares continued to move lower over growing concerns that the company will face a cash crunch in the not-so-distant future. So what Aurora's dwindling cash position and highly uncertain growth outlook haven't gone unnoticed on Wall Street. | What happened Shares of Canadian pot titan Aurora Cannabis (NYSE: ACB) not only failed to break out of their nearly yearlong funk last month, but they also fell by another 12.5% over the course of January, according to data from S&P Global Market Intelligence. Why is Aurora's stock failing to find a bottom? While some top pot stocks like Canopy Growth and OrganiGram Holdings actually posted gains last month, Aurora's shares continued to move lower over growing concerns that the company will face a cash crunch in the not-so-distant future. | What happened Shares of Canadian pot titan Aurora Cannabis (NYSE: ACB) not only failed to break out of their nearly yearlong funk last month, but they also fell by another 12.5% over the course of January, according to data from S&P Global Market Intelligence. While some top pot stocks like Canopy Growth and OrganiGram Holdings actually posted gains last month, Aurora's shares continued to move lower over growing concerns that the company will face a cash crunch in the not-so-distant future. * David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Aurora Cannabis Inc. wasn't one of them! | What happened Shares of Canadian pot titan Aurora Cannabis (NYSE: ACB) not only failed to break out of their nearly yearlong funk last month, but they also fell by another 12.5% over the course of January, according to data from S&P Global Market Intelligence. Why is Aurora's stock failing to find a bottom? Last December, GLJ analyst Gordon Johnson rolled out a controversial $0 price target on the pot stock. |
37699.0 | 2020-02-04 00:00:00 UTC | This Technology Could Make Pot Stocks Profitable | ACB | https://www.nasdaq.com/articles/this-technology-could-make-pot-stocks-profitable-2020-02-04 | nan | nan | It isn't impossible for cannabis stocks to report profits, but finding stocks in the industry that can do so consistently is another story. That's one of the reasons many investors steer clear of the industry, as a lack of profitability and lots of cash burn have made the sector a very risky one to invest in. Two Israeli companies are researching an exciting new technology that could change the outlook for the industry, which could help cannabis companies improve their margins.
Companies team up to modify cannabis plants
Two Israeli companies, medical marijuana provider Cann10 and biotech company Epigenetics, are working together on a way to modify a cannabis plant to produce higher yields. Through a joint company called Cann10 EpiGen, they will be researching a breeding technology in the coming weeks. The technology is based on epigenetics, which involves DNA modifications that do not change the sequence of DNA. It's been successful with increasing the yields of agricultural crops like tomatoes and corn by increasing photosynthesis. Now we'll see whether the same approach works with cannabis.
Source: Getty Images.
Cann10 CEO Ori Alperovitz doesn't mince words when talking about the potential he believes the technology has, stating, "We believe that the ground breaking [sic] invention will change the rules of the game of the global cannabis industry." The companies aren't planning to hold on to the technology themselves, either. Alperovitz stated that "As the research progresses, the joint company may work toward providing franchises to use the technology in Israel and abroad."
The companies expect to release their initial results from the research in six months.
Fatter margins could make a big difference
Improving yields would mean that cannabis companies could produce more products from the same amount of plants. That would drive down costs and improve margins, which for some companies may be enough to hit breakeven.
Aurora Cannabis (NYSE: ACB), for example, generated gross margins of 48% in 2019. Unfortunately, with operating expenses making up more than 168% of gross revenue, Aurora still has a long way to go to break even.
Aurora's operating margin was negative 118% and its net margin was a negative 106%. With general and admin costs and sales and marketing expenses accounting for 97% of gross revenue, Aurora needs a lot of help any way that it can, as do its peers, and improving gross margins is a good place to start.
That's why securing this technology, perhaps even acquiring it outright via the purchase of Cann10 Epigen, could be a way to give a cannabis producer a big advantage, especially if it can also keep the technology out of the hands of its competitors as well.
Improving plant yield would also help increase the value of its biological assets and perhaps improve the accuracy of recording them as well, preventing the gains and losses that are often found on the income statement. Aurora, in its most recent quarter, had a fair value adjustment of CAD$97 million in its biological assets. By comparison, Aphria had an adjustment of CA$21 million.
These adjustments are common for many companies, not just Aurora and Aphria, and that's why financial statements in the industry aren't always of high quality, since their numbers can often be skewed. Any way to improve yields and make the asset values more predictable will help make financial statements stronger, which, in turn, will make companies more investable. There's no downside to improving yields, and that's why every cannabis company should be interested in acquiring the technology.
Why investors should care
Although these companies aren't spending millions or billions to invest in this technology, that doesn't mean that it isn't worth consideration from a major cannabis company. With so much competition in the industry not just domestically but around the world, companies are going to need to acquire technologies and assets that give them advantages over their rivals.
The technology these two Israeli companies are researching is what cannabis companies should be seeking out. Any possibility for a company to add to its competencies and improve its chance at profitability is worth exploring, especially if it may not cost a fortune to do so. Cannabis stocks have been under pressure from their shareholders this past year, and they need something positive to rally around. A technology that can improve their prospects for profitability could do the trick.
Investors should keep a close eye on what happens with Cann10 EpiGen this year and whether North American cannabis companies show an interest, as doing so could give them an important advantage in the industry and make them better buys.
Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming.
Cannabis legalization is sweeping over North America – 11 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.
Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.
Simply click here to get the full story now.
Learn more
David Jagielski has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Aurora Cannabis (NYSE: ACB), for example, generated gross margins of 48% in 2019. That's one of the reasons many investors steer clear of the industry, as a lack of profitability and lots of cash burn have made the sector a very risky one to invest in. Investors should keep a close eye on what happens with Cann10 EpiGen this year and whether North American cannabis companies show an interest, as doing so could give them an important advantage in the industry and make them better buys. | Aurora Cannabis (NYSE: ACB), for example, generated gross margins of 48% in 2019. Companies team up to modify cannabis plants Two Israeli companies, medical marijuana provider Cann10 and biotech company Epigenetics, are working together on a way to modify a cannabis plant to produce higher yields. Fatter margins could make a big difference Improving yields would mean that cannabis companies could produce more products from the same amount of plants. | Aurora Cannabis (NYSE: ACB), for example, generated gross margins of 48% in 2019. Two Israeli companies are researching an exciting new technology that could change the outlook for the industry, which could help cannabis companies improve their margins. Companies team up to modify cannabis plants Two Israeli companies, medical marijuana provider Cann10 and biotech company Epigenetics, are working together on a way to modify a cannabis plant to produce higher yields. | Aurora Cannabis (NYSE: ACB), for example, generated gross margins of 48% in 2019. It isn't impossible for cannabis stocks to report profits, but finding stocks in the industry that can do so consistently is another story. Two Israeli companies are researching an exciting new technology that could change the outlook for the industry, which could help cannabis companies improve their margins. |
Subsets and Splits
No community queries yet
The top public SQL queries from the community will appear here once available.