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37700.0 | 2020-02-04 00:00:00 UTC | If You'd Invested $500 in the Aurora Cannabis IPO, This Is How Much Money You’d Have Now | ACB | https://www.nasdaq.com/articles/if-youd-invested-%24500-in-the-aurora-cannabis-ipo-this-is-how-much-money-youd-have-now-2020 | nan | nan | Aurora Cannabis (NYSE: ACB) is a cannabis producer headquartered in Edmonton, Canada. With sales and operations in more than 20 countries, Aurora is one of the most notable cannabis companies in the sector -- however, the company has struggled to become profitable since its 2018 initial public offering (IPO).
Let's see how much a $500 investment into Aurora Cannabis would be worth today if an investor had purchased the stock at its IPO price.
Image source: Getty Images.
Not every IPO is a good investment
Shares of Aurora opened at $9.70 per share on the New York Stock Exchange (NYSE) Oct. 23, 2018. Technically, this was not Aurora's first day as a public company, as the company had been trading on the Toronto Stock Exchange since July 24, 2017. It also wasn't issuing new shares, but only making existing shares available on the NYSE.
Aurora's debut on the NYSE made Aurora the fourth marijuana-based company to go public in the U.S. Investing $500 into Aurora at the opening price of $9.70 per share would have yielded 51 shares. As shares of Aurora are currently trading at $1.89 per share, an investor would have lost $403.61 in value, an 81% loss. After subtracting the loss, an investor would currently be holding $96.39 in value.
Over-expansion at a premium is destabilizing shareholder value
Aurora has made 15 acquisitions since June 2016, rapidly expanding the company with inflated purchases. Acquiring companies at a high valuation with at Aurora's pace puts a strain on the company's balance sheet -- specifically, an item known as "goodwill". When a company purchases another company, the intangible value of the acquired company, or the amount over the fair value in accounting terms, is chalked up as goodwill on the balance sheet.
To prevent companies from sitting on a hefty goodwill balance, the International Accounting Standards Board and the Financial Accounting Standards Board mandate that companies evaluate goodwill for impairment annually. As a company compares the fair value of a subsidiary or reporting unit to the carrying value, the company must write down any losses on the economic unit.
This process becomes precarious in Aurora's case because the company is sitting on a goodwill balance of 3.17 billion Canadian dollars, CA$1 billion higher than the company's total market capitalization and 57% of Aurora's total assets. A writedown of even CA$1 billion could cut the company's total market capitalization in half, potentially setting the company up for financial disaster.
Where Aurora is headed
In 2019, several class action lawsuits were filed against Aurora by its shareholders, blaming the company for failing to complete planned capital investments and missed revenue and profit forecasts. Additionally, the company halted construction of its two largest projects, Aurora Sun in Alberta and Aurora Nordic 2 in Denmark, to conserve capital. Aurora announced that one of the company's largest greenhouses in Ontario is also for sale for $17 million in an attempt to preserve capital and lower expenses.
Aurora's total debt increased CA$375.3 million year-over-year to CA$600.6 million per the recent first-quarter earnings release. As Aurora is continually unprofitable, the interest expense is climbing alongside debt, rising from CA$6.6 million to CA$13.5 million year over year -- a 104.5% increase.
A bleak future for shareholders
Aurora's decisions to overpay for acquisitions by chasing inorganic growth have put the company in a high-risk scenario that will continue to dampen its share price. As the company sits on a weighty goodwill balance, low cash reserves, and an increasing debt obligation, Aurora will need to focus heavily on capital efficiency, decreasing expenses, and maximizing revenue growth.
Shares of Aurora purchased during its IPO on the NYSE have left shareholders with disappointing returns, and may continue to underwhelm shareholders in the near-term unless management can turn the company around. Shareholders sitting on an 81% loss will want to hold on at this point, though, as 2020 will define the survivability of Aurora Cannabis.
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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) is a cannabis producer headquartered in Edmonton, Canada. Over-expansion at a premium is destabilizing shareholder value Aurora has made 15 acquisitions since June 2016, rapidly expanding the company with inflated purchases. A bleak future for shareholders Aurora's decisions to overpay for acquisitions by chasing inorganic growth have put the company in a high-risk scenario that will continue to dampen its share price. | Aurora Cannabis (NYSE: ACB) is a cannabis producer headquartered in Edmonton, Canada. To prevent companies from sitting on a hefty goodwill balance, the International Accounting Standards Board and the Financial Accounting Standards Board mandate that companies evaluate goodwill for impairment annually. This process becomes precarious in Aurora's case because the company is sitting on a goodwill balance of 3.17 billion Canadian dollars, CA$1 billion higher than the company's total market capitalization and 57% of Aurora's total assets. | Aurora Cannabis (NYSE: ACB) is a cannabis producer headquartered in Edmonton, Canada. Technically, this was not Aurora's first day as a public company, as the company had been trading on the Toronto Stock Exchange since July 24, 2017. This process becomes precarious in Aurora's case because the company is sitting on a goodwill balance of 3.17 billion Canadian dollars, CA$1 billion higher than the company's total market capitalization and 57% of Aurora's total assets. | Aurora Cannabis (NYSE: ACB) is a cannabis producer headquartered in Edmonton, Canada. This process becomes precarious in Aurora's case because the company is sitting on a goodwill balance of 3.17 billion Canadian dollars, CA$1 billion higher than the company's total market capitalization and 57% of Aurora's total assets. 10 stocks we like better than Aurora Cannabis Inc. |
37701.0 | 2020-02-03 00:00:00 UTC | Researchers Discover Cannabis Compound That May Be 30 Times More Potent Than THC | ACB | https://www.nasdaq.com/articles/researchers-discover-cannabis-compound-that-may-be-30-times-more-potent-than-thc-2020-02 | nan | nan | New research out of Italy suggests there could be a much more potent cannabis compound than tetrahydrocannabinol (THC). Scientists have found a new psychoactive substance in the plant called tetrahydrocannabiphorol (THCP), which they believe could be more than 30 times stronger. Researchers measured the impact of THCP in a lab and found that like THC, the compounded attached to cannabinoid receptors in the body but bonded to them 33 times more strongly, indicating it's possible for THCP to disrupt mental and physical functions even more than THC.
Dr. Cinzia Citti, who is the study's lead author, believes this helps explain why some strains behave differently than one would expect based solely on their THC levels. Citti said, "In cannabis varieties where THC is present in very low concentrations, then we can think that the presence of another, more active cannabinoid can explain those effects."
While this discovery of THCP suggests the potential for creating marijuana products that give users a more intense high, the researchers are also optimistic about the possibility of uncovering health benefits related to THCP.
Image source: Getty Images.
Research a key focus for marijuana companies
There's a big need for more cannabis research to be done, and industry leaders Canopy Growth (NYSE: CGC) and Aurora Cannabis (NYSE: ACB) have played significant roles in trying to learn more about the potential benefits of using cannabis.
Last year, Aurora partnered with the UFC (Ultimate Fighting Championship) -- the two plan to jointly study and develop hemp-derived cannabidiol (CBD) products that could help treat athletes with injuries. Canopy Growth, meanwhile, has partnered with ex-athletes from the National Hockey League to determine if cannabis be useful in helping to treat post-concussion diseases, including post-traumatic stress disorder and depression.
Over the past 12 months, those two marijuana companies alone have spent more than 50 million Canadian dollars combined on research and development.
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. | Research a key focus for marijuana companies There's a big need for more cannabis research to be done, and industry leaders Canopy Growth (NYSE: CGC) and Aurora Cannabis (NYSE: ACB) have played significant roles in trying to learn more about the potential benefits of using cannabis. Dr. Cinzia Citti, who is the study's lead author, believes this helps explain why some strains behave differently than one would expect based solely on their THC levels. Last year, Aurora partnered with the UFC (Ultimate Fighting Championship) -- the two plan to jointly study and develop hemp-derived cannabidiol (CBD) products that could help treat athletes with injuries. | Research a key focus for marijuana companies There's a big need for more cannabis research to be done, and industry leaders Canopy Growth (NYSE: CGC) and Aurora Cannabis (NYSE: ACB) have played significant roles in trying to learn more about the potential benefits of using cannabis. While this discovery of THCP suggests the potential for creating marijuana products that give users a more intense high, the researchers are also optimistic about the possibility of uncovering health benefits related to THCP. Last year, Aurora partnered with the UFC (Ultimate Fighting Championship) -- the two plan to jointly study and develop hemp-derived cannabidiol (CBD) products that could help treat athletes with injuries. | Research a key focus for marijuana companies There's a big need for more cannabis research to be done, and industry leaders Canopy Growth (NYSE: CGC) and Aurora Cannabis (NYSE: ACB) have played significant roles in trying to learn more about the potential benefits of using cannabis. Researchers measured the impact of THCP in a lab and found that like THC, the compounded attached to cannabinoid receptors in the body but bonded to them 33 times more strongly, indicating it's possible for THCP to disrupt mental and physical functions even more than THC. 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. | Research a key focus for marijuana companies There's a big need for more cannabis research to be done, and industry leaders Canopy Growth (NYSE: CGC) and Aurora Cannabis (NYSE: ACB) have played significant roles in trying to learn more about the potential benefits of using cannabis. Researchers measured the impact of THCP in a lab and found that like THC, the compounded attached to cannabinoid receptors in the body but bonded to them 33 times more strongly, indicating it's possible for THCP to disrupt mental and physical functions even more than THC. The Motley Fool has no position in any of the stocks mentioned. |
37702.0 | 2020-02-03 00:00:00 UTC | Better Buy: Aurora Cannabis vs. Scotts Miracle-Gro Company | ACB | https://www.nasdaq.com/articles/better-buy%3A-aurora-cannabis-vs.-scotts-miracle-gro-company-2020-02-03 | nan | nan | Cannabis investments have proven to be very risky over the past year. With Aurora Cannabis (NYSE: ACB) and Scotts Miracle-Gro (NYSE: SMG), investors have two very different ways they can gain exposure to the industry. Are you better off investing in a cannabis producer with global reach, or a hydroponics company that has more of an indirect interest in the industry? Let's find out.
Do Aurora's rewards outweigh its risks?
Aurora has a presence in more than two dozen countries across the world, and it's an appealing long-term investment if you expect cannabis legalization to continue its progress around the globe. The potential is significant: By 2025, Grand View Research projects that the legal marijuana market will grow to $66.3 billion, growing at a compounded annual growth rate of 23.9%. It's one of the reasons Aurora appeals to investors, because the company has ambitions that go beyond North America.
The problem is that in the near future, there are many headwinds that could impact its growth and overall profitability. From vaping concerns weighing on the cannabis 2.0 market to a relatively low number of retailers open in Canada some 15 months after the country legalized recreational marijuana, there are many challenges still ahead for the industry.
Image source: Getty Images.
With Aurora already falling out of favor with many investors for a lack of profitability and disappointing sales numbers, there's little reason for much bullishness in the short term. If Aurora can weather the storm, it could have significant growth opportunities ahead. However, that could still be many years away, and the industry will likely look much different than it does today, leaving many questions about what Aurora's growth prospects may look like.
Is there enough growth with Scotts?
Scotts is definitely the safer cannabis play given that the company isn't a producer of marijuana and it doesn't have to worry about quality or which direction pot prices are going. Instead, the plant-growth specialist is effectively a supplier for the industry, and as long as more people are growing marijuana, there will be demand for its products.
The company's growth has been strong thus far, with sales in fiscal 2019 rising 18.5% from the prior year -- much of that coming from the Hawthorne growing company, which provides supplies for hydroponic gardening (growing plants without soil). Revenue for the Hawthorne segment actually rose 94% and the overall growth was weighed down by the company's U.S. consumer segment, which focuses on the lawn and garden business. That segment of the business grew at a much more modest rate of 8% from the prior year.
With such a strong performance in 2019 from Hawthorne, Scotts is expecting 2020's sales for that segment to be between just 12% and 15%. It's a modest expectation and one that could highlight the limited growth that Scotts may achieve in light of it not selling cannabis or being directly involved in the industry.
The company is already off to a strong start, as it recently reported first-quarter results that beat expectations. Sales were up 23% and Hawthorne's top line increased 41% year over year. Scotts' quarterly loss was also better than what analysts were expecting.
Which stock is the better buy?
Both stocks have a lot of potential to benefit from the cannabis industry's growth over the years. However, the advantage goes to Scotts. The company is profitable, it can benefit from the growth of the U.S. cannabis market (whereas Aurora can only sell hemp-derived cannabidiol products since pot remains illegal at the federal level in the U.S.), and it also trades at a more reasonable multiple. Selling at around 15 times earnings and just 2 times its sales, Scotts has a cheaper valuation than Aurora, which investors value at 10 times its top line, and which has no profit to even generate a price-to-earnings multiple.
And given how volatile the industry has been of late, with the Horizons Marijuana Life Sciences ETF losing more than 40% of its value in six months, now is a time that investors should be looking for safer investment options. While both stocks have great growth potential, Scotts is a more balanced and value-oriented investment, making it the better overall buy 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.
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 owns shares of Scotts Miracle-Gro. 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 Aurora Cannabis (NYSE: ACB) and Scotts Miracle-Gro (NYSE: SMG), investors have two very different ways they can gain exposure to the industry. From vaping concerns weighing on the cannabis 2.0 market to a relatively low number of retailers open in Canada some 15 months after the country legalized recreational marijuana, there are many challenges still ahead for the industry. The company is profitable, it can benefit from the growth of the U.S. cannabis market (whereas Aurora can only sell hemp-derived cannabidiol products since pot remains illegal at the federal level in the U.S.), and it also trades at a more reasonable multiple. | With Aurora Cannabis (NYSE: ACB) and Scotts Miracle-Gro (NYSE: SMG), investors have two very different ways they can gain exposure to the industry. From vaping concerns weighing on the cannabis 2.0 market to a relatively low number of retailers open in Canada some 15 months after the country legalized recreational marijuana, there are many challenges still ahead for the industry. The company is profitable, it can benefit from the growth of the U.S. cannabis market (whereas Aurora can only sell hemp-derived cannabidiol products since pot remains illegal at the federal level in the U.S.), and it also trades at a more reasonable multiple. | With Aurora Cannabis (NYSE: ACB) and Scotts Miracle-Gro (NYSE: SMG), investors have two very different ways they can gain exposure to the industry. The company's growth has been strong thus far, with sales in fiscal 2019 rising 18.5% from the prior year -- much of that coming from the Hawthorne growing company, which provides supplies for hydroponic gardening (growing plants without soil). Both stocks have a lot of potential to benefit from the cannabis industry's growth over the years. | With Aurora Cannabis (NYSE: ACB) and Scotts Miracle-Gro (NYSE: SMG), investors have two very different ways they can gain exposure to the industry. The potential is significant: By 2025, Grand View Research projects that the legal marijuana market will grow to $66.3 billion, growing at a compounded annual growth rate of 23.9%. Is there enough growth with Scotts? |
37703.0 | 2020-02-03 00:00:00 UTC | Aurora Cannabis Receives Another EU-GMP Certification | ACB | https://www.nasdaq.com/articles/aurora-cannabis-receives-another-eu-gmp-certification-2020-02-03 | nan | nan | The international expansion Aurora Cannabis (NYSE: ACB) shareholders have been waiting for took another step forward on Monday. A large marijuana production facility in Bradford, Ontario, received its European Union Good Manufacturing Practice (EU-GMP) certification.
The Aurora River site is the company's third and largest facility licensed to produce marijuana for consumption in Canada and throughout the EU. The new certification raises Aurora's ability to serve the growing market for medical marijuana in Germany and the rest of the European Union by 237% to 39,800 kilograms annually.
Image source: Getty Images.
Making ends meet
Aurora has quickly expanded its operations to 25 countries on three continents, and that growth hasn't come cheap. During the third quarter, funding that expansion abroad helped push Aurora's sales, general, and administration, expenses to CA$81.1 million. Meanwhile, international medical revenue grew to an annualized CA$20.0 million during the quarter, which wasn't nearly enough to cover all those added expenses.
While an EU-GMP certification for increased capacity is a vital step on the path to significant medical marijuana sales abroad, the first two Canadian facilities to receive that green light already gave Aurora's European operation a lot of room to grow. And Aurora's German facility can produce 2,100 kilograms per year, which is probably enough capacity to meet demand in 2020 there without any imports from Canada.
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. | The international expansion Aurora Cannabis (NYSE: ACB) shareholders have been waiting for took another step forward on Monday. A large marijuana production facility in Bradford, Ontario, received its European Union Good Manufacturing Practice (EU-GMP) certification. The new certification raises Aurora's ability to serve the growing market for medical marijuana in Germany and the rest of the European Union by 237% to 39,800 kilograms annually. | The international expansion Aurora Cannabis (NYSE: ACB) shareholders have been waiting for took another step forward on Monday. During the third quarter, funding that expansion abroad helped push Aurora's sales, general, and administration, expenses to CA$81.1 million. While an EU-GMP certification for increased capacity is a vital step on the path to significant medical marijuana sales abroad, the first two Canadian facilities to receive that green light already gave Aurora's European operation a lot of room to grow. | The international expansion Aurora Cannabis (NYSE: ACB) shareholders have been waiting for took another step forward on Monday. While an EU-GMP certification for increased capacity is a vital step on the path to significant medical marijuana sales abroad, the first two Canadian facilities to receive that green light already gave Aurora's European operation a lot of room to grow. * 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! | The international expansion Aurora Cannabis (NYSE: ACB) shareholders have been waiting for took another step forward on Monday. The new certification raises Aurora's ability to serve the growing market for medical marijuana in Germany and the rest of the European Union by 237% to 39,800 kilograms annually. 10 stocks we like better than Aurora Cannabis Inc. |
37704.0 | 2020-02-03 00:00:00 UTC | Could This Surprising Move Save The Cannabis Industry? | ACB | https://www.nasdaq.com/articles/could-this-surprising-move-save-the-cannabis-industry-2020-02-03 | nan | nan | The cannabis industry is in trouble. Not only is there lots of competition, but growth can be expensive, especially given the challenging conditions and regulations in today's market.
Transporting marijuana across state lines is not legal and with share prices cratering and many cannabis companies burning through cash, it's not easy for a cannabis producer in the U.S. to grow, even though the opportunities may be there. In Canada, a slow retail rollout and high prices are posing big challenges. The cannabis industry needs something to help turn things around.
Are bankruptcies the answer?
One of the sobering realities for the industry is that many companies may not survive 2020. Cash flow is a growing problem and it's especially problematic for U.S. companies that don't have access to bank accounts or traditional loans.
Many cannabis producers are not generating free cash flow, or even enough to cover their operating expenditures. They also face the risk of criminals targeting their cash-based businesses. With burglaries continuing to threaten dispensaries, it makes a bad situation even worse for American cannabis companies.
Image source: Getty Images.
The positive aspect of companies going out of business and shutting down their operations is that it gives remaining companies the opportunity to gain more market share and acquire assets at cheap prices. If done well, a company that makes these moves could attract investors and boost its share price. There's also the possibility for further consolidation in the industry, especially as valuations keep dropping.
But the bad news for U.S. companies is that because cannabis is not federally legal, bankruptcy and Chapter 11 protection from creditors is not available. The situations vary for cash-strapped cannabis companies depending on the state they're based in, but the end result remains the same: Some companies simply won't be able to continue operating as they do today.
Cash crunch is evident
Investors don't need to look far, or even at financial statements, to know the industry is having cash flow problems. Sundial Growers announced in January it was laying off 10% of its staff, and MedMen Enterprises has cut more than 40% of its headcount over the past few months.
In October, HEXO (NYSE: HEXO) announced it would lay off 200 people from its workforce. Meanwhile, Aurora Cannabis said in November it was halting construction at a facility in order to conserve cash.
These are significant moves by major cannabis companies that suggest they're experiencing serious problems. In a high-growth industry, investors would typically expect to see more jobs and expansions happening, but that hasn't been the case. Companies are doing what they can to stay lean and cut costs as much as they can.
In some cases, cash flow problems aren't at all subtle. In January, MediPharm's wholly-owned subsidiary filed a lawsuit against HEXO for unpaid bills totaling 9.8 million Canadian dollars. MediPharm alleges HEXO hasn't been making payments since October, with invoices outstanding for November, December, and January. It's a touchy situation to go through the courts, but HEXO makes up more than 10% of MediPharm's total sales, which means the issue is more pressing. MediPharm said it "will likely impact near-term results."
What can investors do to protect themselves?
Investors need to look for the warning signs of a business that may be in trouble. Whether it's layoffs, lawsuits that allege they aren't paying their bills, or anything that indicates things aren't going as planned, investors should pay attention and assess why a company is doing what it's doing.
HEXO's stock price began crashing in October when the company pulled its guidance for fiscal 2020, which happened shortly after the company's CFO resigned. Since then, the stock has been in a free fall and is now down 70%, drastically underperforming the cannabis sector, which is down 45% over the same period, measured by the Horizons Marijuana Life Sciences ETF. While retracting guidance alone isn't a sign that cash flow is a problem, when the company is also laying off staff, it starts to paint a very negative picture.
In addition to developments, investors should be paying close attention to a company's statement of cash flow to see whether it is cash flow positive. Over the past 12 months, HEXO has burned through CA$142 million from its operating activities.
While that doesn't mean HEXO can't turn things around, cash flow problems certainly elevate a stock's risk level. That's something investors should consider very carefully when making a decision to buy a pot stock. And if certain cannabis companies start gobbling up defunct companies' assets and market shares, perhaps their stocks are worth a second look.
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. | Since then, the stock has been in a free fall and is now down 70%, drastically underperforming the cannabis sector, which is down 45% over the same period, measured by the Horizons Marijuana Life Sciences ETF. While retracting guidance alone isn't a sign that cash flow is a problem, when the company is also laying off staff, it starts to paint a very negative picture. 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. | While retracting guidance alone isn't a sign that cash flow is a problem, when the company is also laying off staff, it starts to paint a very negative picture. While that doesn't mean HEXO can't turn things around, cash flow problems certainly elevate a stock's risk level. And if certain cannabis companies start gobbling up defunct companies' assets and market shares, perhaps their stocks are worth a second look. | Transporting marijuana across state lines is not legal and with share prices cratering and many cannabis companies burning through cash, it's not easy for a cannabis producer in the U.S. to grow, even though the opportunities may be there. The situations vary for cash-strapped cannabis companies depending on the state they're based in, but the end result remains the same: Some companies simply won't be able to continue operating as they do today. And if certain cannabis companies start gobbling up defunct companies' assets and market shares, perhaps their stocks are worth a second look. | If done well, a company that makes these moves could attract investors and boost its share price. MediPharm alleges HEXO hasn't been making payments since October, with invoices outstanding for November, December, and January. While that doesn't mean HEXO can't turn things around, cash flow problems certainly elevate a stock's risk level. |
37705.0 | 2020-02-03 00:00:00 UTC | A Short Squeeze Could Move Aurora Stock, but Don’t Bet on It | ACB | https://www.nasdaq.com/articles/a-short-squeeze-could-move-aurora-stock-but-dont-bet-on-it-2020-02-03 | nan | nan | With Aurora Cannabis (NYSE:) falling below the $2/share price level, what are the chances of a rebound? Shares of major pot stocks like Canopy Growth (NYSE:) have rebounded from their lows, but Aurora stock has continued to crumble, as investors become more bearish on the companyâÂÂs survival.
Source: Shutterstock
Lack of profitability is par for the course with pot stocks. But unlike peers like Canopy and Cronos Group (NASDAQ:), Aurora stock lacks a war chest to ride out the storm. Canopy and Cronos have the backing to keep them stable. Aurora lacks such a buffer.
Can Aurora surprise investors and start making a rebound upward? The companyâÂÂs cash crunch remains a roadblock. But, just a crumb of good news could send shares higher. With about , Aurora stock could rebound on a short-squeeze alone.
However, long-term, Aurora has its work cut out for them. LetâÂÂs dive in, and see why an Aurora stock turnaround remains a long-shot.
Two Catalysts Could Save Aurora Stock
With debt piling up, and the cash burn continuing, what can save Aurora stock? The company needs to act fast, in order to avoid further deterioration of shareholder value. Aurora has a two lifelines in its corner to help give it a fighting chance.
First, Aurora seems to be having success focusing on the edibles/vapes side of âÂÂCannabis 2.0.â According to CowenâÂÂs Vivien Azer, AuroraâÂÂs edibles . Vape sales have been meeting projections as well. Given that vape sales have yet to be legalized in Alberta and Quebec, we may have yet seen this productâÂÂs full market potential. ItâÂÂs not easy toàsay the same for the recent news from Canopy Growth.
Second AuroraâÂÂs billionaire activist investor turned strategic advisor Nelson Peltz has a fixing consumer products businesses. Peltz may be working behind the scenes, but heâÂÂs yet to help the company find a strategic partner or CEO who could help steer Aurora to profitability.
This catalyst remains a disappointment, but perhapsàPeltzâÂÂs talents turning around food and beverage names doesnâÂÂt translate to pot companies. Yet, until he resigns, Peltz remains a potential factor.
Aurora stock is down, but not out. However, when considering the companyâÂÂs balance sheet, concerns remain. Plus, shares continue to be valued as if Aurora is a high-flyer, instead of a company in financial distress.
What Could Send Aurora Shares Even Lower
âÂÂCannabis 2.0â sales may give Aurora stock a fighting chance, but a pathway to survival (let alone success) remains unclear. Many analysts are skeptical Aurora can continue to . Recent asset sales and cost-cutting may be too little, too late.
Piper SandlerâÂÂs Michael Lavery believes AuroraâÂÂs cash outflows will . Lavery estimates the net cash burn could be C200 million, or about $151 million.
Where is Aurora going to raise this money? With issues involving its debt covenants, the company needs an equity infusion. What does this mean for Aurora stock? A dilutive equity offering would send shares lower. Perhaps to LaveryâÂÂs price target of $1/share.
With this in mind, thereâÂÂs good reason why investors give Aurora a discount to peers like Canopy. Aurora stock trades for FY21 (ending June 2021) sales. In contrast, Canopy shares trade for 14.3 times their FY21 (ending March 2021) sales. As this Seeking Alpha contributor noted, AuroraâÂÂs valuation for the companyâÂÂs distressed situation. Aurora also has millions in planned capital expenditures through the end of FY20 (ending June 2020).
The company may find a way to survive. But not without a high chance of additional downside in Aurora stock. A turnaround could be in the cards. But buying now at around $2/share may not be the best buying opportunity.
Steer Clear of Aurora Stock
âÂÂCannabis 2.0â may eventually move the needle for Aurora stock, but does the company have enough cash to survive until it reaches profitability? The situation remains unclear. WhatâÂÂs clear is AuroraâÂÂs need for capital. With troubles surrounding its debt, the company likely needs a capital infusion.
Paying $2/share for Aurora stock today looks foolish. The odds of shares heading to $1 seem greater than the stock rebounding to $5 or even $10/share. Yet, I wouldnâÂÂt count out a short squeeze. The company is estimated to release earnings in a few weeks. If Aurora can show improved results, shares could skyrocket as shorts cover positions.
Bottom line: stay away from Aurora stock. Whether on the long side or short side.
As of this writing, Thomas Niel 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. | But unlike peers like Canopy and Cronos Group (NASDAQ:), Aurora stock lacks a war chest to ride out the storm. Second AuroraâÂÂs billionaire activist investor turned strategic advisor Nelson Peltz has a fixing consumer products businesses. Peltz may be working behind the scenes, but heâÂÂs yet to help the company find a strategic partner or CEO who could help steer Aurora to profitability. | But unlike peers like Canopy and Cronos Group (NASDAQ:), Aurora stock lacks a war chest to ride out the storm. What Could Send Aurora Shares Even Lower âÂÂCannabis 2.0â sales may give Aurora stock a fighting chance, but a pathway to survival (let alone success) remains unclear. Aurora stock trades for FY21 (ending June 2021) sales. | Two Catalysts Could Save Aurora Stock With debt piling up, and the cash burn continuing, what can save Aurora stock? What Could Send Aurora Shares Even Lower âÂÂCannabis 2.0â sales may give Aurora stock a fighting chance, but a pathway to survival (let alone success) remains unclear. Steer Clear of Aurora Stock âÂÂCannabis 2.0â may eventually move the needle for Aurora stock, but does the company have enough cash to survive until it reaches profitability? | Shares of major pot stocks like Canopy Growth (NYSE:) have rebounded from their lows, but Aurora stock has continued to crumble, as investors become more bearish on the companyâÂÂs survival. Aurora stock is down, but not out. What Could Send Aurora Shares Even Lower âÂÂCannabis 2.0â sales may give Aurora stock a fighting chance, but a pathway to survival (let alone success) remains unclear. |
37706.0 | 2020-02-02 00:00:00 UTC | Canadian Cannabis GDP Contribution Rises by 15% in November | ACB | https://www.nasdaq.com/articles/canadian-cannabis-gdp-contribution-rises-by-15-in-november-2020-02-02-0 | nan | nan | The growth in the contribution of cannabis to gross domestic product (GDP) eclipsed every major category of the Canadian economy in November 2019. That's according to data compiled by Statistics Canada, the federal government's official statistics agency, in an update published on Friday.
All told, cannabis industry production amounted to just over $7.4 billion Canadian ($5.6 billion) that month, which was 15% higher than the November 2018 result. It should be kept in mind, however, that the latter was the first full month that recreational use was legalized for most forms of the drug.
Image source: Getty Images.
Even with the high growth rate and the many news headlines it's engendered, marijuana remains a tiny corner of the Canadian economy. The November 2019 figure comprised just 0.4% of national GDP for the month.
Nevertheless, that 15% was well ahead of the growth of some of the top segments of the economy. It well outpaced information technology, for example, as well as real estate and the content/media sector. (I should note that these sectors are, compared to cannabis, well-established and relatively mature; they're also much larger in terms of revenue).
Combined, total Canadian GDP rose only marginally (by 1.5%) over that one-year stretch.
Most Canadian marijuana companies are enjoying significant production and sales growth rates, although because of a wealth of challenges, many continue to post net losses.
Canopy Growth (NYSE: CGC) is a case in point; its most recently reported quarter was considered a disaster by many, still its top line rose by over 200% year over year. Those dynamics were similar with Aurora Cannabis' (NYSE: ACB) latest set of figures.
Both Canopy Growth and Aurora Cannabis stocks have fallen precipitously over the past year. On Friday, Canopy Growth's shares declined 3.4% on the day, while those of Aurora Cannabis slipped by 2.6%.
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. | Those dynamics were similar with Aurora Cannabis' (NYSE: ACB) latest set of figures. The growth in the contribution of cannabis to gross domestic product (GDP) eclipsed every major category of the Canadian economy in November 2019. Most Canadian marijuana companies are enjoying significant production and sales growth rates, although because of a wealth of challenges, many continue to post net losses. | Those dynamics were similar with Aurora Cannabis' (NYSE: ACB) latest set of figures. All told, cannabis industry production amounted to just over $7.4 billion Canadian ($5.6 billion) that month, which was 15% higher than the November 2018 result. Most Canadian marijuana companies are enjoying significant production and sales growth rates, although because of a wealth of challenges, many continue to post net losses. | Those dynamics were similar with Aurora Cannabis' (NYSE: ACB) latest set of figures. The growth in the contribution of cannabis to gross domestic product (GDP) eclipsed every major category of the Canadian economy in November 2019. 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. | Those dynamics were similar with Aurora Cannabis' (NYSE: ACB) latest set of figures. It should be kept in mind, however, that the latter was the first full month that recreational use was legalized for most forms of the drug. The November 2019 figure comprised just 0.4% of national GDP for the month. |
37707.0 | 2020-02-02 00:00:00 UTC | Canadian Cannabis GDP Contribution Rises by 15% in November | ACB | https://www.nasdaq.com/articles/canadian-cannabis-gdp-contribution-rises-by-15-in-november-2020-02-02 | nan | nan | The growth in the contribution of cannabis to gross domestic product (GDP) eclipsed every major category of the Canadian economy in November 2019. That's according to data compiled by Statistics Canada, the federal government's official statistics agency, in an update published on Friday.
All told, cannabis industry production amounted to just over $7.4 billion Canadian ($5.6 billion) that month, which was 15% higher than the November 2018 result. It should be kept in mind, however, that the latter was the first full month that recreational use was legalized for most forms of the drug.
Image source: Getty Images.
Even with the high growth rate and the many news headlines it's engendered, marijuana remains a tiny corner of the Canadian economy. The November 2019 figure comprised just 0.4% of national GDP for the month.
Nevertheless, that 15% was well ahead of the growth of some of the top segments of the economy. It well outpaced information technology, for example, as well as real estate and the content/media sector. (I should note that these sectors are, compared to cannabis, well-established and relatively mature; they're also much larger in terms of revenue).
Combined, total Canadian GDP rose only marginally (by 1.5%) over that one-year stretch.
Most Canadian marijuana companies are enjoying significant production and sales growth rates, although because of a wealth of challenges, many continue to post net losses.
Canopy Growth (NYSE: CGC) is a case in point; its most recently reported quarter was considered a disaster by many, still its top line rose by over 200% year over year. Those dynamics were similar with Aurora Cannabis' (NYSE: ACB) latest set of figures.
Both Canopy Growth and Aurora Cannabis stocks have fallen precipitously over the past year. On Friday, Canopy Growth's shares declined 3.4% on the day, while those of Aurora Cannabis slipped by 2.6%.
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. | Those dynamics were similar with Aurora Cannabis' (NYSE: ACB) latest set of figures. The growth in the contribution of cannabis to gross domestic product (GDP) eclipsed every major category of the Canadian economy in November 2019. Most Canadian marijuana companies are enjoying significant production and sales growth rates, although because of a wealth of challenges, many continue to post net losses. | Those dynamics were similar with Aurora Cannabis' (NYSE: ACB) latest set of figures. All told, cannabis industry production amounted to just over $7.4 billion Canadian ($5.6 billion) that month, which was 15% higher than the November 2018 result. Most Canadian marijuana companies are enjoying significant production and sales growth rates, although because of a wealth of challenges, many continue to post net losses. | Those dynamics were similar with Aurora Cannabis' (NYSE: ACB) latest set of figures. The growth in the contribution of cannabis to gross domestic product (GDP) eclipsed every major category of the Canadian economy in November 2019. 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. | Those dynamics were similar with Aurora Cannabis' (NYSE: ACB) latest set of figures. It should be kept in mind, however, that the latter was the first full month that recreational use was legalized for most forms of the drug. The November 2019 figure comprised just 0.4% of national GDP for the month. |
37708.0 | 2020-02-02 00:00:00 UTC | Why Wall Street Is Surprisingly More Bullish About Aurora Cannabis Than Canopy Growth | ACB | https://www.nasdaq.com/articles/why-wall-street-is-surprisingly-more-bullish-about-aurora-cannabis-than-canopy-growth-2020 | nan | nan | Aurora Cannabis (NYSE: ACB) probably grew accustomed to being No. 2. Except for a fleeting moment in 2018 when it surpassed Canopy Growth (NYSE: CGC) in market cap, Aurora has played second fiddle to its main rival most of the time. But after its stock took a shellacking last year, Aurora is no longer the second largest Canadian cannabis producer based on market cap. That honor now belongs to Cronos Group.
There's still plenty of negativity surrounding Aurora Cannabis. Believe it or not, though, Wall Street analysts are more bullish about Aurora than they are about Canopy Growth. Here's why.
Image source: Getty Images.
What Wall Street thinks
Perhaps the best way to gauge what Wall Street analysts think about a stock is to look at their one-year price targets. Even when an analyst downgrades a stock, his or her price target can still reflect an underlying bullish outlook.
In the past month, two analysts have downgraded Aurora stock from recommending holding the stock to recommending selling or underweighting the stock. Despite the increased pessimism, though, the average one-year price target for Aurora right now represents a premium of close to 79% above the current share price. Nine analysts view the stock as a buy, six think Aurora is a hold, one has an underweight rating, and three recommend selling the stock.
Contrast that with the picture for Canopy Growth. Over the past month, one analyst that formerly viewed Canopy as a hold upgraded the stock to overweight. Out of the 23 analysts covering the stock, only one recommends selling it. Nine analysts view Canopy as a buy, one has an overweight rating on the stock, and 12 see it as a hold.
But if you think that Wall Street is more favorable toward Canopy than Aurora, think again. The average one-year price target is 4% lower than Canopy's current share price.
The case for Aurora over Canopy
This difference in how analysts see the near-term prospects for Aurora and Canopy is surprising. Although neither company is on a clear path to profitability, Canopy Growth has a huge cash stockpile and a big partner, Constellation Brands, with deep pockets. Aurora could be at risk of violating its debt covenants and will almost certainly have to raise more cash in the not-too-distant future, leading to more dilution in the value of existing shares.
On top of this, Canopy now has a new CEO, former Constellation Brands CFO David Klein, who is expected to bring much-needed fiscal discipline to the company. Aurora's longtime CEO Terry Booth is still at the helm after the unexpected departure of former Chief Corporate Officer Cam Battley.
Why in the world would Wall Street analysts think that Aurora is going to deliver greater returns than Canopy Growth? I think the main reason is that the stock has been beaten down so much that analysts see it as having more room to run if the company has good news.
Both Aurora and Canopy should have positive catalysts in 2020. The Cannabis 2.0 cannabis derivatives market will almost certainly pick up momentum throughout the year. Ontario plans to issue more retail cannabis licenses, a move that will alleviate a huge concern for Canadian cannabis producers. With Aurora's share price at its lowest level since late 2017, it's not unrealistic to think that the stock could enjoy a big rebound.
There also are several wild cards for Aurora that aren't in play anymore for Canopy. Aurora could name a new CEO that investors really like. It could also pick up a major partner. Cantor Fitzgerald analyst Pablo Zuanic suspects that both could happen and cause Aurora's share price to double over the next 12 months.
Is Wall Street right?
I think that Wall Street could be right that Aurora Cannabis will generate bigger gains than Canopy Growth will over the next year. However, the opposite scenario could easily happen as well.
Regardless of what unfolds this year, my view is that Canopy Growth remains the better long-term choice between these two marijuana stocks. While Aurora might land a big partner and might get a new CEO with a track record of success, Canopy Growth has already checked off both of those boxes.
In addition, Canopy's cash advantage has enabled it to enter the U.S. hemp CBD market in a significant way. If the U.S. Congress votes to change federal laws to allow CBD food supplement, bypassing the slow-moving FDA, Canopy could be a big winner while Aurora is left on the sidelines.
While Aurora could regain its No. 2 position, I suspect that's as high as it will go. Canopy Growth deserves its spot at the top of the cannabis industry, at least 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 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) probably grew accustomed to being No. Except for a fleeting moment in 2018 when it surpassed Canopy Growth (NYSE: CGC) in market cap, Aurora has played second fiddle to its main rival most of the time. Although neither company is on a clear path to profitability, Canopy Growth has a huge cash stockpile and a big partner, Constellation Brands, with deep pockets. | Aurora Cannabis (NYSE: ACB) probably grew accustomed to being No. In the past month, two analysts have downgraded Aurora stock from recommending holding the stock to recommending selling or underweighting the stock. The average one-year price target is 4% lower than Canopy's current share price. | Aurora Cannabis (NYSE: ACB) probably grew accustomed to being No. In the past month, two analysts have downgraded Aurora stock from recommending holding the stock to recommending selling or underweighting the stock. Nine analysts view the stock as a buy, six think Aurora is a hold, one has an underweight rating, and three recommend selling the stock. | Aurora Cannabis (NYSE: ACB) probably grew accustomed to being No. Believe it or not, though, Wall Street analysts are more bullish about Aurora than they are about Canopy Growth. The Cannabis 2.0 cannabis derivatives market will almost certainly pick up momentum throughout the year. |
37709.0 | 2020-01-31 00:00:00 UTC | Marijuana Stocks: Buy This, Not That | ACB | https://www.nasdaq.com/articles/marijuana-stocks%3A-buy-this-not-that-2020-01-31 | nan | nan | It's been a wild past year for marijuana stocks, with the first quarter of 2019 turning in some of the most prolific gains we've seen over a three-month period, followed by perhaps the ugliest nine-month stretch in the relatively short history of the cannabis industry. There's no doubt that marijuana stocks have some maturing to do, but there's also no questioning the long-term opportunity present in the pot industry.
With valuations hitting, in some instances, one-year or two-year lows, bargain hunters and growth stock investors are out looking for intriguing deals. The good news is that there are marijuana stocks worth buying that have competitive edges over their competition. But on the other side of the aisle, there are possibly even more awful pot stocks (many of them popular among investors) that we should avoid.
If you have a desire to invest in certain aspects of the cannabis industry, consider this a version of "buy this, not that" for marijuana stocks.
Image source: Getty Images.
Canadian marijuana growers
The most obvious way to invest in the cannabis industry would be to buy a licensed grower/retailer in Canada, the first industrialized country to give adult-use weed sales the green light in the modern era. But what you'll have to be careful of are the brand-name growers, which in many instances are bad news.
Don't buy: Canopy Growth (NYSE: CGC) and Aurora Cannabis (NYSE: ACB)
Canopy and Aurora are easily two of the most popular cannabis stocks in the industry and, at one point, were projected to be Numbers 2 and 1, respectively, in peak production and international presence. However, both have been losing an inordinate amount of money and likely won't be profitable until fiscal 2022 at the earliest. In fact, Canopy Growth's share-based compensation outpaced its net sales in its fiscal second quarter.
What's more, Canopy Growth and Aurora Cannabis have ugly balance sheets that are buried by goodwill. After the companies grossly overpaid for their acquisitions, 57% of Aurora's total assets and 23% of Canopy's are accounted for by goodwill. In other words, these are writedowns just waiting to happen.
To boot, Aurora Cannabis might be facing a cash crunch by midyear, while Canopy's industry-leading cash pile has been cut nearly in half since closing its equity investment from Constellation Brands in November 2018.
Image source: Getty Images.
Buy this instead: OrganiGram Holdings (NASDAQ: OGI)
Comparatively, New Brunswick-based OrganiGram Holdings isn't as well known, but it's a remarkably better company. Operating from only one campus in Moncton, New Brunswick, OrganiGram has more ability to adjust its expenses and production to match Canadian demand than its peers. Not to mention, utilizing its three-tiered growing system should produce a yield per square foot that's well above the industry average.
If you need more evidence of OrganiGram's superiority, it's also the only Canadian grower that's generated an operating profit without the aid of fair-value adjustments or one-time benefits. This speaks to the company's ability to keep expenditures down as well as supports the importance of its production efficiency.
Also, despite having the geographic advantage of being located in an eastern Atlantic province and being able to cater to markets where marijuana adult-use rates are higher than the national average, OrganiGram is one of a small handful of growers with supply deals in every province. It's the preferred name to own in the Canadian cultivation space.
Image source: Getty Images.
U.S. pot stocks
The United States is another no-brainer investment opportunity for marijuana stock investors, especially considering that it'll almost certainly lead the world in annual sales, at least according to various Wall Street estimates. But throwing a dart at just any multistate operator (MSO) might not be a great idea.
Don't buy: MedMen Enterprises (OTC: MMNFF)
Dispensary operator MedMen is very popular among U.S. pot stock investors, and its Southern California stores have had a knack for rivaling Apple stores in terms of sales per square foot. Unfortunately, MedMen's visions of grandeur have led it to overspend, with the company posting an abysmal $231.7 million operating loss in fiscal 2019.
But that's not the worst of it. MedMen looks to be facing a serious cash crunch, with its management team recently confirming that it's paying some of its vendors with common stock in an effort to conserve cash. Although MedMen had worked out up to $280 million in financing with private equity firm Gotham Green Partners, the company informed investors in December that it no longer has access to $115 million of this cash.
This is also a company that called off its all-stock acquisition of privately held MSO PharmaCann in October, likely due to cash concerns. MedMen is in dire straits, and it's perhaps the top marijuana stock to avoid.
Image source: Getty Images.
Buy this instead: Trulieve Cannabis (OTC: TCNNF) and Planet 13 Holdings (OTC: PLNHF)
Instead of tossing your hard-earned money down the drain on MedMen, buy a lesser-known but unique MSO like Trulieve Cannabis or Planet 13 Holdings. Trulieve and Planet 13 are all about being laser-focused on their home states, which is what's liable to make all the difference.
Trulieve Cannabis has a majority of the medical marijuana market share in Florida. It has opened 40 stores in the Sunshine State, and no pure-play marijuana stock in North America is currently generating more in net income without the aid of one-time benefits or fair-value adjustments. Not to mention, keeping its expenses close to the vest has allowed Trulieve to effectively build up its brand.
Meanwhile, Planet 13's Superstore in Las Vegas, Nevada, is all about a unique consumer experience. The company's store spans 112,000 square feet, features plenty of technology and consumer-engaging aspects, and has seen foot traffic and average ticket sales climb steadily since opening its doors in November 2018. This year should see Planet 13 make the push toward recurring profitability.
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 Constellation Brands 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. | Don't buy: Canopy Growth (NYSE: CGC) and Aurora Cannabis (NYSE: ACB) Canopy and Aurora are easily two of the most popular cannabis stocks in the industry and, at one point, were projected to be Numbers 2 and 1, respectively, in peak production and international presence. It's been a wild past year for marijuana stocks, with the first quarter of 2019 turning in some of the most prolific gains we've seen over a three-month period, followed by perhaps the ugliest nine-month stretch in the relatively short history of the cannabis industry. It has opened 40 stores in the Sunshine State, and no pure-play marijuana stock in North America is currently generating more in net income without the aid of one-time benefits or fair-value adjustments. | Don't buy: Canopy Growth (NYSE: CGC) and Aurora Cannabis (NYSE: ACB) Canopy and Aurora are easily two of the most popular cannabis stocks in the industry and, at one point, were projected to be Numbers 2 and 1, respectively, in peak production and international presence. If you need more evidence of OrganiGram's superiority, it's also the only Canadian grower that's generated an operating profit without the aid of fair-value adjustments or one-time benefits. It has opened 40 stores in the Sunshine State, and no pure-play marijuana stock in North America is currently generating more in net income without the aid of one-time benefits or fair-value adjustments. | Don't buy: Canopy Growth (NYSE: CGC) and Aurora Cannabis (NYSE: ACB) Canopy and Aurora are easily two of the most popular cannabis stocks in the industry and, at one point, were projected to be Numbers 2 and 1, respectively, in peak production and international presence. Buy this instead: Trulieve Cannabis (OTC: TCNNF) and Planet 13 Holdings (OTC: PLNHF) Instead of tossing your hard-earned money down the drain on MedMen, buy a lesser-known but unique MSO like Trulieve Cannabis or Planet 13 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. | Don't buy: Canopy Growth (NYSE: CGC) and Aurora Cannabis (NYSE: ACB) Canopy and Aurora are easily two of the most popular cannabis stocks in the industry and, at one point, were projected to be Numbers 2 and 1, respectively, in peak production and international presence. If you have a desire to invest in certain aspects of the cannabis industry, consider this a version of "buy this, not that" for marijuana stocks. To boot, Aurora Cannabis might be facing a cash crunch by midyear, while Canopy's industry-leading cash pile has been cut nearly in half since closing its equity investment from Constellation Brands in November 2018. |
37710.0 | 2020-01-31 00:00:00 UTC | 4 Things Investors Must Consider Before Buying Aurora Cannabis | ACB | https://www.nasdaq.com/articles/4-things-investors-must-consider-before-buying-aurora-cannabis-2020-01-31 | nan | nan | Aurora Cannabis (NYSE:) is currently one of the worst-performing Canadian pot stocks. Investors were hoping the stock would rebound in 2020, but that still hasnâÂÂt happened.
Source: Shutterstock
Aurora stock is currently down 72% from a year earlier, and the stock is already down nearly 10% year-to-date. But according to a , AuroraâÂÂs recent drop presents a good buying opportunity for interested investors.
Analyst Pablo Zuanic blamed the recent stock drop on âÂÂmisplaced market chatter.â Zuanic expects the company to rebound during the second half of the year.
But itâÂÂs getting harder to explain away the companyâÂÂs shortcomings and increasingly, investing in Aurora stock looks like a risky move. Listed below are four things to consider before going in on Aurora Cannabis.
Aurora Is Experiencing a Leadership Shakeup
Aurora is going through a leadership transition after its Chief Corporate Officer last month. Battley was one of the companyâÂÂs more public executives, so his resignation caused the stock to drop. And Aurora didnâÂÂt offer a reason for his sudden resignation.
However, that BattleyâÂÂs resignation is actually a good thing for Aurora stock. This could be an opportunity to bring on an executive that will push greater financial discipline in the company.
The CompanyâÂÂs Financials Went From Bad to Worse
Aurora Cannabis is not yet profitable, and the company continues to issue new stock and dilute the value of its remaining shares. Plus, the company still has quite a bit of outstanding debt that it will need to deal with. And the stock is currently trading at $1.94 per share.
Another thing weighing on the companyâÂÂs financial position is that it doesnâÂÂt have a major partner. Peer cannabis companies Cronos Group (NASDAQ:) and Canopy Growth (NYSE:) have backing from Altria (NYSE:) and Constellation Brands (NYSE:). A major equity partner could help free up some cash for Aurora.
Is a Jump in Revenue Around the Corner?
However, itâÂÂs not all bad news for Aurora Cannabis. The company could see a significant jump in revenue this year.
Last year, the companyâÂÂs sales plummeted largely due to a lack of retail stores in Canada. But Ontario is taking steps to remedy this situation and plans to . This should go a long way toward improving sales for all Canadian cannabis companies.
Aurora Should Be Able to Capitalize on Cannabis 2.0
And finally, Aurora Cannabis is well-positioned to take advantage of Cannabis 2.0. This second round of legalization in Canada allows cannabis companies to begin selling derivative products like cannabis-infused beverages and edibles.
The company has already , including gummies, baked goods and mints. These products represent a significant growth opportunity for Aurora Cannabis.
Overall, there are reasons to be hopeful about Aurora stock, but there are still more potential risks than rewards. The low stock price is tempting, but itâÂÂs probably a good idea to sit on the sidelines for a little bit longer.
As of this writing, Jamie Johnson 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. | The CompanyâÂÂs Financials Went From Bad to Worse Aurora Cannabis is not yet profitable, and the company continues to issue new stock and dilute the value of its remaining shares. This second round of legalization in Canada allows cannabis companies to begin selling derivative products like cannabis-infused beverages and edibles. The low stock price is tempting, but itâÂÂs probably a good idea to sit on the sidelines for a little bit longer. | Aurora Cannabis (NYSE:) is currently one of the worst-performing Canadian pot stocks. Analyst Pablo Zuanic blamed the recent stock drop on âÂÂmisplaced market chatter.â Zuanic expects the company to rebound during the second half of the year. These products represent a significant growth opportunity for Aurora Cannabis. | Source: Shutterstock Aurora stock is currently down 72% from a year earlier, and the stock is already down nearly 10% year-to-date. The CompanyâÂÂs Financials Went From Bad to Worse Aurora Cannabis is not yet profitable, and the company continues to issue new stock and dilute the value of its remaining shares. Aurora Should Be Able to Capitalize on Cannabis 2.0 And finally, Aurora Cannabis is well-positioned to take advantage of Cannabis 2.0. | However, that BattleyâÂÂs resignation is actually a good thing for Aurora stock. Another thing weighing on the companyâÂÂs financial position is that it doesnâÂÂt have a major partner. These products represent a significant growth opportunity for Aurora Cannabis. |
37711.0 | 2020-01-30 00:00:00 UTC | Organigram Stock a Standout Long-Term Winner in the Cannabis Sector | ACB | https://www.nasdaq.com/articles/organigram-stock-a-standout-long-term-winner-in-the-cannabis-sector-2020-01-30 | nan | nan | Having survived a tough year, investors in cannabis stocks are taking a long, hard look at what 2020 portends. Supply concerns, warnings, and a host of poor earnings were devastating to names like Canopy Growth (NYSE:), Aurora Cannabis (NYSE:), Cronos Group (NASDAQ:) and Horizons Marijuana Life Sciences Index ETF (OTCMKTS:).
Source: Shutterstock
However, thereâÂÂs plenty of opportunity to be found in down-and-out cannabis stocks.
For one, support for U.S. legalization is explosive. According to Pew Research Center, 67% of Americans now support its legalization with only 32% of adults now opposing. A Gallup survey found a similar number in favor.
In response, more states are legalizing recreational use, with Illinois just the latest of a growing list. That sort of action in state capitals is contributing to what Arcview Market Research and BDS Analytics say will create global pot spending of $57 billion over the next decade. With the growing talk on presidential campaign trails of federal legalization as a platform plank, we could see higher highs for the sector.
While this all could create the rising tide to lift all ships, over time, I believe one of the top winners in the space will be Organigram Holdings (NYSE:).
In fact, from a current price of about $2.70, I wouldnâÂÂt be shocked if we see $10 with patience.
Emerging as a Long-Term Winner
One of the most compelling reasons to own OGI stock is the fact itâÂÂs a major grower with the ability to produce . Better, its cannabis output comes from its Monkton facility. Having just one campus reduces supply chain costs, as noted by Motley Fool contributor Sean Williams.
Also, OGI has no financing concerns. In fact, the company believes it has enough capital to fund operations and planned capital expenditures. It had $34.1 million of cash and short-term investments at the end of the quarter, in addition to $30 million in undrawn capacity.
Better, OGI could see further upside with the Canadian market well-positioned for retail growth. Retail sales are planned for Ontario and Quebec, which represent 60% of the Canadian population. The recent legalization of edibles and derivatives â so-called Cannabis 2.0 â will be another strong catalyst.
Earnings âÂÂSurprisingly EncouragingâÂÂ
To be sure, CEO Greg Engel recently said, âÂÂI still think weâÂÂre not going to hit any sense of of this year,â pointing to the launch of the edible and vaping segment of the market, which was just made legal in October.âÂÂ
However, its numbers have been solid. The company knocked fiscal 2020 Q1 earnings out of the park, doubling net revenue growth to 25.2 million CAD ($19.3 million) year over year. That beat estimates for 21 million CAD. OGI also returned to positive EBITDA for the quarter.
âÂÂDespite ongoing industry challenges, we are and our return to positive adjusted EBITDA during the quarter, said Engel. âÂÂOur team was also successful in shipping the first of our Rec 2.0 products as planned and on schedule in December of 2019. We also look forward to the launch of the remainder of our vape pen portfolio followed soon after by our premium cannabis-infused chocolate products. In addition to an exciting line-up of 2.0 products, we are rolling out a couple of new core strains, such as our high THC Edison Limelight, across the country following their success as limited-time-offers in smaller markets.âÂÂ
Analysts were impressed. Jefferies analyst Owen Bennett noted itâÂÂs a âÂÂ.â CIBC analysts also said the numbers were âÂÂsurprisingly encouraging.âÂÂ
Bottom Line on Organigram Stock
With plenty of demand and legalization efforts, the long-term growth story is still very much intact with Organigram stock. With great earnings, the fact itâÂÂs a major grower, and Canadian growth, OGI stock is high on the list of top cannabis stocks to buy and hold, long-term.
ÃÂ As of this writing, Ian Cooper 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. | That sort of action in state capitals is contributing to what Arcview Market Research and BDS Analytics say will create global pot spending of $57 billion over the next decade. Earnings âÂÂSurprisingly Encouragingâ To be sure, CEO Greg Engel recently said, âÂÂI still think weâÂÂre not going to hit any sense of of this year,â pointing to the launch of the edible and vaping segment of the market, which was just made legal in October.â However, its numbers have been solid. In addition to an exciting line-up of 2.0 products, we are rolling out a couple of new core strains, such as our high THC Edison Limelight, across the country following their success as limited-time-offers in smaller markets.â Analysts were impressed. | Supply concerns, warnings, and a host of poor earnings were devastating to names like Canopy Growth (NYSE:), Aurora Cannabis (NYSE:), Cronos Group (NASDAQ:) and Horizons Marijuana Life Sciences Index ETF (OTCMKTS:). The company knocked fiscal 2020 Q1 earnings out of the park, doubling net revenue growth to 25.2 million CAD ($19.3 million) year over year. With great earnings, the fact itâÂÂs a major grower, and Canadian growth, OGI stock is high on the list of top cannabis stocks to buy and hold, long-term. | Earnings âÂÂSurprisingly Encouragingâ To be sure, CEO Greg Engel recently said, âÂÂI still think weâÂÂre not going to hit any sense of of this year,â pointing to the launch of the edible and vaping segment of the market, which was just made legal in October.â However, its numbers have been solid. Jefferies analyst Owen Bennett noted itâÂÂs a âÂÂ.â CIBC analysts also said the numbers were âÂÂsurprisingly encouraging.â Bottom Line on Organigram Stock With plenty of demand and legalization efforts, the long-term growth story is still very much intact with Organigram stock. With great earnings, the fact itâÂÂs a major grower, and Canadian growth, OGI stock is high on the list of top cannabis stocks to buy and hold, long-term. | Earnings âÂÂSurprisingly Encouragingâ To be sure, CEO Greg Engel recently said, âÂÂI still think weâÂÂre not going to hit any sense of of this year,â pointing to the launch of the edible and vaping segment of the market, which was just made legal in October.â However, its numbers have been solid. OGI also returned to positive EBITDA for the quarter. With great earnings, the fact itâÂÂs a major grower, and Canadian growth, OGI stock is high on the list of top cannabis stocks to buy and hold, long-term. |
37712.0 | 2020-01-30 00:00:00 UTC | Is Aurora Cannabis a Ticking Time Bomb for Investors? | ACB | https://www.nasdaq.com/articles/is-aurora-cannabis-a-ticking-time-bomb-for-investors-2020-01-30 | nan | nan | The landscape of cannabis investing has changed significantly between 2019 and 2020, and many of the largest, most respectable pot stocks have lost their allure. Despite starting the previous year as many analysts' favorite pot stock, Aurora Cannabis (NYSE: ACB) has quickly lost a lot of its appeal in a relatively short time.
While the company continues to report losses, some experts are worried that there's a bigger issue that threatens the company's financial situation. Specifically, Aurora has over 3.2 billion Canadian dollars in goodwill on its balance sheet, a shockingly high figure when one considers the company's market cap is only at CA$2.7 billion. Since companies are required to audit and evaluate their goodwill at least on an annual basis, some experts are worried that Aurora could end up reporting a goodwill adjustment in the billion | Despite starting the previous year as many analysts' favorite pot stock, Aurora Cannabis (NYSE: ACB) has quickly lost a lot of its appeal in a relatively short time. The landscape of cannabis investing has changed significantly between 2019 and 2020, and many of the largest, most respectable pot stocks have lost their allure. Specifically, Aurora has over 3.2 billion Canadian dollars in goodwill on its balance sheet, a shockingly high figure when one considers the company's market cap is only at CA$2.7 billion. | Despite starting the previous year as many analysts' favorite pot stock, Aurora Cannabis (NYSE: ACB) has quickly lost a lot of its appeal in a relatively short time. The landscape of cannabis investing has changed significantly between 2019 and 2020, and many of the largest, most respectable pot stocks have lost their allure. Since companies are required to audit and evaluate their goodwill at least on an annual basis, some experts are worried that Aurora could end up reporting a goodwill adjustment in the billion | Despite starting the previous year as many analysts' favorite pot stock, Aurora Cannabis (NYSE: ACB) has quickly lost a lot of its appeal in a relatively short time. Specifically, Aurora has over 3.2 billion Canadian dollars in goodwill on its balance sheet, a shockingly high figure when one considers the company's market cap is only at CA$2.7 billion. Since companies are required to audit and evaluate their goodwill at least on an annual basis, some experts are worried that Aurora could end up reporting a goodwill adjustment in the billion | Despite starting the previous year as many analysts' favorite pot stock, Aurora Cannabis (NYSE: ACB) has quickly lost a lot of its appeal in a relatively short time. The landscape of cannabis investing has changed significantly between 2019 and 2020, and many of the largest, most respectable pot stocks have lost their allure. Since companies are required to audit and evaluate their goodwill at least on an annual basis, some experts are worried that Aurora could end up reporting a goodwill adjustment in the billion |
37713.0 | 2020-01-30 00:00:00 UTC | Is 2020 the Year of Cannabis Stock Bankruptcies? | ACB | https://www.nasdaq.com/articles/is-2020-the-year-of-cannabis-stock-bankruptcies-2020-01-30 | nan | nan | The table appeared set in 2019 for cannabis stocks to deliver significant sales growth and push toward recurring profitability. It was supposed to be the year when pot stocks proved to doubters that the cannabis industry wasn't a fad, and that the pricey valuations bestowed on marijuana stocks were backed up by real potential.
But that's not how things shook out. When the curtains closed on 2019, cannabis stocks were mired in a steep, nine-month downtrend that was precipitated by persistent supply problems in Canada, exorbitant tax rates in a number of recreationally legal U.S. states, and a resilient black market.
While most Wall Street analysts and investors expect a better year for pot stocks in 2020, this may not be the case for all cannabis stocks. There are a handful of marijuana companies that may not survive the year, meaning 2020 could be remembered less for growth in the pot industry and more for cannabis stock bankruptcies.
Image source: Getty Images.
MedMen might be the poster child for marijuana bankruptcies
Though it was inevitable that not all marijuana stocks were going to be winners, the idea that bankruptcy is a real possibility has been brought to light by the struggles of vertically integrated multistate operator MedMen Enterprises (OTC: MMNFF).
In Oct. 2018, MedMen made headlines when it announced the largest acquisition in U.S. cannabis history. The dispensary operator announced plans to acquire privately held PharmaCann in an all-stock deal that was, at the time, valued at $682 million. The expectation is that this deal would double MedMen's presence from six states to 12, as well as bolster its retail license portfolio, giving it the ability to open even more retail locations.
However, the so-called "Apple of cannabis" (named for its impressive sales per square foot in its dispensaries that rivaled Apple stores) has struggled mightily since announcing this deal. In fact, just three days prior to the one-year anniversary of announcing its purchase of PharmaCann, MedMen called the deal off. Though MedMen cited its desire not to get pulled into non-core markets as one of the reasons for cancelling the acquisition, the reality looks to be that MedMen lacked the capital to take on PharmaCann's existing dispensaries and expansion plans.
You see, MedMen has been losing money at a breakneck pace for the past couple of years, which isn't good news considering that access to traditional forms of financing remain difficult to come by for U.S. pot stocks. Despite the company's efforts to reduce general and administrative costs by 30% in fiscal 2019, MedMen still produced a mammoth loss of $231.7 million on an operating basis.
Image source: Getty Images.
Though MedMen's cash concerns appeared to be resolved by gaining access to up to $280 million from private equity firm Gotham Green Partners, the company noted in December that the final $115 million from this pledge is no longer accessible. In short, MedMen is facing a potentially serious cash crunch.
How do we know this? MedMen's management recently confirmed that, as part of its restructuring plan, it's been attempting to pay off its vendors with its common stock, or in some cases, settling its debts for half of their value if utilizing cash. To me, this sounds like a desperate measure from a company that may be on its last legs.
But wait -- there's more
Unfortunately, MedMen may not be alone. There are at least two other brand-name cannabis stocks that aren't guaranteed to make it through 2020.
In Dec. 2019, CEO Gordon Johnson of Chicago-based investment firm GLJ Research issued a price target of $0 on Aurora Cannabis (NYSE: ACB), the most popular pot stock in the world. According to Johnson's note to clients, Aurora is facing a cash crunch to which it has no answers. Despite having access to $400 million in at-the-market financing (i.e., a fancy way of saying that Aurora Cannabis can sell up to $400 million worth of its stock to raise cash), Johnson expects a number of restrictions on the company's credit facility with the Bank of Montreal to kick in.
One could certainly make the argument that Aurora Cannabis is in deep trouble. The company completely halted construction on Aurora Nordic 2 in Denmark and Aurora Sun in Alberta (its two largest projects) to conserve capital, and it announced plans to sell the Exeter facility for a hopeful asking price of 17 million Canadian dollars. These moves more than halve Aurora's peak production capacity. When added to the company's hefty overseas investments, which are a long way off from paying dividends, Johnson's thesis of bankruptcy isn't out of the question.
Image source: Getty Images.
The same might be true for CannTrust Holdings (NYSE: CTST), which is certainly not guaranteed to avoid bankruptcy in 2020. For those readers who may not know, CannTrust was caught growing marijuana illegally in five unlicensed rooms between Oct. 2018 and March 2019 at its flagship Niagara campus. As punishment, regulatory agency Health Canada suspended the company's cultivation and sales licenses, as well as gave CannTrust a laundry list of deficiencies it would have to fix in order to regain these licenses. Among those resolutions, CannTrust was forced to destroy $58 million in inventory grown from its illicit operation.
We don't know if or when CannTrust will regain its licenses, which means it'll continue burning capital until such time as it does have the ability to grow and sell pot. Also, CannTrust hasn't reported its operating results since May of last year. Thus, it's been at least 10 months (since the end of March 2019) since we've had a real look at CannTrust's cash situation.
While nothing is written in stone, it's not out of the question that 2020 is remembered as an even darker year for cannabis stocks than 2019.
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Sean Williams owns shares of CannTrust Holdings Inc. The Motley Fool owns shares of and recommends Apple. 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. | In Dec. 2019, CEO Gordon Johnson of Chicago-based investment firm GLJ Research issued a price target of $0 on Aurora Cannabis (NYSE: ACB), the most popular pot stock in the world. When the curtains closed on 2019, cannabis stocks were mired in a steep, nine-month downtrend that was precipitated by persistent supply problems in Canada, exorbitant tax rates in a number of recreationally legal U.S. states, and a resilient black market. You see, MedMen has been losing money at a breakneck pace for the past couple of years, which isn't good news considering that access to traditional forms of financing remain difficult to come by for U.S. pot stocks. | In Dec. 2019, CEO Gordon Johnson of Chicago-based investment firm GLJ Research issued a price target of $0 on Aurora Cannabis (NYSE: ACB), the most popular pot stock in the world. There are a handful of marijuana companies that may not survive the year, meaning 2020 could be remembered less for growth in the pot industry and more for cannabis stock bankruptcies. Despite having access to $400 million in at-the-market financing (i.e., a fancy way of saying that Aurora Cannabis can sell up to $400 million worth of its stock to raise cash), Johnson expects a number of restrictions on the company's credit facility with the Bank of Montreal to kick in. | In Dec. 2019, CEO Gordon Johnson of Chicago-based investment firm GLJ Research issued a price target of $0 on Aurora Cannabis (NYSE: ACB), the most popular pot stock in the world. It was supposed to be the year when pot stocks proved to doubters that the cannabis industry wasn't a fad, and that the pricey valuations bestowed on marijuana stocks were backed up by real potential. MedMen might be the poster child for marijuana bankruptcies Though it was inevitable that not all marijuana stocks were going to be winners, the idea that bankruptcy is a real possibility has been brought to light by the struggles of vertically integrated multistate operator MedMen Enterprises (OTC: MMNFF). | In Dec. 2019, CEO Gordon Johnson of Chicago-based investment firm GLJ Research issued a price target of $0 on Aurora Cannabis (NYSE: ACB), the most popular pot stock in the world. There are a handful of marijuana companies that may not survive the year, meaning 2020 could be remembered less for growth in the pot industry and more for cannabis stock bankruptcies. The dispensary operator announced plans to acquire privately held PharmaCann in an all-stock deal that was, at the time, valued at $682 million. |
37714.0 | 2020-01-30 00:00:00 UTC | 3 Reasons Why Contrarianism Might Finally Work for CGC Stock | ACB | https://www.nasdaq.com/articles/3-reasons-why-contrarianism-might-finally-work-for-cgc-stock-2020-01-30 | nan | nan | At this point, itâÂÂs safe to say that most folks are exhausted with the cannabis investment sector. After so much hype and an even greater magnitude of disappointment, the weak hands â and some of the strong ones â have been flushed out. However, the recent optimism in Canopy Growth (NYSE:), where CGC stock popped up nearly 11% on the Jan. 28 session, is worth taking a longer look.
Source: Shutterstock
Before we get into it, a word of caution: cannabis-based investments are incredibly risky. Although many analysts regard CGC as one of the better plays, the sector is virtually awash in red ink.
The major contenders like Cronos Group (NASDAQ:), Tilray (NASDAQ:) and Aurora Cannabis (NYSE:) have all taken massive hits, and IâÂÂm not talking the good kind of hit, either, not that I would know or anything.
If youâÂÂre ready for potentially severe volatility in exchange for outsized gains, hereâÂÂs what happened: BMO Capital Markets analyst Tamy Chen gave CGC stock a , rating shares âÂÂoutperformâ from âÂÂmarket perform.â The new assessment is notable for two reasons.
First, with the ugliness in the cannabis market, most analysts have serious misgivings about weed. Second, Chen noted that Canopy was hurting itself unnecessarily with a poor product mix. With a current product mix that better matches the demand picture, Chen has confidence in a potential turnaround.
Here are three more reasons why CGC stock may offer a compelling entry point.
CanadaâÂÂs Efficiency Opportunity
Source: Chart by Josh Enomoto
During the 2019 malaise in the cannabis sector, one criticism stood out: the Canadian retail market was shockingly inefficient. Administrative backlogs prevented businesses from attaining their necessary licenses in a timely manner. One of the results was a huge oversupply of products as the backlog choked supply chain pathways.
But the scope and context of the inefficiency is something that is worth considering. According to data compiled by Statista.com, top three provinces with the are Newfoundland and Labrador, Saskatchewan, and Manitoba. However, these three provinces feature some of the smallest communities of adult cannabis users.
On the other end of the spectrum, Ontario, Quebec, and British Columbia feature the least cannabis store density. But these are the three biggest communities of cannabis users, averaging 1.22 million users per province! In contrast, the former three provinces average less than 145,400 users.
When I ran the correlation analysis, I got a coefficient of -60%. ThatâÂÂs a strong inverse relationship. Mathematically, it indicates that as the cannabis user community rises, the number of stores to serve them decreases.
Obviously, thatâÂÂs a gargantuan headwind against CGC stock and its ilk. But itâÂÂs an administrative headwind, not something inherent to CanopyâÂÂs business structure. If the Canadian government can get its act together â and they have every incentive to do so â we could see a rising tide lifting all boats.
CBD an Underappreciated Catalyst for CGC Stock
Source: Chart by Josh Enomoto
Back at home, our government isnâÂÂt exactly a paragon of botanical progressivism. Despite ample evidence of Prohibition-style, morality-based policies being prone to failure, the feds still consider marijuana a Schedule I drug.
But in a rare showing of bipartisanship, Democrats and Republicans came together to sign the Agriculture Improvement Act of 2018. Colloquially known as the 2018 farm bill, this measure was significant because it legalized industrial hemp and its derivatives. And one of those derivatives is a cannabinoid (or organic compound) called cannabidiol.
Abbreviated as CBD, cannabidiol is significant because itâÂÂs a highly potent cannabinoid, with advocates purporting health benefits. But the biggest takeaway with CBD is that it features little to no tetrahydrocannabinol (THC), marijuanaâÂÂs notorious psychoactive compound. Under the farm bill, hemp and hemp-derivatives cannot contain more than 0.3% THC content.
Stated differently, CBD allows everyone to have their cake and eat it too: you can use organic material as a therapy but not get debilitated from it (or go to jail).
Now, CBD is also big for CGC stock because Canopy quietly , First & Free, stateside.
Granted, the competition is fierce and saturated. However, hereâÂÂs something distinct about the U.S. CBD market: its customers are willing to pay big bucks.
According to New Frontier Data, the largest category of monthly CBD customers is those who . In sharp contrast, the largest category of monthly customers of all cannabis products is those who pay under $20.
That tells me that the CBD-specific customer is generally affluent and seeking high-quality brands over a discounted price. If Canopy wins the branding game here â and why wouldnâÂÂt it with backers like Constellation Brands (NYSE:)? â CGC stock could skyrocket.
Massive Technical Discount
Finally, we arrive at the most obvious point: CGC stock is on discount.
Admittedly, neither Canopy Growth nor any other pure cannabis company features confidence-inspiring financials. And with the Canadian supply chain issues, the hype that was initially built into the share price grotesquely unraveled.
At the same time, CGC stock is turning into a classic, albeit risky contrarian opportunity. For instance, some of the reasons for why Canopy and the sector stumbled had nothing to do with their businesses. Rather, the Canadian government grossly underestimated overall demand and made poor, inefficient decisions.
Furthermore, Wall Street hasnâÂÂt really priced in the subtle bullish points, such as CanopyâÂÂs CBD business, until recently. Naturally, most investors are leery and skeptical about cannabis stocks. But as a contrarian, thatâÂÂs also the perfect time to strike.
As of this writing, Josh Enomoto 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. | If youâÂÂre ready for potentially severe volatility in exchange for outsized gains, hereâÂÂs what happened: BMO Capital Markets analyst Tamy Chen gave CGC stock a , rating shares âÂÂoutperformâ from âÂÂmarket perform.â The new assessment is notable for two reasons. CanadaâÂÂs Efficiency Opportunity Source: Chart by Josh Enomoto During the 2019 malaise in the cannabis sector, one criticism stood out: the Canadian retail market was shockingly inefficient. CBD an Underappreciated Catalyst for CGC Stock Source: Chart by Josh Enomoto Back at home, our government isnâÂÂt exactly a paragon of botanical progressivism. | But these are the three biggest communities of cannabis users, averaging 1.22 million users per province! CBD an Underappreciated Catalyst for CGC Stock Source: Chart by Josh Enomoto Back at home, our government isnâÂÂt exactly a paragon of botanical progressivism. According to New Frontier Data, the largest category of monthly CBD customers is those who . | CanadaâÂÂs Efficiency Opportunity Source: Chart by Josh Enomoto During the 2019 malaise in the cannabis sector, one criticism stood out: the Canadian retail market was shockingly inefficient. CBD an Underappreciated Catalyst for CGC Stock Source: Chart by Josh Enomoto Back at home, our government isnâÂÂt exactly a paragon of botanical progressivism. Now, CBD is also big for CGC stock because Canopy quietly , First & Free, stateside. | However, the recent optimism in Canopy Growth (NYSE:), where CGC stock popped up nearly 11% on the Jan. 28 session, is worth taking a longer look. And one of those derivatives is a cannabinoid (or organic compound) called cannabidiol. â CGC stock could skyrocket. |
37715.0 | 2020-01-29 00:00:00 UTC | Aphria Stock Still Looks Attractive After Earnings Despite Guidence Cut | ACB | https://www.nasdaq.com/articles/aphria-stock-still-looks-attractive-after-earnings-despite-guidence-cut-2020-01-29 | nan | nan | ItâÂÂs somewhat surprising that Aphria (NYSE:) has held up so well in the last few weeks. To be sure, Aphria stock has sold off sharply in the last two sessions. Coronavirus fears have led investors to a âÂÂrisk-offâ posture, and cannabis stocks across the board have slumped.
APHA hasnâÂÂt been spared, falling 8.5% on Friday and 6% on Monday as of this writing. Still, shares are up modestly over the past two months, and flat to where they traded on Jan. 10, two days before the release of fiscal second-quarter earnings.
The reason that trading is surprising is that AphriaâÂÂs earnings report, on its face, looks like a disappointment. Most notably, the company lowered its full-year outlook for both revenue and profits.
Yet investors, at least until the last two sessions, had shrugged off that cut â and with good reason. Aphria still looks well-positioned for cannabis growth. Valuation remains reasonable and confidence in the company should increase.
To be sure, risks remain, and itâÂÂs possible the sector as a whole has another leg down. But IâÂÂve argued of late that , and IâÂÂve seen nothing so far in 2020 to suggest otherwise.
The Guidance Cut
Aphria has become an interesting barometer for the cannabis sector. Back in August, Aphria stunned investors by delivering , if only on an adjusted basis. Aphria stock gained 41% on the release. In less than two months, those gains were erased. Such was the sentiment toward cannabis stocks that even such a milestone was quickly dismissed.
Over the last two months, however, pot stocks stabilized. Aphria earnings now are viewed in a different light. After all, AphriaâÂÂs guidance cut was steep: the midpoint of the revenue projection came down CAD$100 million, or about 14%. The outlook for Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was more than halved.
In 2019, this kind of report would have led Aphria stock, or any cannabis play, to plunge. In 2020, however, investor patience has returned.
To be sure, APHA did decline by 8.4% after earnings. But it had risen over 10% the day before and recouped the post-earnings losses in just five sessions. And that reaction makes some sense.
The guidance cut isnâÂÂt welcome to be sure, but itâÂÂs not a surprise. And the reduction, per management commentary on the , largely was driven by external factors. A slower-than-expected retail rollout in Ontario and a temporary ban on vapes in Alberta were two of the key contributors. Obviously, both issues are well outside AphriaâÂÂs control â and neither suggests any change to the companyâÂÂs long-term opportunity.
Slowing growth at the companyâÂÂs German distributor, CC Pharma, is another source of concern. But remember that Aphria for the business, or about $27 million. Against a market capitalization for Aphria of about $1.25 billion, modest weakness in Germany hardly breaks the bull case.
The Good News for Aphria Stock
Despite the guidance cut, the financials here remain positive. Aphria doesnâÂÂt have the debt worries of Aurora Cannabis (NYSE:). The company closed Q2 with CAD$498 million in cash, a sum slightly larger than its borrowings. Aphria stock isnâÂÂt necessarily cheap after the guidance cut, but a ~33x enterprise value to EBITDA multiple is reasonable. AphriaâÂÂs growth, after all, is not going to stop in fiscal 2021, or fiscal 2025, giving the company a nice path to grow into that valuation.
After all, is on the way. And Aphria looks well-positioned in vapes, as a Cantor Fitzgerald analyst noted last week. Edibles and topicals are on the way, according to the second quarter conference call.
The story seems stronger as well. Irwin Simon, a well-respected executive, took the top job on a permanent basis after formerly being the interim chief executive officer. Soon after earnings, Aphria announced a from an institutional investor.
Aphria didnâÂÂt necessarily need the cash, but the share sale is a vote of confidence. And it adds to the companyâÂÂs cash pile, which could be used to buy assets, particularly if valuations in the industry fall even further.
Still the Best Play
And so I believe Aphria remains the best play in the sector. To be clear, that doesnâÂÂt necessarily mean it will be the biggest winner. There are arguments to be made for other names.
Aurora no doubt is the among major players, though itâÂÂs also the highest-risk stock in that group. OrganiGram (NASDAQ:) has pulled back after a blowout earnings report this month, and could be an acquisition target. Canopy Growth (NYSE:) has the biggest heft; Cronos (NASDAQ:) has a wealth of options going forward.
But from a risk/reward standpoint, APHA still looks like the most attractive play. The balance sheet is healthy enough to give Aphria flexibility to make an acquisition if one comes along, and strong enough to prevent an outright collapse if sentiment turns.
Positive Adjusted EBITDA suggests cash burn should moderate in the second half of this fiscal year and potentially end during FY21; solvency risk here is immaterial. Leadership in vapes is a plus. So is the companyâÂÂs exposure to medical markets in Europe.
ThereâÂÂs simply a lot to like here, even if Aphria isnâÂÂt quite as splashy as some of its peers. Those peers, admittedly, have advantages in certain areas. Aurora has the . Canopy, Cronos, and even Tilray (NASDAQ:) have cash to spend.
ItâÂÂs the combination of positive attributes, however, that underpins the bull case for Aphria stock. And recent trading, even though APHA hasnâÂÂt rallied, suggests the market is starting to agree.
ItâÂÂs impressive, in its own way, that Aphria cut guidance and still saw its stock hold up. ThatâÂÂs treatment usually reserved only for quality companies. Aphria seems to be that, and Aphria stock cheap enough if it is.
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. | Still, shares are up modestly over the past two months, and flat to where they traded on Jan. 10, two days before the release of fiscal second-quarter earnings. The balance sheet is healthy enough to give Aphria flexibility to make an acquisition if one comes along, and strong enough to prevent an outright collapse if sentiment turns. Positive Adjusted EBITDA suggests cash burn should moderate in the second half of this fiscal year and potentially end during FY21; solvency risk here is immaterial. | Aphria stock isnâÂÂt necessarily cheap after the guidance cut, but a ~33x enterprise value to EBITDA multiple is reasonable. Canopy Growth (NYSE:) has the biggest heft; Cronos (NASDAQ:) has a wealth of options going forward. Positive Adjusted EBITDA suggests cash burn should moderate in the second half of this fiscal year and potentially end during FY21; solvency risk here is immaterial. | The Good News for Aphria Stock Despite the guidance cut, the financials here remain positive. Aphria stock isnâÂÂt necessarily cheap after the guidance cut, but a ~33x enterprise value to EBITDA multiple is reasonable. Aphria seems to be that, and Aphria stock cheap enough if it is. | Aphria still looks well-positioned for cannabis growth. Valuation remains reasonable and confidence in the company should increase. The Good News for Aphria Stock Despite the guidance cut, the financials here remain positive. |
37716.0 | 2020-01-28 00:00:00 UTC | Aurora Stock Remains a Great Trading Vehicle | ACB | https://www.nasdaq.com/articles/aurora-stock-remains-a-great-trading-vehicle-2020-01-28 | nan | nan | After a decline of 88% from high to low, it is clear that Aurora Cannabis (NYSE:) stock makes for a better trading vehicle than an investment so far. This doesnâÂÂt mean that eventually it wonâÂÂt be successful, but for now the bulls are against the ropes.
Source: Shutterstock
It is not alone â Canopy Growth (NYSE:), for example, is also down almost 70% from its highs. But when a stock shows so much promise as ACB stock did on the way up, only to fail to under $2 per share, itâÂÂs rarely a great sign of future prospects. Nevertheless, the long term thesis for Aurora remains about the same.
The cannabis stock trade in general started out as a speculative bet, and it remains so now. ACB stockâÂÂs long-term success still depends on the same parameters.
First, it needs cannabis applications to develop across several verticals so that the stocks can grow into their valuations. For that to happen they also need to expand their capacity, since they canâÂÂt deliver what they canâÂÂt produce.
Second, they need to rekindle the headline momentum from the legislative front. That catalyst is almost dead. This is where perception is more important than reality. It doesnâÂÂt matter what is actually fact, what matters to the stocks now is what Wall Street believes is true. Currently, there are very few headlines about the U.S. federal legalization push for pot. It is understandably hard for the industry to gain momentum while it remains illegal.
Moreover, the revenues for the states have not panned out to be as fruitful as the proposals suggested. This is exacerbated by the fact that it is still cheaper to buy and deal pot in the gray market, so there is high incentive for dispensaries to remain off the government books even in legal states. So it is easy to see why Aurora stock is mired in a hideous downtrend and cannot dig itself out from the hole.
Aurora Stock Remains a Great trading Vehicle
Source: Charts by TradingView
But even while Aurora gathers its strength, it makes for a great trading vehicle.ÃÂ These are opportunities for the active traders, not to those who believe in its ultimate comeback.
But since it is this close to zero, it is almost like trading options but without the time element. Yes, it could go to zero, but itâÂÂs cheap enough that the absolute total loss is finite and acceptable. The important thing is to keep the bets at the proper size for a highly speculative trades. The total loss should not break the piggy bank or the traderâÂÂs heart.
It is also important to not average down in these stocks because of their speculative nature.
For trading purposes it is crucial to first define the time frame.ÃÂ The faster the holding period, the lower the time frame on the charts.
For example on the 30-minute chart, the triggers are $2 per share on the upside and $1.84 for support. A breach of either those two lines would bring some momentum in that direction. On Jan. 16, ACB stock failed at $2.32, so that would make for a great upside trigger. If the bulls can break out from and hold it as support, then they could really incite interest.
This would even help the long-term investors in their quest of capturing some momentum before the next uncertain earnings event.
Hope May Be Lurking Below Current Levels
Conversely, if Aurora falls back below $1.84, then the progress would be lost and the bears would send it back to wallow near $1.60 once more. So at this point and from a big-picture perspective, there is something to be said about betting on the companyâÂÂs survival.
For what itâÂÂs worth, ACB stock is trading just above the limits of the weekly candle from October 2016. Back then, this marked the start of the massive 1,000% rally that took it to $12 per share.
Now, I am not saying that this is what will happen here. The point is that itâÂÂs a long-term pivot zone, and those usually provide support on the way down. So the bulls can almost feel some certainty knowing that there could be support below so they can make progress above. Recovery rallies are built on strong bases.
Nicolas Chahine is the managing director of . As of this writing, he did not hold a position in any of the aforementioned securities. Join his live chat room for freeÃÂ here.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | But when a stock shows so much promise as ACB stock did on the way up, only to fail to under $2 per share, itâÂÂs rarely a great sign of future prospects. ACB stockâÂÂs long-term success still depends on the same parameters. On Jan. 16, ACB stock failed at $2.32, so that would make for a great upside trigger. | But when a stock shows so much promise as ACB stock did on the way up, only to fail to under $2 per share, itâÂÂs rarely a great sign of future prospects. ACB stockâÂÂs long-term success still depends on the same parameters. On Jan. 16, ACB stock failed at $2.32, so that would make for a great upside trigger. | But when a stock shows so much promise as ACB stock did on the way up, only to fail to under $2 per share, itâÂÂs rarely a great sign of future prospects. ACB stockâÂÂs long-term success still depends on the same parameters. On Jan. 16, ACB stock failed at $2.32, so that would make for a great upside trigger. | But when a stock shows so much promise as ACB stock did on the way up, only to fail to under $2 per share, itâÂÂs rarely a great sign of future prospects. ACB stockâÂÂs long-term success still depends on the same parameters. On Jan. 16, ACB stock failed at $2.32, so that would make for a great upside trigger. |
37717.0 | 2020-01-28 00:00:00 UTC | Aurora Cannabis Must Win Back Investors’ Trust in 2020 | ACB | https://www.nasdaq.com/articles/aurora-cannabis-must-win-back-investors-trust-in-2020-2020-01-28 | nan | nan | After losing four-fifths of its value from its March 2019 peak, investors are wary of looking at Aurora Cannabis (NYSE:) today. And after it closed below $2.00 a share, Aurora stock is still relatively expensive with its $2.1 billion market capitalization.
Source: ElRoi / Shutterstock.com
Shareholders should fear deteriorating fundamentals in 2020.
Not only did the hot money entering the sector dry up, but the sector as a whole faces multiple challenges ahead. The question is whether Aurora has the management capabilities and financial health to navigate through excess supply, weak demand and higher competition.
How will Aurora Cannabis win back investor trust? The 2.0 product launch is a start.
Pricing Pressure
Statistics Canada â a Canadian government agency â reported that , widening the gap between the legalized and illegal industries. The price of legal cannabis rose to 10.30 CAD in the fourth quarter of last year. In that same time, illegal cannabis prices fell to 5.73 CAD, down from 6.44 CAD. The price disparity illustrates the major challenges that cannabis corporations face. So, what might help AuroraâÂÂs prospects in the near term?
According to AuroraâÂÂs Chief Corporate Office Cam Battley, the company has a to embrace Cannabis 2.0. These pillars are:
âÂÂ⦠using quality extracts, leveraging proprietary extraction technologies to produce high-potency concentrates, providing a range of superior products to suit different consumer preferences and using our expertise to produce consistent and reliable products at scale.âÂÂ
To kick off this plan, Aurora will launch vapes, concentrates, gummies and cookies. But worries from investors should persist. Shares will need to price in the risks of these new products reaching store shelves but not selling out. If the product expires before selling, Aurora will have to write-down the inventory, increasing quarterly losses in the process.
Demand Pressures
In its fiscal 2020 first quarter, Aurora reported non-wholesale cannabis net revenue . Medical cannabis revenue grew 3%, helped by its patient base topping 91,000 in the quarter. Still, medical cannabis prices fell 6% because Aurora needed temporary pricing incentives to spur demand. The good news is that if such promotions earned Aurora customer loyalty, medical cannabis sales should grow steadily throughout 2020.
Government regulations also continue to hamper AuroraâÂÂs path to healthy profitability. The company had to absorb excise taxes. But on the flip side, international growth may increase. Once again, itâÂÂs clear that investors have plenty of operational risks to worry about. Germany â where it has leading market share in natural medical cannabis â requires a growing sales force. WhatâÂÂs more, once Aurora figures out its distribution constraints, order rates will improve and revenue from international markets will grow.
Opportunity
Aurora still needs to increase its capacity to then increase its long-term profit margins. So far, its wholesale production is not facing any significant pricing pressures. That gives the company time to develop its high-quality cannabis production. For instance, this output is replicable and scalable, which implies its vast facilities will have high production efficiency per square foot. That competitive advantage should set Aurora apart from its peers.
Valuation
In a 5-year , we use a revenue exit multiple to calculate terminal value. Assume that the multiple is 11 times and that revenue will grow 55% annually. This implies a fair value of $3.25.
Source: Chart by
Conversely, gives the stock an overall score of 29. This is an aggregation of the following sub-scores:
Based on enterprise value-to-sales ratio, Aurora stock has a fair value of $2.19.
My Takeaway on ACB Stock
Aurora Cannabis stock is one of the most disliked investments in the markets, at least for now. Management must win back shareholder trust. That starts with launching 2.0 products without issues. If revenue growth reaccelerates, investors will accumulate shares throughout 2020.
As of this writing, Chris Lau 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. | My Takeaway on ACB Stock Aurora Cannabis stock is one of the most disliked investments in the markets, at least for now. The question is whether Aurora has the management capabilities and financial health to navigate through excess supply, weak demand and higher competition. Pricing Pressure Statistics Canada â a Canadian government agency â reported that , widening the gap between the legalized and illegal industries. | My Takeaway on ACB Stock Aurora Cannabis stock is one of the most disliked investments in the markets, at least for now. How will Aurora Cannabis win back investor trust? In that same time, illegal cannabis prices fell to 5.73 CAD, down from 6.44 CAD. | My Takeaway on ACB Stock Aurora Cannabis stock is one of the most disliked investments in the markets, at least for now. These pillars are: âÂÂ⦠using quality extracts, leveraging proprietary extraction technologies to produce high-potency concentrates, providing a range of superior products to suit different consumer preferences and using our expertise to produce consistent and reliable products at scale.â To kick off this plan, Aurora will launch vapes, concentrates, gummies and cookies. Demand Pressures In its fiscal 2020 first quarter, Aurora reported non-wholesale cannabis net revenue . | My Takeaway on ACB Stock Aurora Cannabis stock is one of the most disliked investments in the markets, at least for now. How will Aurora Cannabis win back investor trust? That gives the company time to develop its high-quality cannabis production. |
37718.0 | 2020-01-28 00:00:00 UTC | Canada's Marijuana Sales Top $100 Million in a Month for the First Time | ACB | https://www.nasdaq.com/articles/canadas-marijuana-sales-top-%24100-million-in-a-month-for-the-first-time-2020-01-28 | nan | nan | It's pretty incredible what a difference a year can make.
At this time last year, cannabis stocks were flying high, and the expectation had been that most brand-name companies would push toward recurring profitability by the end of the year. Of course, hindsight being what it is, we know this didn't happen. High tax rates in select U.S. states, persistent supply issues in Canada, and a resilient black market weighed heavily on the cannabis industry in 2019 and pushed a number of popular pot stocks to two-year lows.
However, there may be light at the end of the tunnel.
Image source: Getty Images.
Canadian weed sales just hit a monthly milestone
Late last week, Statistics Canada released its monthly retail trade sales data for November. Since the marijuana industry is tightly regulated, but nonetheless legal, licensed cannabis store data is included in this monthly report. Aside from the fact that cannabis sales hit a new all-time high in November -- something not unexpected given that the Canadian pot industry is still ramping up -- what really stood out is that monthly sales finally eclipsed $100 million (that's U.S. dollars).
Here's a snapshot of how licensed cannabis store sales have progressed since adult-use weed hit dispensary shelves on Oct. 17, 2018 (data is reported in Canadian dollars (CA$), with parenthesis featuring U.S. dollar equivalency).
October (2018): CA$53.68 million ($40.83 million)
November (2018): CA$53.73 million ($40.87 million)
December (2018): CA$57.34 million ($43.61 million)
January: CA$54.88 million ($41.74 million)
February: CA$51.66 million ($39.29 million)
March: CA$60.94 million ($46.35 million)
April: CA$74.58 million ($56.73 million)
May: CA$85.81 million ($65.27 million)
June: CA$91.46 million ($69.56 million)
July: CA$107.36 million ($81.66 million)
August: CA$125.95 million ($95.8 million)
September: CA$122.93 million ($93.5 million)
October: CA$128.98 million ($98.1 million)
November: CA$135.75 million ($103.25 million)
It took more than a year, but November featured more than $103 million in sales for Canada, a market that Wall Street foresees generating $5 billion in annual sales by 2024. As a whole, the Canadian marijuana market has generated $916.6 million in revenue since sales commenced on Oct. 17, 2018. This makes it very likely that Canada surpassed $1 billion in aggregate pot sales since launch in December, but we'll have to wait a month to confirm.
Image source: Getty Images.
Here's why Canadian cannabis sales could make a major leap forward in 2020
The hope, among both Wall Street and investors, is that this uptick in sales is really just the tip of the iceberg. Two key changes in the cannabis market are expected to improve consumer demand and relieve a lot of the supply bottlenecks that've hindered pot sales to this point.
The first is the launch of high-margin derivative products, which kicked off in mid-December. Derivatives are non-dried flower products, such as vapes, edibles, infused beverages, topicals, and concentrates. Not only do derivatives offer a new means of consumption that doesn't, necessarily, require smoking cannabis, but they're significantly more attractive to a younger generation of users who have shown a greater willingness to try or buy these higher-margin consumption alternatives.
According to investment bank Cowen Group, half of all U.S. pot sales are expected to be generated from derivatives, with dried flower and pre-rolled cannabis making up the other 43% and 7%, respectively. If these figures translate similarly in Canada, then the launch of derivatives should begin to put some pep in grower's step by midyear, or maybe even sooner.
The other major catalyst is the long-awaited dispensary license reform being undertaken in Ontario, the country's largest province by population. Having previously worked with a lottery system, Ontario, home to 38% of Canada's residents, only opened 24 cannabis retail stores as of the one-year anniversary of recreational weed sales. This created few channels for legal product to reach consumers and allowed the black market to thrive.
Moving forward, Ontario has plans to issue dispensary licenses in a more traditional fashion. Licenses should start being issued by no later than April, with the expectation of 20 (or more) stores opening each month. By year's end, provincial regulators hopes to have around 250 open locations, representing about a 10-fold increase from where it began the year.
Image source: Getty Images.
Marijuana stocks may not be so quick to benefit
On the other side of the coin, while sales are expected to march higher in 2020, there's no guarantee that we're going to see an immediate benefit to pot stocks. While higher revenue and improved margins via the sale of derivatives is a good thing, there's no assurance that we'll see meaningful progress in the bottom lines of pot stocks, which is what matters most.
For instance, Aurora Cannabis (NYSE: ACB) has been a highly popular marijuana stock to this point. It was touted as the leading producer, a company with the broadest international presence, and a practical shoo-in to land a brand-name partner given that it hired activist investors and billionaire Nelson Peltz as a strategic advisor.
Yet, in recent months we've seen Aurora Cannabis put its Exeter greenhouse up for sale, as well as completely halt construction on its massive Aurora Nordic 2 project in Denmark and Aurora Sun campus in Alberta. What had been a steadfast prediction that called for at least 625,000 kilos of run-rate output by mid-2020 now looks to be no more than 225,000 kilos, at best.
Aurora Cannabis is also encountering the same issue as Canopy Growth (NYSE: CGC) and Tilray -- namely, that expanding internationally isn't paying any immediate dividends. Despite Aurora, Canopy, and Tilray having a presence in 24, 16, and 12, respective countries outside of Canada, many of these medical marijuana-legal markets are either still establishing their regulations or aren't ready to commit to large imports as of yet. Additionally, Health Canada is counting on its growers to satiate domestic production first before exporting abroad.
And, of course, balance sheets for brand-name cannabis stocks remain a mess. Aurora Cannabis and Canopy Growth are both lugging around an inordinate amount of goodwill that stems from a number of overpriced acquisitions. Aurora Cannabis is also contending with fears that it may not have enough capital on hand to pay off its existing debt.
Things may be improving for the Canadian pot industry as a whole, but individual marijuana stocks remain a dicey investment opportunity.
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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. | For instance, Aurora Cannabis (NYSE: ACB) has been a highly popular marijuana stock to this point. High tax rates in select U.S. states, persistent supply issues in Canada, and a resilient black market weighed heavily on the cannabis industry in 2019 and pushed a number of popular pot stocks to two-year lows. Having previously worked with a lottery system, Ontario, home to 38% of Canada's residents, only opened 24 cannabis retail stores as of the one-year anniversary of recreational weed sales. | For instance, Aurora Cannabis (NYSE: ACB) has been a highly popular marijuana stock to this point. Here's a snapshot of how licensed cannabis store sales have progressed since adult-use weed hit dispensary shelves on Oct. 17, 2018 (data is reported in Canadian dollars (CA$), with parenthesis featuring U.S. dollar equivalency). October (2018): CA$53.68 million ($40.83 million) November (2018): CA$53.73 million ($40.87 million) December (2018): CA$57.34 million ($43.61 million) January: CA$54.88 million ($41.74 million) February: CA$51.66 million ($39.29 million) March: CA$60.94 million ($46.35 million) April: CA$74.58 million ($56.73 million) May: CA$85.81 million ($65.27 million) June: CA$91.46 million ($69.56 million) July: CA$107.36 million ($81.66 million) August: CA$125.95 million ($95.8 million) September: CA$122.93 million ($93.5 million) October: CA$128.98 million ($98.1 million) November: CA$135.75 million ($103.25 million) It took more than a year, but November featured more than $103 million in sales for Canada, a market that Wall Street foresees generating $5 billion in annual sales by 2024. | For instance, Aurora Cannabis (NYSE: ACB) has been a highly popular marijuana stock to this point. At this time last year, cannabis stocks were flying high, and the expectation had been that most brand-name companies would push toward recurring profitability by the end of the year. Aside from the fact that cannabis sales hit a new all-time high in November -- something not unexpected given that the Canadian pot industry is still ramping up -- what really stood out is that monthly sales finally eclipsed $100 million (that's U.S. dollars). | For instance, Aurora Cannabis (NYSE: ACB) has been a highly popular marijuana stock to this point. At this time last year, cannabis stocks were flying high, and the expectation had been that most brand-name companies would push toward recurring profitability by the end of the year. Aurora Cannabis is also encountering the same issue as Canopy Growth (NYSE: CGC) and Tilray -- namely, that expanding internationally isn't paying any immediate dividends. |
37719.0 | 2020-01-27 00:00:00 UTC | Aurora Cannabis (ACB): Key Growth Catalysts to Look for | ACB | https://www.nasdaq.com/articles/aurora-cannabis-acb%3A-key-growth-catalysts-to-look-for-2020-01-27 | nan | nan | I remain bullish on Aurora Cannabis (ACB) over the long term, as the company improves its cost structure while positioning itself to drive sales from derivatives in the current quarter.
In this article, I want to focus on the positive growth catalysts that are visible, and where the company could surprise to the upside if the narratives plays out.
The Obvious
Most investors following Aurora Cannabis and other Canadian cannabis companies are aware of the limitations on their short-term growth prospects as a result of the slow licensing process in Canada and the resultant shortage of retail stores to sell cannabis out of.
While it's clear to the market, investors interested in Aurora have to temper expectations for the company's performance in the short term, as the latest number I've found is there are only 363 retail stores open in all of Canada. When the market is fully served, I think there will be at least another 1,500 stores opened, and probably more. That will take time to play out.
As for revenue, Aurora Cannabis should be able to capture a decent portion of the growing demand as more stores open. It has more than enough supply to meet whatever demand climbs to in the near term.
Derivatives
The good news for Aurora is that as more retail cannabis stores open in Canada, it'll not only capture the obvious increase in recreational pot sales, but the increase in earnings as a result of higher derivative prices and wider margins.
In other words, it's going to enjoy more revenue, not only because of more stores being opened and selling into the regular recreational pot market, but will add further to the revenue because of higher prices for derivatives. We won't know to what level that'll happen until the earnings report comes out after the existing quarter ends.
Aurora is prepared as well as any of its competitors to serve this potentially lucrative market.
The question for the last quarter is how much revenue Aurora managed to generate, after weak results in the prior quarter.
Where a Surprise Could Come
There is no doubt in my mind Aurora will eventually secure a CBD distribution deal in the U.S. It has appeared to be slow in taking action in this vital segment of the market, but the fact it, as far as I can tell, it's been deliberate and patient in order to obtain the best deal, within the parameters of its business model.
What I mean by that is Aurora management has resisted, and rightly so in my view, giving up control of the company in order to get a big cash infusion. This has hurt the company in the near term, but if it's able to put together a significant CBD distribution deal in the U.S., it will be a catalyst that will drive its value and share price up.
If it can do that without sacrificing control, it'll do even better in the long term.
My thought is it would be surprising if there isn't a CBD U.S. deal made as some point in 2020. How much it'll impact the value of the company will be determined by the terms of the deal.
If it doesn't give up control, I think current younger shareholders and investors will prefer that, if it does end up giving up some control, it'll probably attract older investors looking for a larger cash cushion and level of safety.
Under that scenario, I believe Aurora will get a nice short-term and probably sustainable boost in its share price, but probably at the expense of long-term upside. It would perform more like Canopy Growth under those conditions.
Consensus Verdict
TipRanks analysis of 10 analysts shows that the optimism isn’t dead (it just isn’t alive, either). Analysts are offering a consensus "Hold" rating on shares of Aurora, with 3 analysts suggesting Buy, 2 recommending Hold and 5 advising Sell. The average price target among these analysts stands at $2.83, which represents ~50% upside from current levels. (See Aurora stock analysis on TipRanks)
Conclusion
Aurora management has done a good of improving its cost structure without taking away its production capacity potential once the market turns around. As legal pot demand increases it'll be able to rapidly complete the facilities where it has put construction on hold.
I see the company starting to sustainably increase revenue growth in at least the second half of calendar 2020, and possibly in the second calendar quarter. As it increases sales it also should generate revenue with wider margins and start to show a path to profitability.
If it surprises in any way on the positive side, or lands a CBD distribution deal in the U.S., its share price will soar.
I'm bearish on Aurora in the near term until I see its next earnings report for the last calendar quarter of 2019. If it has another quarter of declining revenue, it will take another hit; that would be exasperated if it ends up having to write down a past acquisition.
That's the worst-case scenario in my opinion. I'm not concerned about that because I'm focusing on future cash flow as a result of its prior acquisitions. Nonetheless, it would scare some investors from an inevitable sell-off under those conditions.
Bottom line is Aurora still has all the pieces in place for a long-term run of increasing growth. It has its international medical business that will continue to grow significantly over time, and which I see eventually becoming the real foundation of long-term profitability.
For now, it's going to be a rocky road in 2020, and if it does fail to do well with recreational and derivative sales in the first half, it's going to come under further downside pressure.
Further out, once it rises out of the ashes, it's going to make shareholders a lot of money.
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. | I remain bullish on Aurora Cannabis (ACB) over the long term, as the company improves its cost structure while positioning itself to drive sales from derivatives in the current quarter. While it's clear to the market, investors interested in Aurora have to temper expectations for the company's performance in the short term, as the latest number I've found is there are only 363 retail stores open in all of Canada. It has appeared to be slow in taking action in this vital segment of the market, but the fact it, as far as I can tell, it's been deliberate and patient in order to obtain the best deal, within the parameters of its business model. | I remain bullish on Aurora Cannabis (ACB) over the long term, as the company improves its cost structure while positioning itself to drive sales from derivatives in the current quarter. Derivatives The good news for Aurora is that as more retail cannabis stores open in Canada, it'll not only capture the obvious increase in recreational pot sales, but the increase in earnings as a result of higher derivative prices and wider margins. (See Aurora stock analysis on TipRanks) Conclusion Aurora management has done a good of improving its cost structure without taking away its production capacity potential once the market turns around. | I remain bullish on Aurora Cannabis (ACB) over the long term, as the company improves its cost structure while positioning itself to drive sales from derivatives in the current quarter. The Obvious Most investors following Aurora Cannabis and other Canadian cannabis companies are aware of the limitations on their short-term growth prospects as a result of the slow licensing process in Canada and the resultant shortage of retail stores to sell cannabis out of. Derivatives The good news for Aurora is that as more retail cannabis stores open in Canada, it'll not only capture the obvious increase in recreational pot sales, but the increase in earnings as a result of higher derivative prices and wider margins. | I remain bullish on Aurora Cannabis (ACB) over the long term, as the company improves its cost structure while positioning itself to drive sales from derivatives in the current quarter. Derivatives The good news for Aurora is that as more retail cannabis stores open in Canada, it'll not only capture the obvious increase in recreational pot sales, but the increase in earnings as a result of higher derivative prices and wider margins. The question for the last quarter is how much revenue Aurora managed to generate, after weak results in the prior quarter. |
37720.0 | 2020-01-26 00:00:00 UTC | Aurora Cannabis Still Isn't a Bargain | ACB | https://www.nasdaq.com/articles/aurora-cannabis-still-isnt-a-bargain-2020-01-26 | nan | nan | Over the past six months, Aurora Cannabis (NYSE: ACB) has been the worst-performing Canadian pot stock among the top five licensed producers. In fact, the company's shares have lost nearly half of their value over this period.
Should cannabis investors take advantage of this weakness to build a position, or is it best to stick to the safety of the sidelines with this falling knife? Let's consider Aurora's positives and negatives to find out.
Image Source: Getty Images.
Positives
Wall Street's consensus estimate has Aurora's net revenue rising by a stately 73% over the next 12 months. This anticipated jump in revenue reflects the growing optimism that the retail store bottleneck will get resolved fairly soon, as well as the sizable commercial opportunity offered by Cannabis 2.0. Aurora, for its part, previously announced that it will offer vapes, concentrates, gummies, chocolates, mints, and cookies during the early innings of Cannabis 2.0. As these derivative cannabis products sport markedly higher gross profit margins than traditional dried flowers, Aurora's top line does indeed appear set for a noteworthy bump over the course of the next fiscal year.
Aurora's rosy revenue forecast is important for two key reasons. First off, this expected jump in annual net revenue should significantly reduce the company's rather alarming cash burn rate -- a seminal issue that has slowly morphed into an existential threat for Aurora. Secondly, it would also dramatically improve Aurora's valuation metrics (assuming Aurora's market cap stays relatively the same over the next 12 months). At current levels, Aurora's shares are trading at an astronomical 9.92 price-to-sales ratio, which is roughly three times the prevailing average for a consumer packaged goods company. What's important to understand is that a more typical valuation would almost certainly lower Aurora's attractiveness as a top short-selling target. That's a big deal because Aurora's shares have been one of the most shorted pot stocks in the industry over the past 12 months.
Negatives
Aurora has two major risk factors right now. First and foremost, Wall Street is deeply concerned about the company's looming cash crunch. Aurora's inability to turn a profit, costly empire-building strategy, and boatload of outstanding debt could spell disaster for the company and its shareholders in the not-so-distant future. And this key risk factor is heightened by the fact that Aurora's share price currently stands at a mere $1.99. Stated bluntly, the company probably can't tap the public markets to get out of this financial jam -- at least not without running the risk of having to execute a reverse split to stay listed on the New York Stock Exchange.
Secondly, Aurora appears ripe for a managerial overhaul. In fact, some analysts have already begun calling for CEO Terry Booth to be replaced. Keeping with this theme, Booth has been unable to bring a Fortune 500 partner into the picture during his tenure, or attract large institutional investors akin to the deal Aphria struck last week. Moreover, the company has repeatedly whiffed on financial targets on his watch. Aurora has thus had to rely heavily on stock offerings to fund operations, much to the chagrin of loyal shareholders.
The risk here is that a change in leadership inherently comes with an element of the unknown. While the right executive could be exactly what the doctor ordered for Aurora, there's also the very real risk that the company won't be able to attract the type of high-level talent necessary to fill this key leadership position. Underscoring this point, Aurora doesn't have a lengthy operating history or a proven business model. Right now Aurora is an unprofitable company with a highly uncertain outlook. That's not exactly an uber-attractive setup for a top executive.
Is Aurora worth the risk?
This year could make or break Aurora. The company is perhaps six months away from realizing a healthy increase in sales, which could make it a profitable entity from that point forward. To get to that next phase of its life cycle, however, Aurora's brain trust has to figure out how to handle a possible cash crunch without wiping out current shareholders with seemingly endless stock offerings. As such, it might be best to pass on this high-profile cannabis stock until the company has clearly hit an inflection 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
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. | Over the past six months, Aurora Cannabis (NYSE: ACB) has been the worst-performing Canadian pot stock among the top five licensed producers. As these derivative cannabis products sport markedly higher gross profit margins than traditional dried flowers, Aurora's top line does indeed appear set for a noteworthy bump over the course of the next fiscal year. First off, this expected jump in annual net revenue should significantly reduce the company's rather alarming cash burn rate -- a seminal issue that has slowly morphed into an existential threat for Aurora. | Over the past six months, Aurora Cannabis (NYSE: ACB) has been the worst-performing Canadian pot stock among the top five licensed producers. Positives Wall Street's consensus estimate has Aurora's net revenue rising by a stately 73% over the next 12 months. Secondly, it would also dramatically improve Aurora's valuation metrics (assuming Aurora's market cap stays relatively the same over the next 12 months). | Over the past six months, Aurora Cannabis (NYSE: ACB) has been the worst-performing Canadian pot stock among the top five licensed producers. Secondly, it would also dramatically improve Aurora's valuation metrics (assuming Aurora's market cap stays relatively the same over the next 12 months). While the right executive could be exactly what the doctor ordered for Aurora, there's also the very real risk that the company won't be able to attract the type of high-level talent necessary to fill this key leadership position. | Over the past six months, Aurora Cannabis (NYSE: ACB) has been the worst-performing Canadian pot stock among the top five licensed producers. What's important to understand is that a more typical valuation would almost certainly lower Aurora's attractiveness as a top short-selling target. And this key risk factor is heightened by the fact that Aurora's share price currently stands at a mere $1.99. |
37721.0 | 2020-01-26 00:00:00 UTC | Is Aurora Cannabis the Titanic of Marijuana Stocks? | ACB | https://www.nasdaq.com/articles/is-aurora-cannabis-the-titanic-of-marijuana-stocks-2020-01-26 | nan | nan | Comparing any stock to a ship probably isn't the best analogy. However, I couldn't help thinking of the Titanic after seeing some of the headlines over the last couple of months about Aurora Cannabis (NYSE: ACB).
For example, in December one analyst declared a one-year price target for Aurora of... $0. That's not a typo. GLG Research's Gordon Johnson predicted that the stock could be worth nothing in the not-too-distant future.
Then other analysts came out earlier this month with price targets that would have Aurora Cannabis losing close to half of its market cap. Keep in mind that Aurora already plunged 56% last year. And if that's not enough, there are serious concerns that the company won't be able to meet its debt covenants.
Investors couldn't be blamed if they have a sinking feeling. But is Aurora Cannabis really the Titanic of marijuana stocks?
Image source: Getty Images.
The iceberg cometh?
We can sum up the main knocks against Aurora Cannabis in three brief points:
The company remains unprofitable with no profits in sight.
It has a boatload of debt.
It's running out of cash and will have to dilute shares further to stay afloat.
All of these statements are demonstrably true.
Aurora continues to lose a lot of money. Don't be fooled by the company's positive net income of 10.7 million in Canadian dollars in its fiscal 2020 first-quarter results. That paper profit resulted from a big unrealized gain on the revaluation of Aurora's liability for its 2024 convertible senior notes. And that gain stemmed from Aurora's share price plunging during the quarter.
The company has backed away from its previous predictions of positive adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) like Hollywood celebrities at a party with Ricky Gervais. It's not clear how long it will take for Aurora to achieve positive EBITDA. And even when it does, that's still not the same thing as delivering real profitability in the form of positive net income.
Aurora's huge amount of debt doesn't help matters. The company managed to defuse its ticking time bomb of CA$230 million in convertible debentures coming due in March 2020 by cutting a deal with debenture holders to convert their debentures to stock.
However, that move meant more dilution in the value of Aurora's existing shares. Aurora is also burning through its remaining cash pretty quickly, so further dilution is almost certainly on the way. And there's CA$360 million in notes maturing in August 2021. Debt and dilution could be the equivalents of big icebergs for the company.
A titanic exaggeration
With all of the doom, gloom, and despair about Aurora's prospects, you might think that the stock really could soon be worthless. But there are several things to keep in mind.
Aurora's revenue will probably increase nicely in 2020. The company's biggest headwind last year was the lack of retail cannabis stores, particularly in Ontario -- the biggest potential cannabis market in Canada. Now, though, Ontario is taking steps to open up more retail stores. By March, the province expects to issue 20 new retail licenses each month. That's a significant step in the right direction for Aurora and its peers.
The company will also almost certainly enjoy greater sales as the Cannabis 2.0 cannabis derivatives market takes off. Aurora is already shipping edibles and vapes. Both product categories should present major growth opportunities for the company.
Higher sales should help Aurora move toward profitability as it reins in spending. And, yes, the company has taken serious steps to control costs, notably including freezing plans to spend CA$200 million on the construction related to expanding its production capacity.
What about failing to meet those debt covenants? Cowen analyst Vivien Azer thinks that Aurora will be able to restructure its debt covenants after meeting with creditors. Bank of America's Christopher Carey, who isn't very optimistic about the stock right now, also thinks that the company should be able to restructure its debt covenants.
Aurora has some serious problems and challenges. However, I think that predictions of Aurora's impending demise and the overwhelming negativity surrounding the stock add up to a titanic exaggeration of the position the company is actually in.
No smooth sailing
Will it be smooth sailing for Aurora Cannabis in 2020 and beyond? Probably not. Expect volatility for marijuana stocks, in general, for a long time to come. Aurora isn't an exception.
By the way, I'm not saying Aurora Cannabis is a great stock to buy right now. With the uncertainty and risks the company faces, it isn't. But I don't think that its share price will fall to $0. Aurora might have some worrisome leaks, but it's not a sinking ship.
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. | However, I couldn't help thinking of the Titanic after seeing some of the headlines over the last couple of months about Aurora Cannabis (NYSE: ACB). The company has backed away from its previous predictions of positive adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) like Hollywood celebrities at a party with Ricky Gervais. And, yes, the company has taken serious steps to control costs, notably including freezing plans to spend CA$200 million on the construction related to expanding its production capacity. | However, I couldn't help thinking of the Titanic after seeing some of the headlines over the last couple of months about Aurora Cannabis (NYSE: ACB). Don't be fooled by the company's positive net income of 10.7 million in Canadian dollars in its fiscal 2020 first-quarter results. The company managed to defuse its ticking time bomb of CA$230 million in convertible debentures coming due in March 2020 by cutting a deal with debenture holders to convert their debentures to stock. | However, I couldn't help thinking of the Titanic after seeing some of the headlines over the last couple of months about Aurora Cannabis (NYSE: ACB). But is Aurora Cannabis really the Titanic of marijuana stocks? We can sum up the main knocks against Aurora Cannabis in three brief points: The company remains unprofitable with no profits in sight. | However, I couldn't help thinking of the Titanic after seeing some of the headlines over the last couple of months about Aurora Cannabis (NYSE: ACB). But is Aurora Cannabis really the Titanic of marijuana stocks? Debt and dilution could be the equivalents of big icebergs for the company. |
37722.0 | 2020-01-26 00:00:00 UTC | Cannabis Stocks May Be Tricking You -- Here's How | ACB | https://www.nasdaq.com/articles/cannabis-stocks-may-be-tricking-you-heres-how-2020-01-26 | nan | nan | Last year began with a mountain of promise for the cannabis industry. Canada had recently legalized recreational pot and high-margin derivatives were slated to hit dispensary shelves later in the year. Meanwhile, momentum for state-level legalizations in the U.S., the most lucrative marijuana market in the world, remained high. In short, it looked like the perfect recipe for cannabis stocks to push into profitability.
But hindsight being what it is, we know that this vision didn't come close to reality. As we move headlong into a new decade, marijuana stocks remain unprofitable almost across the board, at least on an operating basis (i.e., without the aid of one-time benefits).
However, if investors haven't done the appropriate amount of digging, they may not realize just how unprofitable cannabis stocks really are. You see, a number of popular marijuana stocks have been able to "trick" investors by posting surprise profitable quarters. I say "trick" in quotation marks because what pot companies are doing is perfectly legal -- but they're not going to advertise that their profit wasn't the result of operational success.
Here are three ways cannabis stocks may be tricking you when it comes to profitability.
Image source: Getty Images.
1. Fair-value adjustments
One of the biggest differences between Canadian and U.S. pot stocks is that Canadian marijuana stocks almost exclusively report their operating results using International Financial Reporting Standards (IFRS) as opposed to generally accepted accounting principles (GAAP). This creates some perfectly legal above-the-line adjustments that can have a big impact on a marijuana stock's bottom line.
For example, cannabis grower Aphria (NYSE: APHA) wound up reporting two consecutive quarterly profits in the fiscal fourth quarter of 2019 and fiscal first quarter of 2020. Including Aphria's pharmaceutical distribution operations, its total sales hit $126.1 million Canadian, with cost of goods sold of CA$98.6 million. This meant Aphria generated a gross profit of CA$27.6 million (when rounded) before factoring in operating expenses.
But before dropping down to operating expenses, Aphria has to deal with its fair-value adjustments. These accounting procedures require the company to estimate the value of their current crop (which can change based on the growth stage of cannabis plants), as well as estimate/adjust the cost to sell these goods. In many instances, this is done months before a company actually sells its pot products. In Q1 2020, the fair-value adjustment on the sale of inventory cost Aphria CA$7.3 million, but it received a CA$25.2 million above-the-line boost from the fair-value adjustment on growth of its biological assets.
Instead of reporting a gross profit of CA$27.6 million, Aphria was able to report a CA$45.4 million gross profit, after fair-value adjustments. This adjustment is wholly responsible for Aphria's two consecutive quarterly profits. Without it, the company would have reported an operating loss in both quarters.
Image source: Getty Images.
2. Derivative liability revaluation
A less-common "trick" that marijuana stocks have used to generate huge quarterly profits is the revaluation of derivative liabilities (i.e., warrants).
Ontario-based Cronos Group (NASDAQ: CRON), for instance, has reported three consecutive quarterly "profits" of CA$1.19, CA$0.51, and CA$1.61 per share, which blew Wall Street's expectations for a modest loss per share each quarter out of the water. Without doing the appropriate due diligence, Cronos' earnings per share might make it look like a bargain. But a deeper dive shows that these huge profits are due to nothing more than derivative liability revaluations.
When Cronos Group closed an equity investment from tobacco giant Altria Group in mid-March, it received a whopping $1.8 billion in cash. In exchange, Altria netted a 45% equity stake in Cronos, as well as warrants that could be executed in the future for additional shares of the company. Altria also possesses certain anti-dilution rights, allowing it to purchase shares of Cronos from time to time to maintain its ownership percentage.
As a result, Cronos decided last year that these warrants will need to be treated as derivative liabilities that should be revalued with the quarterly changes in Cronos Group's stock. The company's precipitous decline last year aided Cronos' bottom-line in a big way, thanks to these derivative liability revaluations. But the fact remains that the company continues to lose quite a bit of money an operating basis, without inclusion of these revaluations.
Image source: Getty Images.
3. Asset disposition/revaluation
Finally, it's important for investors to look past the noise surrounding investment sales or investment revaluations, which are one-time events and fail to accurately portray how an underlying business is performing.
For instance, Aurora Cannabis (NYSE: ACB), the most popular pot stock, has been an active (and successful) investor in the marijuana space. It, at one point, owned a 17% stake in pot grower The Green Organic Dutchman, which Aurora had initially classified as an "investment in associates and compound instruments." However, Aurora wound up reclassifying its investment in TGOD as a marketable security not long after its May 2018 initial public offering. Doing so wound up leading to a realized gain of CA$144.4 million.
But the fact is, a deeper dive shows Aurora Cannabis to be nowhere near profitability. The CA$75.2 million in net sales recognized in Q1 2020 pale in comparison to its CA$32.7 million in cost of goods sold and CA$131.1 million in operating expenses. Even with fair-value adjustments, Aurora remains firmly in the red on an operating basis.
Long story short, investors have to be willing to dig into the income statements of cannabis stocks, because they often contain a number of perfectly legal accounting tricks that make their results look a lot rosier than they actually are.
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. | For instance, Aurora Cannabis (NYSE: ACB), the most popular pot stock, has been an active (and successful) investor in the marijuana space. These accounting procedures require the company to estimate the value of their current crop (which can change based on the growth stage of cannabis plants), as well as estimate/adjust the cost to sell these goods. It, at one point, owned a 17% stake in pot grower The Green Organic Dutchman, which Aurora had initially classified as an "investment in associates and compound instruments." | For instance, Aurora Cannabis (NYSE: ACB), the most popular pot stock, has been an active (and successful) investor in the marijuana space. In Q1 2020, the fair-value adjustment on the sale of inventory cost Aphria CA$7.3 million, but it received a CA$25.2 million above-the-line boost from the fair-value adjustment on growth of its biological assets. Instead of reporting a gross profit of CA$27.6 million, Aphria was able to report a CA$45.4 million gross profit, after fair-value adjustments. | For instance, Aurora Cannabis (NYSE: ACB), the most popular pot stock, has been an active (and successful) investor in the marijuana space. Fair-value adjustments One of the biggest differences between Canadian and U.S. pot stocks is that Canadian marijuana stocks almost exclusively report their operating results using International Financial Reporting Standards (IFRS) as opposed to generally accepted accounting principles (GAAP). Instead of reporting a gross profit of CA$27.6 million, Aphria was able to report a CA$45.4 million gross profit, after fair-value adjustments. | For instance, Aurora Cannabis (NYSE: ACB), the most popular pot stock, has been an active (and successful) investor in the marijuana space. I say "trick" in quotation marks because what pot companies are doing is perfectly legal -- but they're not going to advertise that their profit wasn't the result of operational success. Ontario-based Cronos Group (NASDAQ: CRON), for instance, has reported three consecutive quarterly "profits" of CA$1.19, CA$0.51, and CA$1.61 per share, which blew Wall Street's expectations for a modest loss per share each quarter out of the water. |
37723.0 | 2020-01-25 00:00:00 UTC | The 10 Largest Canadian Marijuana Stocks | ACB | https://www.nasdaq.com/articles/the-10-largest-canadian-marijuana-stocks-2020-01-25 | nan | nan | Though a lot of marijuana history has been made in recent years, most of it can be attributed to Canada, which became the first industrialized country in the modern era to green-light adult-use cannabis sales in October 2018.
Despite the launch of recreational pot sales not going as planned -- marijuana sales totaled only about 1 billion Canadian dollars (approximately $765 million U.S.) in the trailing 12 months since Oct. 17, 2018 -- Wall Street analysts still believe that Canada could be generating in the neighborhood of $5 billion in annual sales from weed by 2024. This provides a long and bountiful runway for the Canadian pot industry to blossom.
The question is, where to start your research as an investor?
Probably the best answer I can offer is to start with the largest Canadian marijuana stocks. While market cap isn't always indicative of quality or competitive advantage, it offers a good indication that investors see value in the assets or intangibles behind these pot stocks. Without further ado, here are Canada's 10 largest cannabis stocks.
Image source: Getty Images.
1. Canopy Growth: $8.44 billion market cap
Canopy Growth (NYSE: CGC) has held the title of largest cannabis stock for some time now, thanks in part to its 5.6 million square feet of cultivation space spanning 10 growing facilities, and its monstrous cash and short-term investments hoard that topped CA$2.7 billion in the most recent quarter. However, despite being the largest pot stock, Canopy's operating losses have been monstrous due to large amounts of share-based compensation. With the company's goodwill also rising as a percentage of total assets, there's no guarantee Canopy Growth returns to large-cap status anytime soon.
2. Cronos Group: $2.82 billion
Perhaps it's no surprise that No.'s 1 and 2 in cash on hand are first and second in terms of market cap in Canada. Cronos Group (NASDAQ: CRON) wound up receiving $1.8 billion in mid-March from tobacco giant Altria Group, which took a 45% stake in the company. Having only used its cash to make one acquisition, Cronos is still sitting on more than $1.5 billion in cash and cash equivalents. Unfortunately, it's also been a slow starter in the production department, which makes its $2.8 billion valuation a bit of a stretch, even with its robust cash balance.
3. Aurora Cannabis: $2.24 billion
How the mighty have fallen! Once pushing for large-cap status, Aurora Cannabis (NYSE: ACB) is now trying to just hang onto its mid-cap classification. Largely expected to be the peak production leader, Aurora has suspended construction at Aurora Sun in Alberta, Canada, and Aurora Nordic 2 in Denmark, as well as put its 1-million-square-foot Exeter facility up for sale. These decisions effectively remove around 425,000 kilos of peak annual output from the equation. As a serial share diluter, Aurora Cannabis has a long way to go before earning investors' trust.
4. Tilray: $2.1 billion
Another Canadian pot stock that's declined significantly is Tilray (NASDAQ: TLRY). Following its initial public offering (IPO), the expectation was that Tilray would utilize its medical cannabis successes and translate those into substantive adult-use market share. However, Tilray's management seems OK de-emphasizing Canadian investments in lieu of investments in Europe and the United States. While these markets could very well outpace Canada in total sales, it's an odd decision to make with Canada's pot market still ramping up. Like Canopy and Aurora, Tilray is unlikely to generate a profit until 2022.
Image source: Getty Images.
5. Aphria: $1.35 billion
Compared to its peers, Aphria (NYSE: APHA) outperformed in 2019 with a decline of only 8%. Now having all three of its cultivation farms licensed by Health Canada, Aphria is slated to be a top-tier grower that could peak at 255,000 kilos of weed per year. Aphria has benefited from the stability of revenue tied to its pharmaceutical distribution subsidiary CC Pharma, but has yet to demonstrate that it can be profitable on a recurring basis without the aid of one-time benefits or fair-value adjustments.
6. OrganiGram Holdings: $493 million
Though OrganiGram Holdings (NASDAQ: OGI) had a poor 2019 (down 31%), it's still the only Canadian cannabis grower to have generated a no-nonsense operating profit. OrganiGram's Moncton facility offers up a number of competitive advantages, including top-notch operating efficiency, that should lead to better-than-average margins and a faster path to recurring profitability than its peers. While not immune to the supply issues and delayed derivatives launch that impacted the industry, OrganiGram appears to have the tools necessary to succeed over the long run.
7. HEXO: $381 million
Once a billion-dollar pot stock, Quebec-based HEXO (NYSE: HEXO) has been hammered by supply concerns. Having previously forecast CA$400 million in fiscal 2020 sales and 150,000 kilos of peak operating capacity, HEXO has since withdrawn its sales guidance, gone on to idle about a third of its peak operating capacity, and laid off 200 of its workers from a variety of departments. Like a number of other growers here, HEXO looks to be a long way away from profitability, even with its aggressive cost-cutting.
8. MediPharm Labs: $380 million
The first non-grower to appear on the list is extraction-service provider MediPharm Labs (OTC: MEDIF). However, MediPharm has produced two consecutive quarters of no-nonsense profits, which is a reflection of its central role in processing cannabis and hemp biomass for the resins, distillates, concentrates, and cannabinoids that are being used in high-margin derivative products. Since extraction-service providers like MediPharm Labs often sign processing contracts that are good for 18 to 36 months, both sales and cash flow become highly predictable.
Image source: Getty Images.
9. The Valens Company: $371 million
Right on MediPharm Labs' heels is yet another extraction-service provider, The Valens Company (OTC: VLNCF). Known as "Valens GroWorks" until its recent name change, Valens also pushed into the profit column in its most recent quarter, and is currently the cheapest marijuana stock in North America, based on its forward price-to-earnings ratio. Having locked in a number of key processing contracts for at least 24 months, Valens Company can ensure it doesn't overspend, and therefore remains profitable.
10. Sundial Growers: $356 million
Last, but not least, Sundial Growers (NASDAQ: SNDL) clocks in with a market value of $356 million. Sundial came roaring out of the gates following its 2019 IPO, but quickly gave back all of its gains -- and then some -- given Canada's supply issues. Just as worrisome, Sundial has primarily made its living to this point by being a wholesale marijuana supplier. This helps to offload larger quantities of pot, but it's a lower-margin pathway, relative to selling its product in the adult-use market. Sundial plans to transition away from the wholesale business, but this could obviously take some time.
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, OrganiGram Holdings, and Valens GroWorks. 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. | Once pushing for large-cap status, Aurora Cannabis (NYSE: ACB) is now trying to just hang onto its mid-cap classification. Though a lot of marijuana history has been made in recent years, most of it can be attributed to Canada, which became the first industrialized country in the modern era to green-light adult-use cannabis sales in October 2018. OrganiGram's Moncton facility offers up a number of competitive advantages, including top-notch operating efficiency, that should lead to better-than-average margins and a faster path to recurring profitability than its peers. | Once pushing for large-cap status, Aurora Cannabis (NYSE: ACB) is now trying to just hang onto its mid-cap classification. Despite the launch of recreational pot sales not going as planned -- marijuana sales totaled only about 1 billion Canadian dollars (approximately $765 million U.S.) in the trailing 12 months since Oct. 17, 2018 -- Wall Street analysts still believe that Canada could be generating in the neighborhood of $5 billion in annual sales from weed by 2024. While market cap isn't always indicative of quality or competitive advantage, it offers a good indication that investors see value in the assets or intangibles behind these pot stocks. | Once pushing for large-cap status, Aurora Cannabis (NYSE: ACB) is now trying to just hang onto its mid-cap classification. Despite the launch of recreational pot sales not going as planned -- marijuana sales totaled only about 1 billion Canadian dollars (approximately $765 million U.S.) in the trailing 12 months since Oct. 17, 2018 -- Wall Street analysts still believe that Canada could be generating in the neighborhood of $5 billion in annual sales from weed by 2024. Canopy Growth: $8.44 billion market cap Canopy Growth (NYSE: CGC) has held the title of largest cannabis stock for some time now, thanks in part to its 5.6 million square feet of cultivation space spanning 10 growing facilities, and its monstrous cash and short-term investments hoard that topped CA$2.7 billion in the most recent quarter. | Once pushing for large-cap status, Aurora Cannabis (NYSE: ACB) is now trying to just hang onto its mid-cap classification. While these markets could very well outpace Canada in total sales, it's an odd decision to make with Canada's pot market still ramping up. Like Canopy and Aurora, Tilray is unlikely to generate a profit until 2022. |
37724.0 | 2020-01-25 00:00:00 UTC | Better Marijuana Stock: Aurora Cannabis vs. Cronos Group | ACB | https://www.nasdaq.com/articles/better-marijuana-stock%3A-aurora-cannabis-vs.-cronos-group-2020-01-25 | nan | nan | Aurora Cannabis (NYSE: ACB) and Cronos Group (NASDAQ: CRON) aren't exactly investors' favorites right now. Both stocks plunged in 2019, with Aurora sinking 56% and Cronos falling 26%.
However, the situation could look better for Aurora and Cronos in 2020. Which of these two marijuana stocks is the better pick now?
Image source: Getty Images.
The case for Aurora Cannabis
Let's first address the biggest challenge for Aurora Cannabis -- its lack of profitability. The company's losses have caused it to borrow heavily and issue new shares, which dilutes the value of existing shares.
However, Aurora has quite a few things going for it. It claims the second-highest market share in the Canadian adult-use recreational marijuana market. The company is a leader in Germany's medical cannabis market. And Aurora ranks first among cannabis producers in production capacity.
Although Aurora isn't profitable, the company boasts the highest gross margin in the industry. In its fiscal 2020 first quarter, Aurora reported a gross margin of 58%. The company's high-tech cannabis facilities enable it to keep growing costs down. CFO Glen Ibbott noted in Aurora's Q1 conference call in November that the company "can compete strongly in any market situation and would still deliver healthy returns at pricing that would not be sustainable for others."
One major headwind for Aurora should die down considerably in 2020. The lack of an adequate retail cannabis environment in Ontario has been a big problem for Aurora and other major Canadian cannabis producers. However, the province is issuing more licenses for retail cannabis stores in 2020, a move that should significantly boost Aurora's recreational marijuana sales.
At the same time, Aurora should be a big winner in Canada's "Cannabis 2.0" market for cannabis-derivative products. The company has launched vapes and edibles, including baked goods, chocolates, gummies, and mints. Look for increasing Cannabis 2.0 sales for Aurora throughout 2020.
Aurora's lack of a major partner has hurt it in some ways. However, it also arguably makes Aurora a top team-up candidate for big consumer packaged goods (CPG) companies seeking to enter the cannabis or CBD markets. One Wall Street analyst even projects that Aurora's share price could double if the company picks up a major CPG partner.
The case for Cronos Group
While Aurora hopes to snag a big partner, Cronos Group already has one with tobacco giant Altria (NYSE: MO). And this partnership is probably the most important reason to consider buying Cronos stock.
For one thing, Altria's cash -- it invested $1.8 billion for a 45% stake in Cronos Group -- puts Cronos in a much better financial position than most of its peers, including Aurora. Although Cronos isn't consistently profitable yet (and any paper profits the company reports usually come with an asterisk), it shouldn't have to worry about raising additional capital with nearly 2 billion in Canadian dollars in cash, cash equivalents, and short-term investments.
The relationship with Altria also opens up lots of doors for Cronos. For example, Cronos will sell its new PEACE+ hemp CBD brands in the U.S. using Altria's retail distribution network. Thanks to the big tobacco maker, Cronos' CBD products will hit the shelves of close to 1,000 U.S. retailers.
Altria's big investment also paved the way for Cronos to acquire four of Redwood Holding Group's operating subsidiaries. This deal brought premium hemp CBD consumer products brand Lord Jones into Cronos' lineup. Lord Jones products are marketed in around 800 stores as well as online.
Cronos also has a different approach than most of its peers that many investors will like. The company has an asset-light strategy. CEO Michael Gorenstein said in Cronos' Q3 conference call in November that "our business model is not to be the farmer." Instead, Cronos' approach is to create shareholder value through research and development and building brands -- which is similar to what Altria has done in the tobacco market.
One example of Cronos Group's asset-light R&D strategy is its partnership with Ginkgo Bioworks. The two companies are working together to develop high-quality cannabinoids using fermentation processes, which could drastically lower the cost for producing cannabinoids compared to current extraction methods.
Better marijuana stock
Aurora Cannabis' revenue is much higher than Cronos Group's, but it has a lower market cap than Cronos does after being hammered in 2019. On the other hand, Cronos Group's balance sheet looks a whole lot better than Aurora's does.
I suspect that Aurora could benefit the most from potential catalysts in 2020. For this reason, my view is that Aurora gets the nod over Cronos Group for now. However, I also think that Aurora is the riskier of the two because it doesn't have the advantage of a major equity partner with deep pockets.
But while Aurora has the edge, I wouldn't call either of these stocks buys right now. I think that there are too many other marijuana stocks with more attractive risk-reward profiles.
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) and Cronos Group (NASDAQ: CRON) aren't exactly investors' favorites right now. CFO Glen Ibbott noted in Aurora's Q1 conference call in November that the company "can compete strongly in any market situation and would still deliver healthy returns at pricing that would not be sustainable for others." However, the province is issuing more licenses for retail cannabis stores in 2020, a move that should significantly boost Aurora's recreational marijuana sales. | Aurora Cannabis (NYSE: ACB) and Cronos Group (NASDAQ: CRON) aren't exactly investors' favorites right now. The lack of an adequate retail cannabis environment in Ontario has been a big problem for Aurora and other major Canadian cannabis producers. This deal brought premium hemp CBD consumer products brand Lord Jones into Cronos' lineup. | Aurora Cannabis (NYSE: ACB) and Cronos Group (NASDAQ: CRON) aren't exactly investors' favorites right now. The case for Cronos Group While Aurora hopes to snag a big partner, Cronos Group already has one with tobacco giant Altria (NYSE: MO). For one thing, Altria's cash -- it invested $1.8 billion for a 45% stake in Cronos Group -- puts Cronos in a much better financial position than most of its peers, including Aurora. | Aurora Cannabis (NYSE: ACB) and Cronos Group (NASDAQ: CRON) aren't exactly investors' favorites right now. Which of these two marijuana stocks is the better pick now? The case for Cronos Group While Aurora hopes to snag a big partner, Cronos Group already has one with tobacco giant Altria (NYSE: MO). |
37725.0 | 2020-01-25 00:00:00 UTC | 2 Stocks That Could Double Your Money | ACB | https://www.nasdaq.com/articles/2-stocks-that-could-double-your-money-2020-01-25 | nan | nan | Finding investments that can generate returns of 100% or more in relatively short periods of time is challenging but certainly not impossible. In fact, well-chosen growth stocks can easily help you double your money in periods of 3-5 years -- and potentially even sooner.
Here are two stocks that just might have what it takes to deliver these types of fortune-building gains.
Image source: Getty Images.
Redfin
If you've ever sold a home -- or know someone who has -- you likely know just how expensive it can be. Seller agent commissions can run as high as 3% of the total value of a house, which equates to $7,500 for a $250,000 home. Redfin (NASDAQ: RDFN) is helping to change this outdated and costly system. By saving its customers thousands of dollars, it's positioned itself to claim a larger share of the $80 billion U.S. brokerage industry.
Redfin's online-based approach and salaried agents allow it to charge home sellers commissions as low as 1% of the sale price of their house, or about 67% less than the typical agent fee. More home sellers are beginning to take notice, and Redfin is quickly gaining market share. It accounted for 0.96% of the value of existing-home sales in its most recent quarter, up from 0.81% in 2018, 0.67% in 2017, and 0.33% back in 2014. Yet with its share of this enormous market currently at only about 1%, Redfin can still grow exponentially in the years ahead.
Better still, Redfin's ancillary services are helping to expand its already massive market opportunity and fuel its growth. Its "other revenue" -- which includes sales from its mortgage and title businesses -- surged 92% year over year to $5 million in the third quarter. Redfin also has a fast-growing home-buying business, which is enticing more customers to use its platform and further boosting demand for its brokerage, mortgage, and title services.
All told, Redfin's $2.3 billion market capitalization belies its incredible growth potential. As such, investors who buy shares today could easily double their money over the next half-decade -- and potentially much sooner.
Aurora Cannabis
Canadian marijuana producer Aurora Cannabis (NYSE: ACB) is another stock with the potential to help you quickly earn gains of 100% or more.
The cannabis industry is expanding at a rapid rate. Analysts at investment bank Stifel estimate that global marijuana sales could grow to $200 billion by the end of this decade. With its industry-leading cannabis production capacity and international footprint, Aurora is well-positioned to capture a significant portion of the industry's profits in the coming years.
However, Aurora's stock is down sharply in recent months. And is currently valued at only $2.2 billion. Investors have understandably grown concerned about Aurora's withering cash reserves and ability to fund its growth initiatives. But these are challenges that can be solved quickly if Aurora were to sell an equity stake to a larger company, such as when fellow cannabis producer Cronos Group sold 45% of its shares to tobacco titan Altria for $1.8 billion in late 2018. Even if Aurora were to raise a smaller amount of capital via a similar deal, by alleviating its cash concerns, its stock price would likely explode higher on the news -- potentially doubling your money in the process.
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
Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool recommends Redfin. 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 Canadian marijuana producer Aurora Cannabis (NYSE: ACB) is another stock with the potential to help you quickly earn gains of 100% or more. With its industry-leading cannabis production capacity and international footprint, Aurora is well-positioned to capture a significant portion of the industry's profits in the coming years. But these are challenges that can be solved quickly if Aurora were to sell an equity stake to a larger company, such as when fellow cannabis producer Cronos Group sold 45% of its shares to tobacco titan Altria for $1.8 billion in late 2018. | Aurora Cannabis Canadian marijuana producer Aurora Cannabis (NYSE: ACB) is another stock with the potential to help you quickly earn gains of 100% or more. In fact, well-chosen growth stocks can easily help you double your money in periods of 3-5 years -- and potentially even sooner. More home sellers are beginning to take notice, and Redfin is quickly gaining market share. | Aurora Cannabis Canadian marijuana producer Aurora Cannabis (NYSE: ACB) is another stock with the potential to help you quickly earn gains of 100% or more. But these are challenges that can be solved quickly if Aurora were to sell an equity stake to a larger company, such as when fellow cannabis producer Cronos Group sold 45% of its shares to tobacco titan Altria for $1.8 billion in late 2018. Even if Aurora were to raise a smaller amount of capital via a similar deal, by alleviating its cash concerns, its stock price would likely explode higher on the news -- potentially doubling your money in the process. | Aurora Cannabis Canadian marijuana producer Aurora Cannabis (NYSE: ACB) is another stock with the potential to help you quickly earn gains of 100% or more. By saving its customers thousands of dollars, it's positioned itself to claim a larger share of the $80 billion U.S. brokerage industry. More home sellers are beginning to take notice, and Redfin is quickly gaining market share. |
37726.0 | 2020-01-24 00:00:00 UTC | Key Catalysts Will Get Risky Aurora Stock Back On Track | ACB | https://www.nasdaq.com/articles/key-catalysts-will-get-risky-aurora-stock-back-on-track-2020-01-24 | nan | nan | Aurora Cannabis (NYSE:) has pulled a nice rally during the past couple weeks. Over this time, ACB stock has gained about 24% to hit $2.04.
Source: Shutterstock
Of course, this is little consolation for long-term holders. A year ago ACB was fetching a much more robust price of $10.
No doubt, the rest of industry has seen steep declines as well. Just look at the charts for companies like Tilray (NASDAQ:), Canopy Growth (NYSE:) and Cronos Group (NASDAQ:).
As for Aurora, there are certainly some bigtime challenges for the company. First of all, Aurora pulled off a string of acquisitions, which ballooned the companyâÂÂs debt and added lots of complexity to the organization. It also did not help that several Wall Street analysts put out awful reports, such as Piper SandlerâÂÂs Michael Lavery, who slapped a on ACB stock. But the worst of all came from GLJ Research analyst Gordon Johnson, who says Aurora stock will hit $0 within the next two years!
But hey, analysts are far from perfect. The fact is that Wall Street can get overly gloomy, especially when a sector goes out of favor.
However, this can present opportunities. With sentiment so bad right now, it wonâÂÂt take much good news to perk up the stock price.
So what is the bull case for ACB stock and what are the drivers?
Canadian Market and ACB Stock
The problems with the Canadian market arenâÂÂt really about demand. Rather, theyâÂÂre about distribution and enforcement. An onerous government process has made it extremely difficult go launch new retail locations. In the meantime, there has emerged more black market activities that have generally not been checked by the authorities.
Consider this: there are a mere . ThatâÂÂs just one location for every 14,3188 cannabis users. Given this, it should be no surprise that companies like ACB have struggled.
Yet this will not be permanent. There are signs that Canadian authorities are being more proactive â and this should go a long way to help improve AuroraâÂÂs fortunes.
But there should be another catalyst â âÂÂCannabis 2.0.â This refers to the legalization of cannabis edibles and beverages in Canada, which could be a multi-billion dollar opportunity for the sector.
HereâÂÂs what Aurora CEO Cam Battley said about this during the latest : âÂÂThe initial suite of new products that we will launch include vapes, concentrates, gummies, chocolates, mints and cookies. WeâÂÂve selectively partnered with a variety of organizations, prioritized our resources and built the inventory to help ensure consumers across Canada will have access to our high-quality derivative products.âÂÂ
Fiscal Restraint
Aurora is already taking actions to cut back on expenses. The company has initiated construction deferrals and slowed commissioning of projects, which is to save $200 million âÂÂin the near term.â The company also retired $227 million of a 5% unsecured convertible debenture that had a due date of March 2020. WhatâÂÂs more, if revenues continue to increase as the situation in Canada improves, this will definitely alleviate the pressures.
ItâÂÂs also important to keep in mind that Aurora has Nelson Peltz as a strategic advisor. He is one of the worldâÂÂs top investors for consumer stocks, with positions in companies like Procter & Gamble (NYSE:), Mondelez (NASDAQ:) and WendyâÂÂs (NASDAQ:). In other words, he should be a great source of strategic advice, but should also provide key introductions to other investors and corporate partners.
Tom Taulli is the author of the book,ÃÂ .ÃÂ Follow himÃÂ on Twitter atÃÂ @ttaulli. 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. | It also did not help that several Wall Street analysts put out awful reports, such as Piper SandlerâÂÂs Michael Lavery, who slapped a on ACB stock. Over this time, ACB stock has gained about 24% to hit $2.04. A year ago ACB was fetching a much more robust price of $10. | Canadian Market and ACB Stock The problems with the Canadian market arenâÂÂt really about demand. Over this time, ACB stock has gained about 24% to hit $2.04. A year ago ACB was fetching a much more robust price of $10. | It also did not help that several Wall Street analysts put out awful reports, such as Piper SandlerâÂÂs Michael Lavery, who slapped a on ACB stock. Canadian Market and ACB Stock The problems with the Canadian market arenâÂÂt really about demand. Over this time, ACB stock has gained about 24% to hit $2.04. | It also did not help that several Wall Street analysts put out awful reports, such as Piper SandlerâÂÂs Michael Lavery, who slapped a on ACB stock. Over this time, ACB stock has gained about 24% to hit $2.04. A year ago ACB was fetching a much more robust price of $10. |
37727.0 | 2020-01-24 00:00:00 UTC | In Canada, the Price Gap Between Legal and Black-Market Marijuana Is Near Its Peak | ACB | https://www.nasdaq.com/articles/in-canada-the-price-gap-between-legal-and-black-market-marijuana-is-near-its-peak-2020-01 | nan | nan | On Thursday, Statistics Canada issued its latest quarterly update about the development of that country's cannabis market, and one key set of figures in that report merits a closer look from investors.
On the retail pricing front, the gap between the average selling price of licensed cannabis and that of the illicit variety has widened, increasing the attractiveness of the latter.
In Q4, the price of a gram of legal marijuana rose slightly on a quarter-over-quarter basis to 10.30 Canadian dollars ($7.83), while illegal product cost an average of CA$5.73 ($4.36) per gram. The CA$4.57 ($3.47) gap between the two is the second-widest it has been since the law legalizing recreational cannabis in Canada first came into effect in late 2018.
Image source: Getty Images
Over the past five quarters, there has been a notable difference in the trends of those prices. From Q4 2018 to Q4 2019, the average selling price for licensed product grew by more than 6%. That for illegally produced weed declined by 11%.
The price difference has been caused in no small degree by the slow pace at which governments are awarding retail licenses to would-be cannabis sellers in certain areas of the country (such as Ontario). A somewhat aggressive tax rate on legal cannabis only adds to the list of challenges for legitimate producers and sellers.
These factors have contributed to revenue declines for even the biggest Canadian cannabis companies, such as industry bellwethers Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC). In their most recently reported quarters, Aurora suffered a 24% quarter-over-quarter decrease in net revenue, while Canopy Growth's top line slumped by 15%.
On Thursday, shares of Aurora Cannabis closed 1.5% higher, while shares of Canopy Growth rose by almost 1.9%.
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. | These factors have contributed to revenue declines for even the biggest Canadian cannabis companies, such as industry bellwethers Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC). On Thursday, Statistics Canada issued its latest quarterly update about the development of that country's cannabis market, and one key set of figures in that report merits a closer look from investors. The price difference has been caused in no small degree by the slow pace at which governments are awarding retail licenses to would-be cannabis sellers in certain areas of the country (such as Ontario). | These factors have contributed to revenue declines for even the biggest Canadian cannabis companies, such as industry bellwethers Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC). On the retail pricing front, the gap between the average selling price of licensed cannabis and that of the illicit variety has widened, increasing the attractiveness of the latter. In Q4, the price of a gram of legal marijuana rose slightly on a quarter-over-quarter basis to 10.30 Canadian dollars ($7.83), while illegal product cost an average of CA$5.73 ($4.36) per gram. | These factors have contributed to revenue declines for even the biggest Canadian cannabis companies, such as industry bellwethers Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC). In Q4, the price of a gram of legal marijuana rose slightly on a quarter-over-quarter basis to 10.30 Canadian dollars ($7.83), while illegal product cost an average of CA$5.73 ($4.36) per gram. 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. | These factors have contributed to revenue declines for even the biggest Canadian cannabis companies, such as industry bellwethers Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC). In Q4, the price of a gram of legal marijuana rose slightly on a quarter-over-quarter basis to 10.30 Canadian dollars ($7.83), while illegal product cost an average of CA$5.73 ($4.36) per gram. 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. |
37728.0 | 2020-01-24 00:00:00 UTC | 3 Marijuana Stock Trends for 2020 That Are All Bad News | ACB | https://www.nasdaq.com/articles/3-marijuana-stock-trends-for-2020-that-are-all-bad-news-2020-01-24 | nan | nan | For a number of years now, the cannabis industry has made history many times over. In 2018, we witnessed Canada become the first industrialized country to legalize recreational pot sales, and saw the U.S. Food and Drug Administration approve the very first cannabis-derived drug. Meanwhile, in 2019, Illinois became the first state to legalize the consumption and sale of adult-use weed entirely at the legislative level.
This year, we're liable to see even more history made. For instance, by no later than the end of April, Mexico's lawmakers are expected to pass legislation that would establish a retail market for recreational cannabis. We'll also see South Dakota become the first state to vote on medical and adult-use weed in the same election this coming November.
However, 2020 will also be a year filled with unwanted trends for marijuana stock investors. Here are three pot industry trends that investors should be prepared to contend with throughout the year.
Image source: Getty Images.
Delisting from a major U.S. exchange
First of all, investors may have to watch a handful of marijuana stocks get delisted from major U.S. exchanges.
Over the previous three years, more than a dozen cannabis stocks either uplisted or went the initial public offering route on the New York Stock Exchange (NYSE) or Nasdaq. Being listed on either of these major exchanges means added visibility, improved volume-based liquidity, and the likelihood of increased coverage and/or investment from Wall Street. You could also say it's a big step in the maturation process of marijuana stocks.
But in 2020, a couple of pot stocks that have moved from the over-the-counter exchange to either the NYSE or Nasdaq could get the boot.
Take CannTrust Holdings (NYSE: CTST), for example. CannTrust was found to have illegally grown cannabis in five unlicensed rooms at its flagship Niagara property for a period of six months (October 2018 to March 2019). This led regulatory agency Health Canada to suspend the company's cultivation and sales licenses in September. Although the door has been left open for CannTrust to regain its licenses, the company is unable to sell any product or plant additional crops for the time being.
Meanwhile, CannTrust received a warning from the NYSE in early December for not maintaining the minimum required listing price of $1. Even though CannTrust has since ascended back above $1 per share, it also hasn't reported its operating results since last May. In other words, it looks like a shoo-in to be shown the door in 2020 -- and other popular pot stocks might follow in its footsteps.
Image source: Getty Images.
Lawsuits
Next up, marijuana stock investors should prepare for a myriad of lawsuits, regardless of whether or not there's a lot of substance behind the allegations being made.
You see, cannabis stocks struggled mightily in 2019 to hold investors' trust, which opens the door for lawyers to attack even the slightest possible sign of wrongdoing going forward. For example, Canopy Growth (NYSE: CGC), the largest marijuana stock in the world by market cap, is having to defend itself against class action lawsuits that allege it made false or misleading claims about its line of softgel and oil products. The lawsuits suggest these claims resulted in Canopy taking a 32.7 million Canadian dollar charge tied to excess returns and inventory in the fiscal second quarter, contributing to the substantive losses in the company's share price last year.
And Canopy isn't alone. Quebec-based grower HEXO (NYSE: HEXO) is also facing a myriad of class action lawsuits stemming from the company's fourth-quarter about-face on its forward guidance. Having previously forecast CA$400 million in forward-year sales, HEXO pulled its sales guidance for the upcoming year and dramatically lowered its fiscal fourth-quarter sales outlook in October. HEXO also announced that it would completely idle its Niagara campus, acquired when it purchased Newstrike Brands, and lay off 200 workers from a variety of departments.
Put simply, investors don't have a lot of faith in marijuana stocks right now, and law firms are going to look to exploit that when even the slightest bit of potential wrongdoing emerges. Expect lawsuits to be a constant theme for cannabis stocks in 2020.
Image source: Getty Images.
Goodwill writedowns
Lastly, investors should expect writedowns to become a somewhat common theme this year, especially after the mountain of goodwill pot stocks have racked up over the past two years.
Goodwill, or the premium that acquiring companies pay above and beyond tangible assets, is usually common during an acquisition. The goal of an acquiring company is to utilize the purchased company's assets to completely recoup any goodwill. But for cannabis stocks, this is incredibly unlikely given how grossly overpriced most deals were.
As a perfect example, Aurora Cannabis (NYSE: ACB) wound up buying Ontario's MedReleaf for CA$2.64 billion in mid-2018. Part of the allure of this deal was the 1-million-square-foot Exeter facility, which would need to be retrofit to grow up to 105,000 kilos of weed per year. Aurora announced just weeks ago that it would be putting Exeter up for sale for just CA$17 million. This means Aurora Cannabis bought MedReleaf for perhaps CA$2.62 billion (net), but will have received only 35,000 kilos of annual output in return from MedReleaf's Markham and Bradford campuses. That's a grossly overvalued deal that's liable to lead Aurora to take a huge writedown.
We're likely to see a writedown from Aphria (NYSE: APHA), as well. Aphria's 2018 purchases of Nuuvera and its Latin American assets pumped up its goodwill to nearly CA$670 million. This represents about 28% of its current total assets. What you may not realize is that this figure already includes a CA$50 million writedown tied to its Latin American assets last year, which Wall Street and investors didn't take too kindly to. Pot stocks like Aphria with more than 20% of their total assets tied up in goodwill should bear a red flag for investors 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 owns shares of CannTrust Holdings Inc. The Motley Fool recommends CannTrust Holdings Inc, HEXO, and Nasdaq. 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. | As a perfect example, Aurora Cannabis (NYSE: ACB) wound up buying Ontario's MedReleaf for CA$2.64 billion in mid-2018. For example, Canopy Growth (NYSE: CGC), the largest marijuana stock in the world by market cap, is having to defend itself against class action lawsuits that allege it made false or misleading claims about its line of softgel and oil products. The lawsuits suggest these claims resulted in Canopy taking a 32.7 million Canadian dollar charge tied to excess returns and inventory in the fiscal second quarter, contributing to the substantive losses in the company's share price last year. | As a perfect example, Aurora Cannabis (NYSE: ACB) wound up buying Ontario's MedReleaf for CA$2.64 billion in mid-2018. Image source: Getty Images. Quebec-based grower HEXO (NYSE: HEXO) is also facing a myriad of class action lawsuits stemming from the company's fourth-quarter about-face on its forward guidance. | As a perfect example, Aurora Cannabis (NYSE: ACB) wound up buying Ontario's MedReleaf for CA$2.64 billion in mid-2018. Over the previous three years, more than a dozen cannabis stocks either uplisted or went the initial public offering route on the New York Stock Exchange (NYSE) or Nasdaq. Goodwill writedowns Lastly, investors should expect writedowns to become a somewhat common theme this year, especially after the mountain of goodwill pot stocks have racked up over the past two years. | As a perfect example, Aurora Cannabis (NYSE: ACB) wound up buying Ontario's MedReleaf for CA$2.64 billion in mid-2018. Goodwill writedowns Lastly, investors should expect writedowns to become a somewhat common theme this year, especially after the mountain of goodwill pot stocks have racked up over the past two years. Pot stocks like Aphria with more than 20% of their total assets tied up in goodwill should bear a red flag for investors in 2020. |
37729.0 | 2020-01-23 00:00:00 UTC | Relatively Weak Aurora Stock Could Be a Multibagger in 2020 | ACB | https://www.nasdaq.com/articles/relatively-weak-aurora-stock-could-be-a-multibagger-in-2020-2020-01-23 | nan | nan | After an ugly 2019 where the entire sector fell off a cliff, marijuana stocks are attempting to stage a big comeback in early 2020 amid a series of favorable legal and fundamental developments. Year-to-date, the ETFMG Alternative Harvest ETF (NYSEARCA:) is already up more than 10%, an impressive average gain of about one percent per trading day. Leading the way, cannabis giants Tilray (NASDAQ:), Canopy Growth (NYSE:), and Cronos (NASDAQ:) are up 30%, 20% and 12% respectively so far in 2020.
Source: Shutterstock
One pot stock that didnâÂÂt get an invite to the party is Aurora (NYSE:). Instead, while many of its peers have rattled off double-digit gains through the first two weeks of the year, Aurora stock has dropped by 5%.
Why the relative weakness of Aurora stock? A few Wall Street downgrades, persistent concerns about the companyâÂÂs cash burn and balance sheet, as well as some hiccups in the companyâÂÂs international expansion plans.
Put it all together and Aurora stock has been unable to rally alongside its cannabis peers. The question now is, how much longer will this relative underperformance last?
Not much longer. HereâÂÂs why.
Aurora Stock Fundamentals Will Improve
AuroraâÂÂs fundamentals are admittedly ugly right now. Falling sales, falling margins, widening losses, a shrinking balance sheet and lots of Wall Street downgrades. But most of these adverse trends will reverse course in 2020 as the companyâÂÂs fundamentals dramatically improve.
This all starts with the idea that CanadaâÂÂs legal cannabis market will rebound in 2020. Demand trends will improve thanks to the introduction of new edible and vape products, as well as aggressive retail footprint expansion. These improving demand trends mean demand will catch up to todayâÂÂs supply glut, providing a lift to average selling prices across the market.
Concurrently, there will be a series of favorable legal developments across the globe as more and more governments accept the idea of legal marijuana, and as companies like Aurora more and more aggressively monetize their huge supply volumes through international business expansion.
What does all that mean for ACB stock?
Improving demand trends in Canada coupled with aggressive international expansion will turn falling sales into rising sales. Higher prices across the Canadian market will turn compressing margins into expanding margins. Rising sales plus expanding margins will turn widening losses into shrinking losses. Pressure on the companyâÂÂs balance sheet will ease significantly. And amid all these favorable developments, Wall Street will stop hating the stock, with a likely flurry of upgrades throughout 2020.
Net net, thereâÂÂs reason to believe that the presently depressed Aurora growth narrative will improve significantly over the next few quarters.
ACB Value Will Bounce
As AuroraâÂÂs growth narrative improves in 2020, Aurora stock will rebound from todayâÂÂs depressed levels in a big way.
ThatâÂÂs because ACB stock is too cheap for its own good, plunging to a dirt cheap valuation due to persistent balance sheet and liquidity concerns. On an enterprise-value-to-one-year-forward-revenues basis, Aurora stock is about as cheap as it gets in the cannabis sector (only 4-times EV-to-forward-revenues, versus an 11-times multiple for Canopy Growth stock). It reasons that as marijuana socks rebound in 2020, ACB stock could rebound even further given its current depressed valuation.
Indeed, implies a somewhat visible pathway for this $2 billion company to one day fetch a $40 billion market cap, assuming that Aurora can leverage first-moverâÂÂs advantage, an early production capacity lead and respectable brand equity to turn into one of the more important players in the global cannabis market in 10 years.
ThatâÂÂs simply too much upside to ignore at current levels. Consequently, if AuroraâÂÂs fundamental trends do improve in 2020, ACB stock will likely headàwayàhigher.
Bottom Line on Aurora Stock
The bull thesis on Aurora is predicated on the idea that improving global cannabis market fundamentals will inevitably lead to The companyâÂÂsgrowth trajectory similarly improving in 2020. If that doesnâÂÂt happen, Aurora stock will simply keep dropping.
If it does happen â and I think it will â then Aurora stock could be due for a big up year. Of course, that means Aurora is a high-risk, high-reward play. If you arenâÂÂt game for that risk, go check out Canopy Growth. ThereâÂÂs a lot less risk there.
But, if youâÂÂre willing to take a risk on a potential multibagger in the pot sector in 2020, ACB stock is worth a look.
As of this writing, Luke Lango was long CGC.
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. | What does all that mean for ACB stock? ACB Value Will Bounce As AuroraâÂÂs growth narrative improves in 2020, Aurora stock will rebound from todayâÂÂs depressed levels in a big way. ThatâÂÂs because ACB stock is too cheap for its own good, plunging to a dirt cheap valuation due to persistent balance sheet and liquidity concerns. | What does all that mean for ACB stock? ACB Value Will Bounce As AuroraâÂÂs growth narrative improves in 2020, Aurora stock will rebound from todayâÂÂs depressed levels in a big way. ThatâÂÂs because ACB stock is too cheap for its own good, plunging to a dirt cheap valuation due to persistent balance sheet and liquidity concerns. | ACB Value Will Bounce As AuroraâÂÂs growth narrative improves in 2020, Aurora stock will rebound from todayâÂÂs depressed levels in a big way. What does all that mean for ACB stock? ThatâÂÂs because ACB stock is too cheap for its own good, plunging to a dirt cheap valuation due to persistent balance sheet and liquidity concerns. | Consequently, if AuroraâÂÂs fundamental trends do improve in 2020, ACB stock will likely headàwayàhigher. What does all that mean for ACB stock? ACB Value Will Bounce As AuroraâÂÂs growth narrative improves in 2020, Aurora stock will rebound from todayâÂÂs depressed levels in a big way. |
37730.0 | 2020-01-23 00:00:00 UTC | Could a New CEO Solve Some of Aurora Cannabis’ Problems? | ACB | https://www.nasdaq.com/articles/could-a-new-ceo-solve-some-of-aurora-cannabis-problems-2020-01-23 | nan | nan | It has not been a good year for Aurora Cannabis (NYSE:) CEO Terry Booth. On his watch, ACB stock has lost around 67% of its value in the past year. More importantly, the company has failed to deliver on many of its promises it made to shareholders over the past two years.
Source: Jarretera / Shutterstock.com
Cantor Fitzgerald analyst Pablo Zuanic believes one way to stem the bleeding at Aurora is to replace Booth as the companyâÂÂs chief executive with somebody more familiar with operating growth businesses.
In ZuanicâÂÂs opinion, the companyâÂÂs senior management is bloated. An excellent first move was sending Cam Battley, its chief corporate officer, packing on Dec. 21.ÃÂ
âÂÂWe understand that was not voluntary and thus see potential for ACB to turn the corner regarding reconciling its long-term ambitions with a more realistic approach to managing its near-term profitability and cash flow,â Zuanic wrote in a note to clients Jan. 2.
However, to ensure Aurora Cannabis lives to fight another day, Zuanic sees a change at the top helping stem the tide.ÃÂ
âÂÂWe think current CEO Terry Booth could take the role of chairman, Glen Ibbott should stay as CFO, and the new CEO could rationalize what we deem to be a bloated senior management structure,â he added.ÃÂ
Where Does ACB Stock Go From Here?
In his note to clients, the analyst cut his price target to $5 from $5.85. At current prices, thatâÂÂs still nearly 190% upside over the next 12 months.ÃÂ
Although Terry Booth deserves much of the credit for getting Aurora to this point in its development, it might be time to let someone else do the heavy lifting required to turn it from growth story to a mature and profitable company.
While itâÂÂs hard to imagine Aurora without Booth at the helm, Zuanic might be onto something â and hereâÂÂs why.àÃÂ
HeâÂÂs No Bruce Linton
Say what you will about former Canopy Growth (NYSE:) co-CEO Bruce Linton, but itâÂÂs hard to deny the legacy he built as the founder of CanadaâÂÂs largest cannabis company.ÃÂ
During his tenure, Linton did two things that stand out for me.
First, he managed to secure the companyâÂÂs financial future by selling a control position to Constellation Brands (NYSE:), allowing it to survive what has been a crazy 21 months since pot was legalized in Canada.ÃÂ
Secondly, he managed to snag a deal with Acreage Holdings (OTCMKTS:) that gives Canopy the right to buy it for $3.4 billion â if, and only if, the U.S. federal government legalizes cannabis before October 2026.ÃÂ
It might not look like a great deal, given AcreageâÂÂs current market capitalization is less than $600 million. However, should the legalization happen, valuations across the U.S. will fly through the ceiling. Being ahead of the curve gives ACRGF financial certainty in a very uncertain industry â and that, to me, is priceless.
Despite Linton being the soul of the company, and him making a couple of moves that could cement CanopyâÂÂs future, Constellation still felt it was necessary to bring in their own person to ensure it got on the pathway to profitability.ÃÂ
Which Brings Me to Terry Booth
Opposite to Linton, Booth hasnâÂÂt been nearly as creative in his role as CEO. Moving up to chairman would ensure that he stays with Aurora through a difficult period, while letting someone else with a more appropriate skill set to guide the company to the next level.ÃÂ
At $2 per share, Aurora must get this right. The status quo wonâÂÂt cut it with investors. Relieving Battley of his duties was a good first move, but more need to follow.ÃÂ
Zuanic has suggested that Aurora get strategic advisor Nelson Peltz more involved in the day-to-day operations, perhaps finding a new CEO and a possible sugar daddy with ties to the consumer packaged goods (CPG) sector.ÃÂ
I like both ideas. However, itâÂÂs a bit of a chicken and egg situation.ÃÂ
Terry Booth might agree to move up to the chairmanâÂÂs role and work with the board to find his replacement. The problem is, however, that should it find a CPG company to take a stake in Aurora, theyâÂÂre going to want to be a part of the CEO-selection process.ÃÂ
So, if you hire the CEO first, the valuation goes down because youâÂÂve removed your future partner from the hiring process. ThatâÂÂs never an attractive way to enter a partnership.ÃÂ
That said, AuroraâÂÂs board should set up a special committee with Booth on it to find a well-funded, strategic investor. Once that investor is found and an investment is made, it should start looking for a new CEO.
The Bottom Line on ACB Stock
I donâÂÂt often agree with analysts, but in this instance, Zuanic is on the money. A new partner and a new CEO would do wonders for ACB stock.
The question is whether Nelson Peltz is going to step up to the plate. Over the next few weeks, I think weâÂÂll get our answer. And for shareholderâÂÂs sake, it better be good news.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. | An excellent first move was sending Cam Battley, its chief corporate officer, packing on Dec. 21.àâÂÂWe understand that was not voluntary and thus see potential for ACB to turn the corner regarding reconciling its long-term ambitions with a more realistic approach to managing its near-term profitability and cash flow,â Zuanic wrote in a note to clients Jan. 2. On his watch, ACB stock has lost around 67% of its value in the past year. However, to ensure Aurora Cannabis lives to fight another day, Zuanic sees a change at the top helping stem the tide.àâÂÂWe think current CEO Terry Booth could take the role of chairman, Glen Ibbott should stay as CFO, and the new CEO could rationalize what we deem to be a bloated senior management structure,â he added.àWhere Does ACB Stock Go From Here? | However, to ensure Aurora Cannabis lives to fight another day, Zuanic sees a change at the top helping stem the tide.àâÂÂWe think current CEO Terry Booth could take the role of chairman, Glen Ibbott should stay as CFO, and the new CEO could rationalize what we deem to be a bloated senior management structure,â he added.àWhere Does ACB Stock Go From Here? On his watch, ACB stock has lost around 67% of its value in the past year. An excellent first move was sending Cam Battley, its chief corporate officer, packing on Dec. 21.àâÂÂWe understand that was not voluntary and thus see potential for ACB to turn the corner regarding reconciling its long-term ambitions with a more realistic approach to managing its near-term profitability and cash flow,â Zuanic wrote in a note to clients Jan. 2. | However, to ensure Aurora Cannabis lives to fight another day, Zuanic sees a change at the top helping stem the tide.àâÂÂWe think current CEO Terry Booth could take the role of chairman, Glen Ibbott should stay as CFO, and the new CEO could rationalize what we deem to be a bloated senior management structure,â he added.àWhere Does ACB Stock Go From Here? On his watch, ACB stock has lost around 67% of its value in the past year. An excellent first move was sending Cam Battley, its chief corporate officer, packing on Dec. 21.àâÂÂWe understand that was not voluntary and thus see potential for ACB to turn the corner regarding reconciling its long-term ambitions with a more realistic approach to managing its near-term profitability and cash flow,â Zuanic wrote in a note to clients Jan. 2. | However, to ensure Aurora Cannabis lives to fight another day, Zuanic sees a change at the top helping stem the tide.àâÂÂWe think current CEO Terry Booth could take the role of chairman, Glen Ibbott should stay as CFO, and the new CEO could rationalize what we deem to be a bloated senior management structure,â he added.àWhere Does ACB Stock Go From Here? A new partner and a new CEO would do wonders for ACB stock. On his watch, ACB stock has lost around 67% of its value in the past year. |
37731.0 | 2020-01-23 00:00:00 UTC | 3 Marijuana Stocks Trading Below Their Book Value | ACB | https://www.nasdaq.com/articles/3-marijuana-stocks-trading-below-their-book-value-2020-01-23 | nan | nan | Last year was supposed to be a breakout year for marijuana stocks. The stage appeared to be set for a good portion of the industry to push toward profitability. Canada was selling adult-use weed, and higher-margin derivatives were slated to hit dispensary shelves later in the year. Meanwhile, legalization momentum in the U.S. remained strong, striking hope that pot sales would continue to soar.
Unfortunately for investors, none of this came to fruition. In reality, supply issues have continued to persist in Canada, with the official launch of high-margin derivatives being delayed until mid-December. Then, in the U.S., high tax rates in select states (ahem, California) have made it virtually impossible for legal retailers to compete with black-market producers. As a result, marijuana stocks were clobbered in 2019.
One of the more interesting effects of this precipitous decline can be seen on the book value of pot stocks. While book value isn't exactly a valuation measure that cannabis investors would be expected to pay much attention to, the simple fact that three marijuana stocks are now trading below their book value is bound to raise a few eyebrows and catch some attention from value seekers. Of course, as you're about to see, there are very good reasons these below-book-value pot stocks aren't necessarily good deals.
Image source: Getty Images.
Aurora Cannabis: Price-to-book of 0.64
The first marijuana stock that's dropped well below its book value is Aurora Cannabis (NYSE: ACB). After declining by more than 50% in 2019, the most popular pot stock in the world is now worth a mere 64% of its book value. But make no mistake about it: Aurora Cannabis is no deal.
As of the end of Aurora's fiscal first quarter, ended Sept. 30, the company counted $5.61 billion Canadian in total assets. However, CA$3.17 billion of this was recognized as goodwill, with another CA$683 million classified as intangible assets. Put in another context, almost 70% of the company's total assets are built on hope and promises, ratherThat's a recipe for disaster.
The biggest issue for Aurora Cannabis is that it looks to have grossly overpaid for its more than one dozen acquisitions since August 2016. The most egregious of these deals is the CA$2.64 billion paid to acquire MedReleaf. With the Exeter facility now up for sale -- Exeter is a vegetable-growing greenhouse that was supposed to be retrofit to grow at least 105,000 kilos of pot per year -- the pricey CA$2.64 billion deal only wound up netting Aurora 35,000 kilos of annual output and MedReleaf's branding. It's a massive writedown waiting to happen.
Furthermore, Aurora Cannabis doesn't look as if it'll reach operating profitability in fiscal 2020, and the company may struggle to meet its repayment obligations on existing debt, according to some folks on Wall Street. Despite trading for less than book value, Aurora Cannabis is most definitely a pot stock to avoid.
Image source: Getty Images.
iAnthus Capital Holdings: Price-to-book of 0.6
It's important to realize that low book values for pot stocks are occurring in the U.S., as well. Vertically integrated multistate operator iAnthus Capital Holdings (OTC: ITHUF), which has a presence in 11 states and 30 open dispensaries, is valued at perhaps the lowest price-to-book of any marijuana stock. However, similar to Aurora Cannabis, poor dealmaking looks to be its undoing.
In February, iAnthus Capital completed what would be, at the time, the largest U.S. marijuana deal in history. Unfortunately, the all-stock acquisition of MPX Bioceutical is what's responsible for the majority of the $440.4 million in goodwill (that's in U.S. dollars) the company was carrying around on its balance sheet, as of the end of September. For context, iAnthus' goodwill is 55% higher than the company's current market cap, and it represents 53% of its $831.6 million in total assets.
And it gets worse. Like Aurora, iAnthus has quite a bit of its total assets classified as intangible assets -- $177.5 million, to be exact. This means 74% of the company's total assets are built on finger-crossing and hoping everything goes its way.
Although iAnthus is well-positioned in a handful of U.S. states, and it should see its sales move notably higher in 2020, it's hard to overlook the strong likelihood of a writedown in the not-so-distant future.
Image source: Getty Images.
CannTrust Holdings: Price-to-book of 0.85
Last, but not least, embattled marijuana stock CannTrust Holdings (NYSE: CTST) is valued at just 85% of its book value. Though this, too, might look like a deep discount, there are number of reasons behind CannTrust's bottom-feeding valuation.
For one, the company admitted in July to growing marijuana illegally in five unlicensed rooms for a period of six months (October 2018-March 2019). This admission eventually led to the firing of now-former CEO Peter Aceto, the destruction of $58 million in illicitly grown pot, and Health Canada handing out a cultivation and sales license suspension in September. That suspension does leave the door open for CannTrust to regain its licenses this year, but for the time being the company is unable to grow new crops or sell any product.
Additionally, CannTrust hasn't reported any of its operating results since May of last year. With the company having been caught with illicit grow, its previous income statements will need to be restated. It might take until the end of the first quarter of this year before the company delivers any of its previous results. Therefore, the company's book value could wind up being very different from the data we have now.
Although I do consider CannTrust a very risky buy for the second half of 2020, its exceptionally low book value plays no role in that belief.
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: Price-to-book of 0.64 The first marijuana stock that's dropped well below its book value is Aurora Cannabis (NYSE: ACB). Furthermore, Aurora Cannabis doesn't look as if it'll reach operating profitability in fiscal 2020, and the company may struggle to meet its repayment obligations on existing debt, according to some folks on Wall Street. Vertically integrated multistate operator iAnthus Capital Holdings (OTC: ITHUF), which has a presence in 11 states and 30 open dispensaries, is valued at perhaps the lowest price-to-book of any marijuana stock. | Aurora Cannabis: Price-to-book of 0.64 The first marijuana stock that's dropped well below its book value is Aurora Cannabis (NYSE: ACB). Of course, as you're about to see, there are very good reasons these below-book-value pot stocks aren't necessarily good deals. As of the end of Aurora's fiscal first quarter, ended Sept. 30, the company counted $5.61 billion Canadian in total assets. | Aurora Cannabis: Price-to-book of 0.64 The first marijuana stock that's dropped well below its book value is Aurora Cannabis (NYSE: ACB). While book value isn't exactly a valuation measure that cannabis investors would be expected to pay much attention to, the simple fact that three marijuana stocks are now trading below their book value is bound to raise a few eyebrows and catch some attention from value seekers. CannTrust Holdings: Price-to-book of 0.85 Last, but not least, embattled marijuana stock CannTrust Holdings (NYSE: CTST) is valued at just 85% of its book value. | Aurora Cannabis: Price-to-book of 0.64 The first marijuana stock that's dropped well below its book value is Aurora Cannabis (NYSE: ACB). iAnthus Capital Holdings: Price-to-book of 0.6 It's important to realize that low book values for pot stocks are occurring in the U.S., as well. CannTrust Holdings: Price-to-book of 0.85 Last, but not least, embattled marijuana stock CannTrust Holdings (NYSE: CTST) is valued at just 85% of its book value. |
37732.0 | 2020-01-22 00:00:00 UTC | A Huge Year for Aurora Cannabis Stock Is Off to a Wild Start | ACB | https://www.nasdaq.com/articles/a-huge-year-for-aurora-cannabis-stock-is-off-to-a-wild-start-2020-01-22 | nan | nan | Aurora Cannabis (NYSE:) stock is not for the risk-averse investor. The stock has dropped over 69% in the last 12 months. The âÂÂglass is half fullâ crowd would point out that Aurora stock is up about 8% in 2020, but itâÂÂs been anything but a smooth ride. After closing the first trading day of the year at $2.02 per share, the stock dropped nearly 20% during the first week.
Source: Shutterstock
Some of the problems bedeviling Aurora stock are out of its control and impact all the major cannabis providers. Like when, and if, more retail stores will open up throughout Canada â particularly in Ontario.
However, the company has had more than its share of self-inflicted wounds in the past few months. One such wound was the companyâÂÂs numerous acquisitions. At first, the strategy seemed to make sense. Becoming one of the largest growers, and therefore suppliers, would have put Aurora in a great position.
However, when the supply glut hit, it was a company like Aurora that was largely left holding the bag. Still, Aurora stock has erased its initial losses and is up for the year. The question for investors, however, is: has anything changed?
Cannabis 2.0 Is Providing a Reason for Optimism
The answer is a definite maybe. OrganiGram (NASDAQ:) saw its stock rise after the company posted better-than-expected revenue figures. An underlying factor for the positive revenue figures was initial evidence that the long-awaited Cannabis 2.0 was meeting, and perhaps exceeding, expectations.
Cannabis 2.0 is bringing what are referred to as derivative cannabis products into the market. This includes edibles, potentially beverages and vapes. The long-standing belief is that, while some potential customers may have no desire to smoke marijuana and therefore stay away from the dry-flower product, they will be attracted to cannabis in other forms.
On the other hand, this may be a question of having a bar set so low that it would be impossible to not clear it. Overall though, the issue facing Aurora along with other cannabis companies is that there needs to be several months of sustained â if not increasing â revenue to say for sure the supply bottleneck is really broken.
Also, a temporary will affect companies like Aurora and Canopy Growth (NYSE:) more than others. These companies have staked a lot of their success, at least initially, on the vaping market.
AuroraâÂÂs Path to Profit Remains Elusive
One problem facing Aurora stock is that . And because it is still working through a large amount of debt, its path to profitability looks elusive. However, analysts have recently been taking a closer look at Aurora stock and are starting to like what they see.
In particular, Cantor Fitzgerald analyst Pablo Zuanic is looking at three specific reasons why Aurora may be turning the corner. First, the company could be searching for a new CEO. This is usually a cause for concern, and explains in part the stockâÂÂs recent drop. However, this may be just what the doctor ordered for Aurora Cannabis. If the company can bring in a CEO that can offer investors a sound growth strategy along with financial discipline, it could help take the risk premium off the stock.
And it appears the company is already taking measures to achieve that financial discipline. It appears that Aurora is prepared to write down the value of certain âÂÂnon-coreâ assets. If true, that would be one step the company is taking to help its balance sheet.
And while analystsâ price targets are all over the map, CantorâÂÂs comes in at $3.85, which is more than a 91% increase from the stockâÂÂs current level.
Is Aurora Stock a Buy Right Now?
Aurora Cannabis will issue their next earnings report at the beginning of February. If thereâÂÂs anything you can take away from OrganiGramâÂÂs earnings report, itâÂÂs that you may see a pop in revenue from Aurora. That would be a welcome sign for the beleaguered company.
However, its ability to become profitable is where this ballgame will be won or lost. And in that regard, Aurora still has some proving to do. Who will the new CEO be? What will their plan be for the company?
So is it a buy? I think itâÂÂs a hold. You can wait it out. Right now, itâÂÂs trading at a penny-stock level. Yes, itâÂÂs an attractive idea to get in on âÂÂthe next big thing,â but Aurora has a lot of proving to do. And there appear to be some other cannabis companies that may represent a less-risky option.
As of this writing, Chris Markoch 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. | The long-standing belief is that, while some potential customers may have no desire to smoke marijuana and therefore stay away from the dry-flower product, they will be attracted to cannabis in other forms. Overall though, the issue facing Aurora along with other cannabis companies is that there needs to be several months of sustained â if not increasing â revenue to say for sure the supply bottleneck is really broken. If the company can bring in a CEO that can offer investors a sound growth strategy along with financial discipline, it could help take the risk premium off the stock. | Aurora Cannabis (NYSE:) stock is not for the risk-averse investor. AuroraâÂÂs Path to Profit Remains Elusive One problem facing Aurora stock is that . If the company can bring in a CEO that can offer investors a sound growth strategy along with financial discipline, it could help take the risk premium off the stock. | Aurora Cannabis (NYSE:) stock is not for the risk-averse investor. Overall though, the issue facing Aurora along with other cannabis companies is that there needs to be several months of sustained â if not increasing â revenue to say for sure the supply bottleneck is really broken. Is Aurora Stock a Buy Right Now? | Overall though, the issue facing Aurora along with other cannabis companies is that there needs to be several months of sustained â if not increasing â revenue to say for sure the supply bottleneck is really broken. If the company can bring in a CEO that can offer investors a sound growth strategy along with financial discipline, it could help take the risk premium off the stock. Is Aurora Stock a Buy Right Now? |
37733.0 | 2020-01-22 00:00:00 UTC | Aurora Cannabis: Love It or Leave It? | ACB | https://www.nasdaq.com/articles/aurora-cannabis%3A-love-it-or-leave-it-2020-01-22 | nan | nan | It's one of the most controversial names in the cannabis industry. Aurora Cannabis (NYSE: ACB) definitely has its fair share of detractors. But some think that Aurora could be one of the biggest winners in the global cannabis industry over the long run.
Aurora's share price tanked more than 56% in 2019. However, there are several legitimate reasons to think that the stock could rebound in a major way this year. Should you love Aurora Cannabis or leave it to be traded only by foolhardy investors?
Image source: Getty Images.
Why analysts are all over the map
If you're looking to Wall Street to help with your decision, you'll quickly find that they're sharply divided about Aurora Cannabis. Analysts' opinions are all over the map with respect to the stock's prospects.
GLJ Research analyst Gordon Johnson is, by far, the most pessimistic about Aurora. He not only recommends that investors sell the stock; Johnson even has a one-year price target of $0. That's right, this analyst believes that Aurora is in so much trouble that it could go under.
Johnson isn't alone in his negative take on the stock, although others aren't quite as gloomy. Piper Sandler's Michael Lavery thinks that Aurora could lose half of its current market cap. Bank of America Merrill Lynch analyst Christopher Carey agrees.
On the other hand, one of the most respected cannabis analysts in the industry, Cowen's Vivien Azer, recently confirmed her recommendation of Aurora with an outperform rating. Azer set a one-year price target that reflects a more than 100% upside for the stock. Cantor Fitzgerald's Pablo Zuanic also thinks that Aurora Cannabis could double its current price.
The big problem for investors
There's one big problem for investors considering what to do about Aurora: All of the analysts have pretty good reasons for their views.
The pessimistic analysts point to Aurora's abysmal balance sheet. And they're 100% correct that the company's financial condition doesn't look very good. Aurora still isn't anywhere close to achieving profitability. It's loaded with debt -- and there are real concerns the company won't be able to meet its debt covenants. More dilution seems to be inevitable.
However, Gordon Johnson's price target of $0 appears to be more of a public relations ploy than an actual projection. After all, despite its problems, Aurora Cannabis still has the second-largest market share in Canada and ranks as a leader in the important German medical cannabis market. Analysts with more positive opinions about Aurora focus on these strengths.
Vivien Azer isn't as worried about Aurora's debt problem as some of her peers are. After meeting with Aurora's management team, she wrote to clients that the company hopes to restructure its debt covenants with creditors and is actively working to that end.
Pablo Zuanic anticipates that Aurora could hire a new CEO who will implement tighter fiscal discipline. He also thinks that the company's advisor, billionaire Nelson Peltz, could help Aurora land a big equity partner from the consumer packaged goods industry.
Safest bet
So what's the best strategy for investors when it comes to Aurora Cannabis -- love it or leave it? My view is that the doomsayers often go too far with their negativity about the stock. Aurora still has tremendous production capacity, strong gross margins, and market-leading products.
In addition, there are several positive developments in progress that should help the company. Ontario is opening more retail cannabis stores. The Cannabis 2.0 market is just getting started.
But while I'm not nearly as pessimistic as some are about Aurora, I don't think investors should ignore the company's significant challenges. My view is that the safest bet for investors seeking to profit from the cannabis boom is to leave Aurora for others and instead look elsewhere. There are quite a few marijuana stocks that offer more attractive risk-reward propositions than Aurora does. Just because you don't hate a stock doesn't mean you have to love it.
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.
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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) definitely has its fair share of detractors. On the other hand, one of the most respected cannabis analysts in the industry, Cowen's Vivien Azer, recently confirmed her recommendation of Aurora with an outperform rating. After meeting with Aurora's management team, she wrote to clients that the company hopes to restructure its debt covenants with creditors and is actively working to that end. | Aurora Cannabis (NYSE: ACB) definitely has its fair share of detractors. On the other hand, one of the most respected cannabis analysts in the industry, Cowen's Vivien Azer, recently confirmed her recommendation of Aurora with an outperform rating. Cantor Fitzgerald's Pablo Zuanic also thinks that Aurora Cannabis could double its current price. | Aurora Cannabis (NYSE: ACB) definitely has its fair share of detractors. The big problem for investors There's one big problem for investors considering what to do about Aurora: All of the analysts have pretty good reasons for their views. After all, despite its problems, Aurora Cannabis still has the second-largest market share in Canada and ranks as a leader in the important German medical cannabis market. | Aurora Cannabis (NYSE: ACB) definitely has its fair share of detractors. The big problem for investors There's one big problem for investors considering what to do about Aurora: All of the analysts have pretty good reasons for their views. Analysts with more positive opinions about Aurora focus on these strengths. |
37734.0 | 2020-01-22 00:00:00 UTC | Aurora Cannabis Teaches a Great Lesson on Ignoring the Gurus | ACB | https://www.nasdaq.com/articles/aurora-cannabis-teaches-a-great-lesson-on-ignoring-the-gurus-2020-01-22 | nan | nan | IâÂÂve noticed a disconcerting trend lately as more analysts, it seems, are seeking celebrity status by trash-talking stocks and assigning absurdly low price targets. JPMorgan analyst Stephen TusaâÂÂs on General Electric (NYSE:) stock took center stage in the financial press recently, but a different pair of analysts have ganged up on Aurora Cannabis (NYSE:) stock and IâÂÂm questioning whether itâÂÂs warranted.
Source: ElRoi / Shutterstock.com
Immediately after their dire predictions, Aurora stock surged. And so far, the ACB share price has powered relentlessly forward and upward. That might be sheer coincidence, but I must admit itâÂÂs been perversely satisfying to watch their forecasts fall flat. On the other hand, itâÂÂs too early to judge the long-term veracity of their price targets. Will they find vindication down the road?
Time for a Gut Check
Upon of Piper SandlerâÂÂs Michael Lavery and Bank of America Merrill LynchâÂÂs Christopher Carey, my instincts kicked in. I just felt that their pessimism was excessive. I couldnâÂÂt have known that the share price would soon stage an impressive turnaround.
While ACB shares were trading in a range near $1.70, Lavery on Aurora Cannabis from âÂÂneutralâ to âÂÂunderweight.â ThatâÂÂs no biggie, as IâÂÂve seen this before and itâÂÂs not atypical for analysts to downgrade stocks after a negative price move. However, Lavery then proceeded to test the limits of pessimism by slashing his price target from $3 to $1.
Almost as if the two analysts had discussed it beforehand, Carey similarly battered Aurora with a downgrade from âÂÂneutralâ to âÂÂunderperformâ and a swift price-target reduction from 4 CAD to 1.50 CAD. While I canâÂÂt prove this, it did seem as if the two downgrades caused the share price to go lower â but not for long.
Within a matter of days, ACB stock made a 180-degree turn, shot up to $2.20, and closed the week at $2.13. IâÂÂll try to refrain from mocking Lavery and Carey for picking the exact bottom as a time to issue their doom-and-gloom proclamations, but I hope you wonâÂÂt begrudge me the gratification of seeing big-bank financial gurus crash and burn from time to time.
A Dissenting View
Not to oversimplify the issue, but everybody knows by now that Aurora has had balance sheet problems. Lavery, for instance, opined that Aurora wonâÂÂt from the companyâÂÂs operations until fiscal 2021âÂÂs third quarter.
I wonâÂÂt dispute this, but weâÂÂve been widely discussing this cash flow issue for a while now. Indeed, itâÂÂs probably the main reason why the share price has languished for the better part of a year. ACB stock has underperformed even relative to other cannabis names.
In other words, thereâÂÂs really no new negative news here and the price target cuts donâÂÂt sit well with me. Incidentally, IâÂÂm not the only dissenter in this regard. Cantor FitzgeraldâÂÂs Pablo Zuanic seized the opportunity to and took a veiled swipe at Lavery and Carey. He said, âÂÂThe poor liquidity makes the stock sensitive to downgrades (some done despite the absence of new catalysts/news) and misplaced market chatter.âÂÂ
I always thought that ACBâÂÂs liquidity was fairly decent for a weed stock, but Zuanic has a valid point. Sans justification, the aggressive price-target reductions ring hollow and perhaps a tad opportunistic. Wild predictions can bring publicity, sure, but the reputational damage is a hefty price to pay.
My Takeaway on ACB Stock
To be fair, analysts have a job to do and thereâÂÂs a place in the financial universe for âÂÂunusualâ predictions. As 2020 progresses weâÂÂll be in better positions to look back and evaluate the evaluators. And as informed investors, we donâÂÂt have to let their sentiment result in our detriment.
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. | While ACB shares were trading in a range near $1.70, Lavery on Aurora Cannabis from âÂÂneutralâ to âÂÂunderweight.â ThatâÂÂs no biggie, as IâÂÂve seen this before and itâÂÂs not atypical for analysts to downgrade stocks after a negative price move. And so far, the ACB share price has powered relentlessly forward and upward. Within a matter of days, ACB stock made a 180-degree turn, shot up to $2.20, and closed the week at $2.13. | While ACB shares were trading in a range near $1.70, Lavery on Aurora Cannabis from âÂÂneutralâ to âÂÂunderweight.â ThatâÂÂs no biggie, as IâÂÂve seen this before and itâÂÂs not atypical for analysts to downgrade stocks after a negative price move. And so far, the ACB share price has powered relentlessly forward and upward. Within a matter of days, ACB stock made a 180-degree turn, shot up to $2.20, and closed the week at $2.13. | While ACB shares were trading in a range near $1.70, Lavery on Aurora Cannabis from âÂÂneutralâ to âÂÂunderweight.â ThatâÂÂs no biggie, as IâÂÂve seen this before and itâÂÂs not atypical for analysts to downgrade stocks after a negative price move. And so far, the ACB share price has powered relentlessly forward and upward. Within a matter of days, ACB stock made a 180-degree turn, shot up to $2.20, and closed the week at $2.13. | While ACB shares were trading in a range near $1.70, Lavery on Aurora Cannabis from âÂÂneutralâ to âÂÂunderweight.â ThatâÂÂs no biggie, as IâÂÂve seen this before and itâÂÂs not atypical for analysts to downgrade stocks after a negative price move. My Takeaway on ACB Stock To be fair, analysts have a job to do and thereâÂÂs a place in the financial universe for âÂÂunusualâ predictions. And so far, the ACB share price has powered relentlessly forward and upward. |
37735.0 | 2020-01-22 00:00:00 UTC | Aurora Cannabis Could Recover in 2020 if the Stars Align | ACB | https://www.nasdaq.com/articles/aurora-cannabis-could-recover-in-2020-if-the-stars-align-2020-01-22 | nan | nan | The Canadian cannabis sector has never marketed itself as a stable, worry-free opportunity. However, some names are worse than others â as is the case with Aurora Cannabis (NYSE:). Once a bright spot in legal marijuana due to its massive international footprint, ACB stock plummeted in 2019 as fiscal concerns weighed more heavily than the companyâÂÂs potential opportunities. With shares off to a rocky start to 2020, is there any hope here?
Source: Shutterstock
Investors have every right to be concerned. Since the last session of 2019, ACB stock appeared determined to kill every holding handsâ patience. At one point, the markets feared that shares could fall below $1. However, some positive notes â or at least, non-overtly negative notes â brought some life back into the embattled shares.
In a note to clients, Cowen analyst Vivien Azer described attending an investors conference, where Aurora Cannabisâ management team disclosed that it was working with creditors to . Also, Cantor Fitzgerald analyst Pablo Zuanic called for the company to find a better CEO.
Clearly, ACB stock can use any help that it can get, and these suggestions are steps in the right direction. But, will it be enough to convince observers to speculate on the company?
If youâÂÂre even mildly risk averse, ACB stock is not for you. Although I see optimistic catalysts for the organization and the industry, time is the biggest enemy; And donâÂÂt mistake the present situation: although management is trying to restructure its debt, what theyâÂÂre really asking for is more digits on the clock.
If they get it, ACB stock could fly higher in 2020. However, as with anything cannabis related, thatâÂÂs a big âÂÂif.âÂÂ
The Possible Case for a Recovery in ACB Stock
Before we get into it, letâÂÂs reiterate once again: Aurora Cannabis is only for speculators at this point. While it has a chance for recovery, many things have to go right â and in time.
With that out of the way, the catalyst for ACB stock is the possible improvement of the Canadian cannabis marketâÂÂs . Specifically, Canada needs to approve more cannabis retail outlets and dispensaries to effectively feed demand. Failing that, it needs to feed demand based on efficiency metrics.
Interestingly, Azer pointed out that AuroraâÂÂs disappointing fiscal first-quarter revenue was at least partially attributable to âÂÂcongested channel inventoryâ¦from initial inventory loading in anticipation of Ontario opening additional locations that has yet to occur.âÂÂ
Importantly, this channel-inventory congestion isnâÂÂt a lame excuse. In the third calendar quarter of 2019, Ontario had adult cannabis users. However, it only had 75 stores open to serve this demand. Put differently, there are nearly 27,000 users per each store.
Source: Chart by Josh Enomoto
Unfortunately, this metric just wonâÂÂt do. Currently, Canada has nearly 5.2 million cannabis users total and only 363 stores nationwide. Doing the simple math, this breaks down to 14,318 stores per one cannabis user.
Now, this last figure to the state of Colorado: it has approximately one store per every 10,000 residents! Be that as it may, the issue with the Canadian province of Ontario is that compared to other provinces, itâÂÂs incredibly inefficient. Of course, whatâÂÂs really glaring is that Ontario is home to CanadaâÂÂs largest population of cannabis users.
However, itâÂÂs not just Ontario. Provinces like Quebec, Nova Scotia and Manitoba have relatively sizable cannabis user communities â yet these markets too are grossly inefficient.
Nonetheless, any improvement here could do wonders for ACB stock.
Can the U.S. Improve AuroraâÂÂs Chances?
Another factor that could play a vital role for Aurora Cannabis is the legalization momentum in the U.S. Although marijuana remains a Schedule I drug, the federal government legalized hemp and hemp derivatives like cannabidiol, or CBD. This suggests that full legalization is becoming more of a reality than a pipe dream.
Furthermore, the upcoming 2020 presidential election presents an interesting wrinkle for ACB stock. Primarily, the Democratic party has generally moved toward supporting both marijuana legalization and decriminalization initiatives. Senator Bernie Sanders has gone a step further, indicating that heâÂÂll if necessary â and at 4:20pm ET, no less.
However, not everyone is quite onboard with such a proposal. For instance, former Vice President Joe Biden has flip-flopped on the legalization question. And if he wins the election, he probably wouldnâÂÂt be the most supportive of that idea. Plus, President Donald Trump could win another term â and as such, full legalization would clash with his law-and-order image.
Still, a few powerful catalysts are poised to launch ACB stock, that much is for sure. The question is whether they can actually do so, and in quick enough time.
As of this writing, Josh Enomoto 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. | Once a bright spot in legal marijuana due to its massive international footprint, ACB stock plummeted in 2019 as fiscal concerns weighed more heavily than the companyâÂÂs potential opportunities. Since the last session of 2019, ACB stock appeared determined to kill every holding handsâ patience. Clearly, ACB stock can use any help that it can get, and these suggestions are steps in the right direction. | Since the last session of 2019, ACB stock appeared determined to kill every holding handsâ patience. With that out of the way, the catalyst for ACB stock is the possible improvement of the Canadian cannabis marketâÂÂs . Furthermore, the upcoming 2020 presidential election presents an interesting wrinkle for ACB stock. | Once a bright spot in legal marijuana due to its massive international footprint, ACB stock plummeted in 2019 as fiscal concerns weighed more heavily than the companyâÂÂs potential opportunities. However, as with anything cannabis related, thatâÂÂs a big âÂÂif.â The Possible Case for a Recovery in ACB Stock Before we get into it, letâÂÂs reiterate once again: Aurora Cannabis is only for speculators at this point. With that out of the way, the catalyst for ACB stock is the possible improvement of the Canadian cannabis marketâÂÂs . | Clearly, ACB stock can use any help that it can get, and these suggestions are steps in the right direction. However, as with anything cannabis related, thatâÂÂs a big âÂÂif.â The Possible Case for a Recovery in ACB Stock Before we get into it, letâÂÂs reiterate once again: Aurora Cannabis is only for speculators at this point. With that out of the way, the catalyst for ACB stock is the possible improvement of the Canadian cannabis marketâÂÂs . |
37736.0 | 2020-01-21 00:00:00 UTC | Aurora Cannabis (ACB): Fade the Bulk Wholesale Induced Rally | ACB | https://www.nasdaq.com/articles/aurora-cannabis-acb%3A-fade-the-bulk-wholesale-induced-rally-2020-01-21 | nan | nan | The cannabis sector has seen a huge rally over the last week and Aurora Cannabis (ACB) is no exception. Some general excitement over a competitor’s quarterly earnings report and some positive regulatory headlines from the U.S. have investors throwing caution to the wind again. The company still has too many unresolved risks to rush into the stock here just because a competitor beat quarterly estimates due to a large bulk wholesale deal.
Money Losing Operations
The firing of CCO Cam Battley and the placing of a facility on the market for sale at a price of C$17 million doesn’t alter the bleak financial prospects of Aurora Cannabis. In the last quarter alone, the Canadian cannabis company reported an EBITDA loss of C$39.7 million.
A capex cut might help stem the cash flow burn, but Aurora Cannabis has made limited steps announced to the public on the operational side. The company needs higher revenues and reduced costs in order to reach EBITDA profitable, a measure that doesn’t even factor in potentially mounting interest expenses into the cash burn equation.
The big story coming up with the FQ2 results in mid-February is whether the company restructures operations to reduce the operating expense base of C$81.1 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 reduced by disappointing sales.
Wholesale Sales
The Organigram (OGI) earnings beat has the whole market up, but the company beat sales estimates based on a surprise bulk wholesale sale of C$9.2 million. Aurora Cannabis had a similar quarterly boost back in the June quarter where an additional C$18.0 million in bulk wholesale sales boosted those numbers sending the stock up to $6.50 back in September. The stock didn’t hold up at the end of 2019, partly because the September quarter sales saw wholesale revenues decline 50% to only C$10.3 million.
The addition of competition in the wholesale space should hurt the ability of the company to repeat the revenue boost from bulk sales at 60% gross margins. Without the bulk sales, OrganiGram didn’t see any jump in revenues sequentially for the last quarter following the weak August quarter hit by lack of provinces ordering and product returns.
Aurora Cannabis avoided the product returns hit, but the company saw sales dip last quarter. Investors shouldn’t expect any revenue boost this quarter outside of the wholesale sales. Analysts forecast December quarterly revenues of C$80 million which won’t inspire the market to chase this rally back above $2.
With at least 1.2 billion shares outstanding, the stock has a market value of ~$2.5 billion and quarterly revenues of $60 million aren’t going to inspire investors to hold the sock assuming the adjusted EBITDA levels don’t show any major improvement.
Consensus Verdict
All in all, the Street's current view on Aurora Cannabis 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 2 "hold" and 5 "sell" ratings. However, the $2.83 price target suggests an upside potential of nearly 40% from the current share price. (See Aurora Cannabis stock analysis on TipRanks)
Takeaway
The key investor takeaway is that Aurora Cannabis has a lot of positive catalysts to play out in 2020, but the company needs to reorganize the firm to reduce operating expenses following delayed catalysts in 2020. The stock has seen a recent boost due to some over excitement about the rebound in sales at Organigram, but investors should be cautioned that the revenue beat was due to low quality sales.
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. | The cannabis sector has seen a huge rally over the last week and Aurora Cannabis (ACB) is no exception. Money Losing Operations The firing of CCO Cam Battley and the placing of a facility on the market for sale at a price of C$17 million doesn’t alter the bleak financial prospects of Aurora Cannabis. A capex cut might help stem the cash flow burn, but Aurora Cannabis has made limited steps announced to the public on the operational side. | The cannabis sector has seen a huge rally over the last week and Aurora Cannabis (ACB) is no exception. Wholesale Sales The Organigram (OGI) earnings beat has the whole market up, but the company beat sales estimates based on a surprise bulk wholesale sale of C$9.2 million. Aurora Cannabis had a similar quarterly boost back in the June quarter where an additional C$18.0 million in bulk wholesale sales boosted those numbers sending the stock up to $6.50 back in September. | The cannabis sector has seen a huge rally over the last week and Aurora Cannabis (ACB) is no exception. Wholesale Sales The Organigram (OGI) earnings beat has the whole market up, but the company beat sales estimates based on a surprise bulk wholesale sale of C$9.2 million. Aurora Cannabis had a similar quarterly boost back in the June quarter where an additional C$18.0 million in bulk wholesale sales boosted those numbers sending the stock up to $6.50 back in September. | The cannabis sector has seen a huge rally over the last week and Aurora Cannabis (ACB) is no exception. Wholesale Sales The Organigram (OGI) earnings beat has the whole market up, but the company beat sales estimates based on a surprise bulk wholesale sale of C$9.2 million. Analysts forecast December quarterly revenues of C$80 million which won’t inspire the market to chase this rally back above $2. |
37737.0 | 2020-01-21 00:00:00 UTC | News Flash: Aurora Cannabis Is No Longer the Leading Pot Grower | ACB | https://www.nasdaq.com/articles/news-flash%3A-aurora-cannabis-is-no-longer-the-leading-pot-grower-2020-01-21 | nan | nan | To say that marijuana stocks have been volatile would be a bit of an understatement. Last year, more than a dozen pot stocks wound up gaining in excess of 70% during the first quarter. But the final nine months of 2019 were marked by a steep downtrend in cannabis stocks, resulting in most finishing the year far lower than where they began.
Visions of rapid sales growth and profitability quickly faded and gave way to the realities that supply is constrained in Canada, tax rates on pot are far too high in most recreationally legal U.S. states, and the black market remains resilient. This has caused a number of marijuana growers to rethink their production needs, including the most popular marijuana stock in the world, Aurora Cannabis (NYSE: ACB).
Image source: Getty Images.
Aurora Cannabis is no longer a marijuana production kingpin
By midyear 2019, Aurora Cannabis was projected to be the largest producer of weed, when at full operating capacity. The company had 15 cultivation facilities that were expected to generate no less than 625,000 combined kilos of annual run-rate capacity by the end of its fiscal 2020 (June 30, 2020), with peak production potential of around 670,000 kilos. Such a huge annual haul of marijuana was expected to make Aurora a popular grower to forge supply deals with, as well as push its per-gram production costs well below the industry average.
But industry dynamics in Canada have coerced changes from growers both big and small. Ontario's inability to open a sufficient number of cannabis retail locations, and Health Canada delaying the launch of derivatives by two months, have hurt pot stock operating results and sent many growers into cash-conservation mode, including Aurora.
In recent months, Aurora Cannabis announced that it would be halting construction on its 1-million-square-foot Aurora Nordic 2 facility in Denmark, which was slated to produce at least 120,000 kilos per year, as well as its 1.62-million-square-foot Aurora Sun campus in Alberta. Only six grow rooms covering 238,000 square feet at Aurora Sun will remain in use for the time being. Aurora Sun was expected to produce at least 230,000 kilos annually at full capacity. These two construction halts essentially removed around 320,000 kilos of run-rate peak annual output.
What's more, Aurora recently announced that it was putting the Exeter facility up for sale. Exeter is a 1-million-square-foot vegetable-growing greenhouse on 164 acres that was acquired as part of its buyout of MedReleaf for 2.64 billion in Canadian dollars ($2.02 billion). The idea had been that Exeter would be retrofit to produce no less than 105,000 kilos of cannabis per year; but Aurora simply never got around to this project. Assuming this sale goes through, Aurora Cannabis will have sold or set aside roughly 425,000 kilos in annual output, potentially reducing its yearly run-rate production to less than 250,000 kilos.
Image source: Getty Images.
These cannabis stocks may outproduce Aurora
Meanwhile, three growers might be able to outproduce Aurora Cannabis, assuming Aurora Sun and Aurora Nordic 2 remain on ice.
First, there's Canopy Growth (NYSE: CGC), the largest marijuana stock by market cap. Canopy Growth has 10 production facilities, and the company has yet to announce any intentions to cut back on its output. Then again, it hasn't exactly been forthcoming with its peak production estimate, so it's a little bit of a guessing game. With Canopy projected to have 5.6 million square feet of cultivation space, north of 500,000 kilos is the current expectation. We should learn a lot more in the months to come as new CEO David Klein outlines the company's strategic growth objectives.
Second, Aphria (NYSE: APHA) has a decent shot at outpacing Aurora Cannabis in production. Following a more than 18-month wait, Health Canada approved the joint venture Aphria Diamond farm for cultivation in November. This farm is capable of 140,000 kilos of peak annual cannabis output, which goes along with 110,000 kilos for Aphria One, and 5,000 kilos for Broken Coast Cannabis (which Aphria acquired). All told, Aphria's 255,000 kilos of peak run-rate output might edge out Aurora Cannabis.
Third and finally, Flowr (OTC: FLWPF) might be a dark-horse candidate to deliver more marijuana than Aurora Cannabis (albeit that's unlikely to happen in 2020). In Canada, Flowr is primarily focused on its Kelowna campus in British Columbia, which will be capable of roughly 50,000 kilos of premium and ultra-premium weed. However, Flowr also acquired the remainder of Holigen that it didn't already own last year, thereby inheriting the 7-million-square-foot outdoor Aljustrel grow farm in Portugal. This farm is capable of as much as 500,000 kilos a year in run-rate output when at full capacity.
Image source: Getty Images.
Aurora has bigger things to worry about
When push comes to shove, Aurora Cannabis has far more important things to worry about than being the top producer of marijuana in the world.
For one, there are glaring concerns from a few analysts on and off Wall Street that Aurora may not have enough cash on hand to make good on its debts. The company already had to amend a CA$230 million convertible note that was slated to come due in March by issuing a boatload of new stock, and has $400 million (that's U.S. dollars) in additional at-the-market share offerings at its disposal to bolster its cash position. Halting construction at two of its largest grow farms (Aurora Sun and Aurora Nordic 2), as well as cutting ties with Exeter, are all a means to conserve cash and reduce operating expenses in the meantime.
In addition to bolstering its cash, Aurora is likely going to need to deal with the mammoth amount of goodwill on its balance sheet. After grossly overpaying for more than a dozen acquisitions over the past three-plus years, Aurora's CA$3.17 billion in goodwill now accounts for a staggering 57% of its total assets. The sooner Aurora admits that it overpaid for previous acquisitions and writes down a significant portion of this value, the better the company's balance sheet will look.
Aurora Cannabis has a lot of work ahead of it, and the company that investors see today looks nothing like what was envisioned as recently as six months ago.
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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. | This has caused a number of marijuana growers to rethink their production needs, including the most popular marijuana stock in the world, Aurora Cannabis (NYSE: ACB). Visions of rapid sales growth and profitability quickly faded and gave way to the realities that supply is constrained in Canada, tax rates on pot are far too high in most recreationally legal U.S. states, and the black market remains resilient. Such a huge annual haul of marijuana was expected to make Aurora a popular grower to forge supply deals with, as well as push its per-gram production costs well below the industry average. | This has caused a number of marijuana growers to rethink their production needs, including the most popular marijuana stock in the world, Aurora Cannabis (NYSE: ACB). Assuming this sale goes through, Aurora Cannabis will have sold or set aside roughly 425,000 kilos in annual output, potentially reducing its yearly run-rate production to less than 250,000 kilos. These cannabis stocks may outproduce Aurora Meanwhile, three growers might be able to outproduce Aurora Cannabis, assuming Aurora Sun and Aurora Nordic 2 remain on ice. | This has caused a number of marijuana growers to rethink their production needs, including the most popular marijuana stock in the world, Aurora Cannabis (NYSE: ACB). Aurora Cannabis is no longer a marijuana production kingpin By midyear 2019, Aurora Cannabis was projected to be the largest producer of weed, when at full operating capacity. In recent months, Aurora Cannabis announced that it would be halting construction on its 1-million-square-foot Aurora Nordic 2 facility in Denmark, which was slated to produce at least 120,000 kilos per year, as well as its 1.62-million-square-foot Aurora Sun campus in Alberta. | This has caused a number of marijuana growers to rethink their production needs, including the most popular marijuana stock in the world, Aurora Cannabis (NYSE: ACB). This farm is capable of 140,000 kilos of peak annual cannabis output, which goes along with 110,000 kilos for Aphria One, and 5,000 kilos for Broken Coast Cannabis (which Aphria acquired). This farm is capable of as much as 500,000 kilos a year in run-rate output when at full capacity. |
37738.0 | 2020-01-20 00:00:00 UTC | Finally, Some Good News for Marijuana Stocks | ACB | https://www.nasdaq.com/articles/finally-some-good-news-for-marijuana-stocks-2020-01-20 | nan | nan | In just one year, marijuana stocks went from being a cash machine for investors to a vacuum looking to suck their investment capital dry.
Following an incredible first quarter, which saw more than a dozen pot stocks gain at least 70% in value, cannabis stock investors would endure a steep nine-month downtrend the remainder of the year. Supply issues in Canada, exorbitant tax rates on weed in key U.S. markets, and a mammoth black-market presence have worked together to keep marijuana stocks from realizing their potential. As a result, cannabis stocks suffered, while short-sellers rejoiced.
However, a recent check of short interest on a number of marijuana stocks listed on the Nasdaq or New York Stock Exchange (NYSE) revealed some good news: Shares held by short-sellers declined for some of the most popular pot stocks between the end of November and the end of December. Put in another context, pessimism waned for the first time in a long time.
Here are five cannabis stocks that witnessed a notable decline in shares held short.
Image source: Getty Images.
Aurora Cannabis
In 2019, the most popular marijuana stock in the world, Aurora Cannabis (NYSE: ACB), wound up losing more than half its value and roughly 80% of its share price since its yearly high set in March. Short-sellers absolutely cleaned up after Aurora failed to produce positive adjusted EBITDA, as the company had initially suggested it would do. It also wound up halting construction projects at a number of its largest cultivation facilities, thereby more than halving its peak production potential.
Despite this, the number of shares held short declined from 172.9 million at the end of November to 156 million by year's end. This was likely a combination of short-sellers locking in profits, as well as the realization that Aurora is still a major potential producer with a large international presence. If and when the Canadian cannabis market fixes its supply problems, the risk-versus-reward profile could very well favor Aurora.
Of course, with Aurora Cannabis contending with serious cash concerns and what I believe to be a massive writedown just waiting to happen, the 156 million shares that remain short could still be handsomely rewarded.
Image source: Getty Images.
HEXO
Another cannabis stock that allowed investors to make bank in 2019 is Quebec-based HEXO (NYSE: HEXO). Last year, HEXO shed 54% of its share price, and wound up declining by more than 80% from its late-April high. Once-lofty fiscal 2020 sales projections were completely stripped away by management, with HEXO also announcing significant peak production cutbacks.
Yet, the latest short interest data also showed that pessimists have reduced their holdings in HEXO from 36 million shares at the end of November to 31.3 million shares by the end of 2019. A substantial decline in HEXO's share price, compounded with cost-cutting moves such as the layoff of 200 employees and the aforementioned production cuts, might have convinced pessimists that the company's downside was limited.
What remains to be seen is if HEXO can maintain its listing on the NYSE, which requires a $1 minimum share price. HEXO's stock has been clobbered so badly by regulatory and company-based miscues that it's been nearing this minimum share price. If HEXO winds up getting the heave-ho from the NYSE, short-sellers would likely pile back on.
Image source: Getty Images.
OrganiGram Holdings
New Brunswick-based OrganiGram Holdings (NASDAQ: OGI) didn't have anywhere near as bad of a year as Aurora or HEXO. Nevertheless, it didn't stop yearlong short-sellers from enjoying a 31% decline in OrganiGram's share price, primarily spurred by supply issues in Ontario and a higher-than-expected fiscal fourth-quarter loss.
However, the newest data shows that short interest for OrganiGram declined from 10.2 million shares at the end of November to just 9.3 million shares by the end of December. As the only company to have generated a no-nonsense quarterly operating profit to date, it's not surprising to see pessimists approaching OrganiGram with caution.
Furthermore, the remaining short-sellers were likely burnt to a crisp last Wednesday, Jan. 15, after OrganiGram surged 45% following its fiscal first-quarter results. Although the company wound up losing a small amount of money, revenue surpassed expectations, and the company calmed investor nerves by suggesting it has enough capital to fund its existing operations and expansion activity. This isn't a pot stock short-sellers should be attacking.
Image source: Getty Images.
Aphria
Even though it didn't have a terrible year, Aphria (NYSE: APHA) remained a popular short-sale candidate in 2019. Shares of the company only lost 8% last year, although this underperformed the broad-based S&P 500 by 37 percentage points, thereby making it a win for pessimists.
But between the end of November and the end of December, shares held short in Aphria declined from 35.5 million to 30.9 million. This ebbing in pessimism may have to do with the company reporting two consecutive quarterly profits (aided by fair-value adjustments) in fiscal Q4 2019 and Q1 2020. The company's pharmaceutical distribution subsidiary, CC Pharma, acquired in January 2019, has been a boon to Aphria's top-line results, while adult-use cannabis revenue has steadily ticked higher.
Then again, the remaining short-sellers may be banking on Aphria's inability to regain investors' trust. In spite of a number of allegations from short-sellers surrounding Aphria in early 2019 that proved untrue, an independent committee did find conflicts of interest with a small number of execs regarding the company's Latin American assets purchase. This led longtime CEO Vic Neufeld to step down, and has cast a cloud over this stock ever since. Trust is a very hard thing to regain.
Image source: Getty Images.
CannTrust Holdings
Lastly, there's perhaps the most logical short-sell candidate of them all, CannTrust Holdings (NYSE: CTST). When 2019 came to a close, CannTrust had shed 81% of its value, much of which was the result of a July admission that it illegally grew marijuana in five unlicensed rooms for a period of six months (October 2018 to March 2019). The company would eventually see its cultivation and sales licenses suspended in September by Health Canada.
Even with this news, CannTrust's shares held short declined from 13.1 million to 12.1 million over the final month of the year. This likely had to do with the company's share price declining below $1, thereby minimizing the potential future returns for pessimists. Remember, short-seller gains are capped at 100% if a stock goes to $0, but their potential losses are never capped.
My suspicion is that short-sellers may get one final push out of CannTrust if the company is ultimately delisted from the NYSE. Although CannTrust has regained the $1 share level, it still hasn't reported its operating results in eight months, which is a requirement for continued listing. But, like Aphria, CannTrust has a long way to go before regaining investor trust.
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Sean Williams owns shares of CannTrust Holdings Inc. The Motley Fool recommends CannTrust Holdings Inc, HEXO, Nasdaq, 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. | Aurora Cannabis In 2019, the most popular marijuana stock in the world, Aurora Cannabis (NYSE: ACB), wound up losing more than half its value and roughly 80% of its share price since its yearly high set in March. A substantial decline in HEXO's share price, compounded with cost-cutting moves such as the layoff of 200 employees and the aforementioned production cuts, might have convinced pessimists that the company's downside was limited. Nevertheless, it didn't stop yearlong short-sellers from enjoying a 31% decline in OrganiGram's share price, primarily spurred by supply issues in Ontario and a higher-than-expected fiscal fourth-quarter loss. | Aurora Cannabis In 2019, the most popular marijuana stock in the world, Aurora Cannabis (NYSE: ACB), wound up losing more than half its value and roughly 80% of its share price since its yearly high set in March. However, a recent check of short interest on a number of marijuana stocks listed on the Nasdaq or New York Stock Exchange (NYSE) revealed some good news: Shares held by short-sellers declined for some of the most popular pot stocks between the end of November and the end of December. Yet, the latest short interest data also showed that pessimists have reduced their holdings in HEXO from 36 million shares at the end of November to 31.3 million shares by the end of 2019. | Aurora Cannabis In 2019, the most popular marijuana stock in the world, Aurora Cannabis (NYSE: ACB), wound up losing more than half its value and roughly 80% of its share price since its yearly high set in March. However, a recent check of short interest on a number of marijuana stocks listed on the Nasdaq or New York Stock Exchange (NYSE) revealed some good news: Shares held by short-sellers declined for some of the most popular pot stocks between the end of November and the end of December. Yet, the latest short interest data also showed that pessimists have reduced their holdings in HEXO from 36 million shares at the end of November to 31.3 million shares by the end of 2019. | Aurora Cannabis In 2019, the most popular marijuana stock in the world, Aurora Cannabis (NYSE: ACB), wound up losing more than half its value and roughly 80% of its share price since its yearly high set in March. Another cannabis stock that allowed investors to make bank in 2019 is Quebec-based HEXO (NYSE: HEXO). Last year, HEXO shed 54% of its share price, and wound up declining by more than 80% from its late-April high. |
37739.0 | 2020-01-20 00:00:00 UTC | Is It Finally Time to Buy Aurora Cannabis Stock? | ACB | https://www.nasdaq.com/articles/is-it-finally-time-to-buy-aurora-cannabis-stock-2020-01-20 | nan | nan | I that Aurora Cannabis (NYSE:) stock isnâÂÂt headed for $0, but itâÂÂs still too early to buy. However, in the past couple of weeks, multiple Wall Street analysts have updated their outlook for Aurora. Some analysts are getting more pessimistic on the fundamental outlook for Aurora in the first half of 2020. Others are getting more bullish on the potential long-term value opportunity in Aurora stock.
Source: Jarretera / Shutterstock.com
AuroraâÂÂs next earnings report is less than a month away. I think itâÂÂs still too early to be buying the dip. Besides, there is at least one better option out there for speculative cannabis investors.
Management Is Confident
One of the biggest Aurora bulls on Wall Street is Cantor Fitzgerald analyst . Zuanic recently met with Aurora management. This week, he said he came away from the meeting even more convinced that AuroraâÂÂs massive selloff is a buying opportunity.
Zuanic says there are three primary drivers of AuroraâÂÂs underperformance in the past month, none of which are real reasons to sell the stock. First, CCO Cam Battley was let go. Zuanic says the market seems to think Battley resigned, but thatâÂÂs not the case. In fact, he says some more fresh blood would be good news for Aurora.
âÂÂWe think ACB would benefit from some pruning and from bringing in an outside CEO renown in the investment community for both sound growth strategy and financial discipline (cost/cash flow),â Zuanic says.
Second, traders have been speculating that Aurora may significantly write-down the value of certain assets after a recent property listing price came in below expectations. Zuanic says AuroraâÂÂs move to sell non-core assets is part of its cost management plans and should be considered good news for the balance sheet.
Finally, AuroraâÂÂs credit facility requires it to have a total funded debt-to-adjusted shareholders equity ratio at or below 0.25:1 by Sept. 30, 2020. Zuanic says all Aurora needs to get its ducks in order prior to this deadline is to generate around $21 million in earnings before interest, taxes depreciation and amortization (EBITDA) per quarter by the September quarter.
Company management and Zuanic himself are confident that goal is still within reach.
âÂÂWe would make use of the recent pullback,â Zuanic said in conclusion. Cantor has an âÂÂoverweightâ rating and $3.85 price target for Aurora stock.
Balance Sheet Concerns
The same week Zuanic came out with his bullish commentary on Aurora, Bank of America analyst downgraded the stock to âÂÂunderperform.â Carey also cut his price target to just $1.15.
Like many Aurora bears, CareyâÂÂs primary concern is the companyâÂÂs balance sheet.
âÂÂWith [balance sheet] risks to remain a core investment thesis in 2020 in our view, and lingering uncertainty especially on financial covenants, we struggle to envision a scenario where shares have sustainable support,â Carey wrote in the downgrade note.
Carey credits Aurora with taking several steps to improve its balance sheet, including spending cuts, deferred capex and asset sales. However, he says Aurora is still not in position to meet the terms of its credit facility.
Bank of America expects weakness in the Canadian cannabis market to continue throughout the first half of 2020. Without impressive growth numbers to support the bull thesis for cannabis stocks in the near-term, Carey says investors will remain focused on balance sheets.
âÂÂUnfortunately, ACB has the weakest in our group, while valuation is still near group high,â he said.
In other words, Aurora has a lot of good things going for it. But at this point of uncertainty and at the current valuation, he simply canâÂÂt recommend the stock.
A Better Option Than Aurora Stock
Long-time readers know IâÂÂve been like a broken record when it comes to cannabis stocks. There will likely ultimately be some huge winners in the space in the long term. But there is simply too much risk and uncertainty at this point to be picking one winner.
If you insist on picking one stock, I believe Canopy Growth Corp (NYSE:) is the best pick in the space today. It certainly has a lot less risk than Aurora. Canopy has a strong balance sheet and a major financial backer in Constellation Brands (NYSE:). In addition, I think thereâÂÂs a good chance Constellation may step in and buy out Canopy as soon as the financial outlook for cannabis stocks clears up.
In the meantime, rather than buying a single stock, cannabis investors should consider owning a basket of at least four or five cannabis stocks to diversify their portfolio. Analysts expect theÃÂ difficult cannabis market to persist in the first half of 2020. It would be wise for cannabis investors to consider clash flow, debt levels and valuation. In addition to Canopy, investors should consider other top-tier stocks such as Tilray (NASDAQ: ) and Cronos Group (NASDAQ:).
As of this writing, Wayne Duggan 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. | âÂÂWe think ACB would benefit from some pruning and from bringing in an outside CEO renown in the investment community for both sound growth strategy and financial discipline (cost/cash flow),â Zuanic says. âÂÂUnfortunately, ACB has the weakest in our group, while valuation is still near group high,â he said. Balance Sheet Concerns The same week Zuanic came out with his bullish commentary on Aurora, Bank of America analyst downgraded the stock to âÂÂunderperform.â Carey also cut his price target to just $1.15. | âÂÂWe think ACB would benefit from some pruning and from bringing in an outside CEO renown in the investment community for both sound growth strategy and financial discipline (cost/cash flow),â Zuanic says. âÂÂUnfortunately, ACB has the weakest in our group, while valuation is still near group high,â he said. Balance Sheet Concerns The same week Zuanic came out with his bullish commentary on Aurora, Bank of America analyst downgraded the stock to âÂÂunderperform.â Carey also cut his price target to just $1.15. | âÂÂWe think ACB would benefit from some pruning and from bringing in an outside CEO renown in the investment community for both sound growth strategy and financial discipline (cost/cash flow),â Zuanic says. âÂÂUnfortunately, ACB has the weakest in our group, while valuation is still near group high,â he said. Balance Sheet Concerns The same week Zuanic came out with his bullish commentary on Aurora, Bank of America analyst downgraded the stock to âÂÂunderperform.â Carey also cut his price target to just $1.15. | âÂÂWe think ACB would benefit from some pruning and from bringing in an outside CEO renown in the investment community for both sound growth strategy and financial discipline (cost/cash flow),â Zuanic says. âÂÂUnfortunately, ACB has the weakest in our group, while valuation is still near group high,â he said. Balance Sheet Concerns The same week Zuanic came out with his bullish commentary on Aurora, Bank of America analyst downgraded the stock to âÂÂunderperform.â Carey also cut his price target to just $1.15. |
37740.0 | 2020-01-19 00:00:00 UTC | Your Best Profit Opportunities in 2020 | ACB | https://www.nasdaq.com/articles/your-best-profit-opportunities-in-2020-2020-01-19 | nan | nan | A surging stock market gave investors plenty of ways to make money in 2019. Yet it's a new year, and the question now is: What's next?
If you're looking for ways to make 2020 as profitable as -- or even more lucrative than -- 2019, here are some key areas you'll want to focus on.
IMAGE SOURCE: GETTY IMAGES.
Cannabis
2019 was most unkind to cannabis investors. Many marijuana stocks plunged in value as regulatory delays, financing challenges, and a still-thriving black market all slowed the industry's expansion.
But with many cannabis stocks now trading at far lower prices, some of the best marijuana businesses now represent compelling profit opportunities.
The majority of cannabis investors have focused on the companies that produce marijuana, such as industry titan Aurora Cannabis (NYSE: ACB). Although Aurora has intriguing growth potential due to its industry-leading production capacity and strong international presence, the Canadian cannabis producer has struggled to generate the cash it needs to fund its expansion. Its once high-flying stock has fallen sharply in recent months, as investors have grown more concerned about Aurora's financial health. So while its stock certainly has significant upside potential, it's also a high-risk investment.
A far safer way to profit from the cannabis boom can be found in marijuana-focused real estate investment trust (REIT) Innovative Industrial Properties (NYSE: IIPR). Rather than produce cannabis itself, IIP acquires facilities that can be used to grow and process medical marijuana. It then leases these properties to only the most financially sound state-licensed producers in the U.S.
These low-risk leases are highly profitable for IIP, generating annual returns of 10%-16% for periods of as much as 20 years. As a REIT, IIP passes nearly all of these profits on to investors via its rapidly growing dividend, which currently yields a sizable 4.9%. For these reasons, Innovative Industrial Properties delivered gains of more than 70% in 2019 -- and it's poised to continue to reward shareholders in 2020 and beyond.
Gold
Gold is another investment that could help you protect and grow your wealth in 2020.
Long viewed as a defensive store of wealth, gold maintains this valuable purpose today. But gold can help you do more than just preserve your wealth. The precious metal tends to perform well during periods of geopolitical turmoil, particularly when the potential for military conflict is high. It's during these times that gold can not only outperform other asset classes that decline in value, but also see its own price rise significantly.
With tensions between the U.S. and Iran once again causing investors to factor the risk of war into their outlook for the economy and their own portfolios, many are seeking refuge in gold.
The precious metal, in turn, has seen its price trade near multi-year highs in recent weeks. Moreover, the potential for escalating military conflict in the Middle East could see investors bid up the price of gold to new highs in 2020.
Investors seeking to profit from a potential surge in gold prices should take a look at iShares Gold Trust (NYSEMKT: IAU). The exchange-traded fund holds gold bars in secure vaults, thereby giving its owners a means to benefit from a rise in gold bullion prices without the need to store and secure the gold themselves.
Although SPDR Gold Trust (NYSEMKT: GLD) is more popular, with net assets of nearly $44 billion compared to less than $18 billion for iShares Gold Trust, IAU is the better bargain, with an annual expense ratio of only 0.25% versus 0.40% for GLD. So if you're looking for a way to invest in gold, iShares Gold Trust is your best profit opportunity.
E-commerce
While gold is a great defensive investment, e-commerce is fertile ground for growth investors. Global retail e-commerce sales will grow to more than $6.5 trillion by 2022, up from approximately $3.5 trillion in 2019, according to Statista.
Within this huge and fast-growing market, Amazon (NASDAQ: AMZN) reigns supreme in the U.S. and many other areas of the world. Its massive online retail operations and army of third-party sellers offer an unmatched selection of goods at attractive prices delivered in as little as a few hours. It's a powerful value proposition that should continue to fuel Amazon's growth -- and its shareholders' profits -- well into the next decade.
Shopify's (NYSE: SHOP) stock is another excellent way to profit from the growth of e-commerce. Shopify provides the tools that online merchants need to operate and scale their businesses. More than one million merchants use Shopify's platform. Together, they sold $14.8 billion of merchandise in the third quarter alone. In turn, Shopify generated more than $390 in revenue during the quarter, representing a 45% year over year increase. With demand for its services booming, Shopify is likely to continue to rewards its investors in the years ahead.
Lastly, don't overlook Visa (NYSE: V) and Mastercard (NYSE: MA). The digital payment titans are two additional ways for you to profit from the worldwide growth of e-commerce. As more retail sales transactions are completed online, Visa and Mastercard enjoy more demand for their debit and credit card payment processing services. Although their processing fees are small on an individual basis, the well over 100 billion transactions these payment giants facilitated helped Visa and Mastercard produce $11.5 billion and $6.9 billion in net income, respectively, over the past year. With e-commerce set to fuel their growth, Mastercard and Visa are set to deliver even more profits -- and more gains to their investors -- in 2020.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | The majority of cannabis investors have focused on the companies that produce marijuana, such as industry titan Aurora Cannabis (NYSE: ACB). Although Aurora has intriguing growth potential due to its industry-leading production capacity and strong international presence, the Canadian cannabis producer has struggled to generate the cash it needs to fund its expansion. A far safer way to profit from the cannabis boom can be found in marijuana-focused real estate investment trust (REIT) Innovative Industrial Properties (NYSE: IIPR). | The majority of cannabis investors have focused on the companies that produce marijuana, such as industry titan Aurora Cannabis (NYSE: ACB). A far safer way to profit from the cannabis boom can be found in marijuana-focused real estate investment trust (REIT) Innovative Industrial Properties (NYSE: IIPR). With e-commerce set to fuel their growth, Mastercard and Visa are set to deliver even more profits -- and more gains to their investors -- in 2020. | The majority of cannabis investors have focused on the companies that produce marijuana, such as industry titan Aurora Cannabis (NYSE: ACB). Investors seeking to profit from a potential surge in gold prices should take a look at iShares Gold Trust (NYSEMKT: IAU). Although SPDR Gold Trust (NYSEMKT: GLD) is more popular, with net assets of nearly $44 billion compared to less than $18 billion for iShares Gold Trust, IAU is the better bargain, with an annual expense ratio of only 0.25% versus 0.40% for GLD. | The majority of cannabis investors have focused on the companies that produce marijuana, such as industry titan Aurora Cannabis (NYSE: ACB). Investors seeking to profit from a potential surge in gold prices should take a look at iShares Gold Trust (NYSEMKT: IAU). As more retail sales transactions are completed online, Visa and Mastercard enjoy more demand for their debit and credit card payment processing services. |
37741.0 | 2020-01-19 00:00:00 UTC | Is Aurora a Buy at Under $2? | ACB | https://www.nasdaq.com/articles/is-aurora-a-buy-at-under-%242-2020-01-19 | nan | nan | Aurora Cannabis' (NYSE: ACB) stock has been sinking like a stone lately. To put into perspective its massive decline: Troubled pot stock CannTrust Holdings is down 59% over the past six months. Aurora, however, has crashed more than 70% during the same period, while the Horizons Marijuana Life Sciences ETF, which contains a broad mix of pot stocks, is only down 44%.
Aurora is a risky buy, but given how much of a sell-off there's been, it could be a sign that there's been an overreaction in the markets. Let's take a closer look at if investors should consider buying shares of the stock should it dip below $2 again.
Is Aurora worth a market cap of $2 billion?
One of the hardest things to do with pot stocks is properly value them. Without much of a history and valuations being all over the place these past few years, narrowing down just how much public cannabis companies are worth is more of an art than it is a science. And that only complicates the process of determining whether a stock is a buy or not. One way we can assess Aurora's value is by looking at its sales and comparing that to the relative valuation of its peers.
Image source: Getty Images.
At $2 per share, Aurora's market cap is a little over the $2 billion mark. Its total revenue over the past four quarters is 294 million Canadian dollars, which computes to approximately $226 million in U.S. currency. That means that at a $2 billion market cap, Aurora is trading at less than nine times the revenue it generated in 12 months. That certainly puts the stock in a good light compared to its rival Canopy Growth, which trades at 32 times its revenue, and it's cheaper than Tilray as well, which investors value at 16 times sales. But when compared to Aphria's multiple of about four times sales, Aurora can still look expensive.
Nonetheless, the figures do suggest that based on its top line, investors may have undervalued Aurora, especially as the company continues to grow and add to its sales.
But it may still not be worth the risk
Investors may not value Aurora as highly as its peers largely because of the risk surrounding the company. News that Aurora halted production at two of its facilities and that it's looking to conserve cash definitely set off red flags for many investors.
And when there's added risk involved, investors normally aren't as willing to pay a similar multiple of earnings or sales for a company as they would for a stock without those same problems. That can explain why Aurora trades below Tilray and Canopy Growth's price-to-sales multiples, but it's not far from HEXO, which trades at around 10 times sales and where a lack of cash is a growing problem as well.
Once investors account for risk, it makes it more difficult to place a much higher valuation for Aurora than where it is today, especially given its poor results. Net losses of CA$384 million over the past 12 months and negative free cash flow of CA$669 million during that time don't inspire much hope that the company is on the right path. With total cash of CA$192 million, there isn't a lot on the books to support Aurora's cash burn, and that makes the stock a very high-risk buy.
Investors should stay far away from Aurora, even if the price drops
If a company's business is in trouble, then it's not worth investing in, regardless of the price you pay for it. If Aurora runs out of cash and can't continue operating, its business will have no value beyond its net assets. And even those valuations can be suspect given the gains and losses marijuana stocks often have on earnings reports relating to their assets.
Unless you're a speculator, you shouldn't buy shares of a business like Aurora where cash burn is still a big concern moving forward. There's too much risk involving the company today and investors are better off with stocks that offer more stability.
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 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' (NYSE: ACB) stock has been sinking like a stone lately. Nonetheless, the figures do suggest that based on its top line, investors may have undervalued Aurora, especially as the company continues to grow and add to its sales. And when there's added risk involved, investors normally aren't as willing to pay a similar multiple of earnings or sales for a company as they would for a stock without those same problems. | Aurora Cannabis' (NYSE: ACB) stock has been sinking like a stone lately. To put into perspective its massive decline: Troubled pot stock CannTrust Holdings is down 59% over the past six months. Net losses of CA$384 million over the past 12 months and negative free cash flow of CA$669 million during that time don't inspire much hope that the company is on the right path. | Aurora Cannabis' (NYSE: ACB) stock has been sinking like a stone lately. That certainly puts the stock in a good light compared to its rival Canopy Growth, which trades at 32 times its revenue, and it's cheaper than Tilray as well, which investors value at 16 times sales. And when there's added risk involved, investors normally aren't as willing to pay a similar multiple of earnings or sales for a company as they would for a stock without those same problems. | Aurora Cannabis' (NYSE: ACB) stock has been sinking like a stone lately. Is Aurora worth a market cap of $2 billion? But it may still not be worth the risk Investors may not value Aurora as highly as its peers largely because of the risk surrounding the company. |
37742.0 | 2020-01-19 00:00:00 UTC | What Aphria's and Organigram's Quarterly Updates Mean for Aurora Cannabis and Canopy Growth | ACB | https://www.nasdaq.com/articles/what-aphrias-and-organigrams-quarterly-updates-mean-for-aurora-cannabis-and-canopy-growth | nan | nan | All you had to do to know how the latest quarters went for Aphria (NYSE: APHA) and OrganiGram (NASDAQ: OGI) was to look at their share prices following their earnings announcements. Aphria stock fell on Tuesday after the company missed analysts' revenue estimates and lowered its full-year outlook. On the other hand, shares of OrganiGram skyrocketed after the company posted much better-than-expected revenue in its fiscal 2020 first-quarter results.
Were there any hints about how the Canadian cannabis industry's two biggest players, Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC), could fare in 2020 in Aphria's and OrganiGram's quarterly updates? Actually, yes. There was both good news and bad news for Aurora and Canopy.
Image source: Getty Images.
Bad news
Most people like to hear the bad news first, so let's start there. Two key factors behind Aphria's lower full-year outlook for fiscal 2020 will weigh on Aurora Cannabis, Canopy Growth, and the rest of the industry.
Aphria CFO Carl Merton stated in the company's Q2 conference call that the biggest reason for the lower guidance was Ontario's slower-than-expected rollout of new retail cannabis stores. He noted that there were "40 additional stores that were supposed to be opened sometime in the late fall and now don't look like they're going to get opened until March, maybe late April."
In November, Canopy Growth CFO Mike Lee said that the company was projecting "40 new stores opening per month in Ontario starting in January." That's a much higher estimate than what will actually happen.
The second-biggest factor impacting Aphria's weaker outlook was Alberta's ban of vaping products. Although this ban is temporary, it probably won't be lifted until late April. OrganiGram CEO Greg Engel was asked about how Alberta's ban impacted his company's outlook in OrganiGram's quarterly conference call Tuesday afternoon. Although Engel didn't directly answer the question, he acknowledged that it was "a last minute change" and "certainly was unexpected."
Both Aurora and Canopy Growth have made big bets on selling vapes in the Cannabis 2.0 market. The temporary ban in Alberta will almost certainly dampen each company's growth in the first half of 2020.
Speaking of the Cannabis 2.0 market, Aphria CEO Irwin Simon said that there has "been a more muted initial purchases by the control boards" in the Cannabis 2.0 market than there was in the initial Canadian recreational marijuana launch. He added that there have been lower purchases but with a higher frequency.
Good news
Now for some good news. Even though Irwin Simon indicated that the Cannabis 2.0 market wasn't as frenzied as the initial recreational pot market launch in 2018, he said that Aphria expects to see positive margin impact from cannabis derivative sales in its third quarter, which ends on Feb. 29, 2020.
Greg Engel was even more positive about the Cannabis 2.0 market. He noted that OrganiGram has received a "good response to vapes overall." And although OrganiGram hasn't begun to ship cannabis edible products yet, Engel said that "one of the key large provinces has already tripled the order that they had wanted to place based on the consumer demand that they're seeing in the marketplace."
This strong demand bodes well for Aurora and Canopy. Both companies are launching cannabis-infused chocolates. Aurora is also rolling out gummies and mints, while Canopy is hoping to make a big splash with its cannabis-infused beverages.
While Aphria's Q2 results were disappointing, the company still provided some reasons for optimism in its latest update. Aphria had to buy wholesale cannabis because "customer demand exceeded the company's supply capabilities in the second quarter." Although some of this supply/demand imbalance was caused by Aphria not receiving a license for its Aphria Diamond facility in November, the level of demand could be good news for Aurora and Canopy. OrganiGram's strong quarterly performance reinforces this optimistic view.
Engel also mentioned that Canadian provinces, especially Alberta and Ontario, aren't holding as much inventory as they have in the past. That could be great for the big cannabis producers if the Cannabis 2.0 market really picks up momentum, causing the provinces to order a lot more product in future quarters.
Most important
What's the most important thing that Aurora and Canopy should note from Aphria's and OrganiGram's latest quarterly updates? Probably the fact that both Aphria and OrganiGram delivered positive adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA).
Most Canadian marijuana stocks -- including Aurora and Canopy -- aren't profitable yet. Generating positive EBITDA is a key step toward achieving profitability. Investors are focused more on the bottom line for cannabis producers than ever before. For Aurora Cannabis and Canopy Growth to deliver good news instead of bad news for investors in their next quarterly updates, they'll need to show progress toward achieving positive EBITDA.
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 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. | Were there any hints about how the Canadian cannabis industry's two biggest players, Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC), could fare in 2020 in Aphria's and OrganiGram's quarterly updates? Two key factors behind Aphria's lower full-year outlook for fiscal 2020 will weigh on Aurora Cannabis, Canopy Growth, and the rest of the industry. Aphria CFO Carl Merton stated in the company's Q2 conference call that the biggest reason for the lower guidance was Ontario's slower-than-expected rollout of new retail cannabis stores. | Were there any hints about how the Canadian cannabis industry's two biggest players, Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC), could fare in 2020 in Aphria's and OrganiGram's quarterly updates? Two key factors behind Aphria's lower full-year outlook for fiscal 2020 will weigh on Aurora Cannabis, Canopy Growth, and the rest of the industry. OrganiGram CEO Greg Engel was asked about how Alberta's ban impacted his company's outlook in OrganiGram's quarterly conference call Tuesday afternoon. | Were there any hints about how the Canadian cannabis industry's two biggest players, Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC), could fare in 2020 in Aphria's and OrganiGram's quarterly updates? Even though Irwin Simon indicated that the Cannabis 2.0 market wasn't as frenzied as the initial recreational pot market launch in 2018, he said that Aphria expects to see positive margin impact from cannabis derivative sales in its third quarter, which ends on Feb. 29, 2020. For Aurora Cannabis and Canopy Growth to deliver good news instead of bad news for investors in their next quarterly updates, they'll need to show progress toward achieving positive EBITDA. | Were there any hints about how the Canadian cannabis industry's two biggest players, Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC), could fare in 2020 in Aphria's and OrganiGram's quarterly updates? Both Aurora and Canopy Growth have made big bets on selling vapes in the Cannabis 2.0 market. Greg Engel was even more positive about the Cannabis 2.0 market. |
37743.0 | 2020-01-18 00:00:00 UTC | 3 Surprising Stocks Hitting New Lows This Week | ACB | https://www.nasdaq.com/articles/3-surprising-stocks-hitting-new-lows-this-week-2020-01-18 | nan | nan | Wall Street's roaring these days, picking up where last year's gains left off. The S&P 500 is now up 33% since the start of last year, but that doesn't mean every investment is paying off these days. There were more than 120 stateside exchange-listed stocks hitting new lows last week.
Five Below (NASDAQ: FIVE), Aurora Cannabis (NYSE: ACB), and Six Flags Entertainment (NYSE: SIX) are some of the more surprising stocks that just hit fresh 52-week lows. Let's dive into why the market has cooled on these former market darlings.
Image source: Six Flags Entertainment.
Five Below
Shares of trendy discounter Five Below took a hit after the company announced disappointing results for the peak holiday selling season. The good news is that sales rose 13% for the two-month period ended on Jan. 4. The bad news is that it grew its store count by roughly 20% over the past year.
Same-store sales slipped 2.6% for the holiday shopping period, problematic on its own but even more troublesome because Five Below was targeting positive comps for the current quarter just a month earlier. Sales really had to flop during the final few weeks of December for Five Below to fall so woefully short of its earlier goal of 2% to 3% in store-level growth.
Five Below was rocking the past few years, offering teens, pre-teens, and young-at-heart thrifty grown-ups a superstore full of trendy items that, true to to its moniker, sell for $5 or below. Five Below realizes it may have to rethink its concept, especially now as it's testing a zone in its stores offering merchandise for as high as $10 apiece. But it also won't give up on its heady expansion strategy, aiming to open roughly 180 new stores in the upcoming fiscal year. It goes without saying that the key for Five Below to bounce back is to get back to posting positive comps.
Aurora Cannabis
Marijuana companies may be all about the highs, but Aurora Cannabis traded as low as $1.50 on Monday. It was still reeling from the back-to-back analyst downgrades near the end of the prior week, as Bank of America and Piper Jaffray lowered their ratings on the battleground stock.
Aurora Cannabis did bounce back as the week played out, following a bullish note from Cantor Fitzgerald analyst Pablo Zuanic. He thinks the recent pessimism is overdone and that the departure of its chief corporate officer last month could be a positive development. He also sees Aurora's financial situation improving later this year, and he's sticking to this bullish overweight rating.
Six Flags Entertainment
This is the offseason for most of Six Flags' regional amusement parks, and it's been a rough month on the news front. The company revealed that Riverside Investment Group, the Chinese developer that was supposed to provide a new revenue stream by building Six Flags-licensed water parks and amusement parks, was in default on its required payments to Six Flags.
Aside from the hiccups overseas, Six Flags also warned that its financial results for the fourth quarter will decline by as much as $10 million from the prior year's showing. This isn't as bad as if Six Flags was falling short during its potent summer quarter, but it still adds insult to injury. Analysts at B. Riley and Jefferies put out cautious notes, warning investors to brace for a likely dividend cut. A lower price for Six Flags may prop up its yield to the point that it attracts dividend investors, but that's not going to happen if folks thinks the payouts are about to get slashed.
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Rick Munarriz has no position in any of the stocks mentioned. The Motley Fool recommends Five Below. 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. | Five Below (NASDAQ: FIVE), Aurora Cannabis (NYSE: ACB), and Six Flags Entertainment (NYSE: SIX) are some of the more surprising stocks that just hit fresh 52-week lows. Same-store sales slipped 2.6% for the holiday shopping period, problematic on its own but even more troublesome because Five Below was targeting positive comps for the current quarter just a month earlier. Five Below was rocking the past few years, offering teens, pre-teens, and young-at-heart thrifty grown-ups a superstore full of trendy items that, true to to its moniker, sell for $5 or below. | Five Below (NASDAQ: FIVE), Aurora Cannabis (NYSE: ACB), and Six Flags Entertainment (NYSE: SIX) are some of the more surprising stocks that just hit fresh 52-week lows. Aurora Cannabis did bounce back as the week played out, following a bullish note from Cantor Fitzgerald analyst Pablo Zuanic. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market. | Five Below (NASDAQ: FIVE), Aurora Cannabis (NYSE: ACB), and Six Flags Entertainment (NYSE: SIX) are some of the more surprising stocks that just hit fresh 52-week lows. 10 stocks we like better than Six Flags When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. See the 10 stocks *Stock Advisor returns as of December 1, 2019 Rick Munarriz has no position in any of the stocks mentioned. | Five Below (NASDAQ: FIVE), Aurora Cannabis (NYSE: ACB), and Six Flags Entertainment (NYSE: SIX) are some of the more surprising stocks that just hit fresh 52-week lows. The bad news is that it grew its store count by roughly 20% over the past year. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market. |
37744.0 | 2020-01-16 00:00:00 UTC | 3 Cannabis Stocks at High Risk of a Writedown | ACB | https://www.nasdaq.com/articles/3-cannabis-stocks-at-high-risk-of-a-writedown-2020-01-16 | nan | nan | It'd be fair to say that the past year has not gone as planned for marijuana stocks. Although the first quarter of 2019 started off well, the remaining nine months of the year were a nightmare for investors.
In Canada, supply issues were clearly front and center, with Ontario's inability to open a sufficient number of dispensaries and Health Canada's delayed launch of high-margin derivatives adversely impacting pot stocks. Meanwhile, in the U.S., exceptionally high tax rates have made it virtually impossible for licensed producers to compete with the black market. With few exceptions, cannabis stocks have disappointed.
Unfortunately, this disappointment could grow in 2020.
Image source: Getty Images.
Marijuana stock goodwill is soaring, and writedowns are in the offing
You see, the pot industry has a goodwill problem. Goodwill is the amount of premium that one company pays for another in an acquisition above and beyond tangible assets. While goodwill is commonplace in an acquisition, there's no precedent to valuing companies in the cannabis space. As a result, it looks as if pretty much all completed buyouts in the pot arena were grossly overpriced.
In an ideal world, when one company acquires another, it looks to build out existing infrastructure and monetize any patents to recoup or significantly lessen any goodwill on its balance sheet. But that's not likely to happen in the cannabis space, with goodwill for some companies representing a substantial percentage of total assets. And if you don't think goodwill is a big deal, check out what a mammoth writedown did to Kraft Heinz last year.
With this being said, here are three cannabis stocks currently at high risk of an eventual writedown on their goodwill.
Image source: Getty Images.
Aurora Cannabis
There's not a marijuana stock with a bigger red flag than Aurora Cannabis (NYSE: ACB), which ended its fiscal first quarter with a whopping 3.17 billion Canadian dollars in goodwill. This represents 57% of the company's total assets.
Aurora Cannabis has made more than a dozen acquisitions since August 2016, and they've pretty much all resulted in goodwill being added to the company's balance sheet. This includes what I've dubbed the "worst marijuana acquisition in history" -- the CA$2.64 billion buyout of Ontario's MedReleaf. Following Aurora's recent announcement that it was putting the Exeter facility up for sale for CA$17 million (the Exeter greenhouse was acquired in the MedReleaf buyout), it's become apparent that all Aurora really purchased for CA$2.64 billion was the Bradford and Markham grow farms, capable of 35,000 kilos per year combined.
Aurora's chances of recouping CA$3.17 billion in goodwill, or anywhere close to this amount, are slim to none, especially with the company cutting its peak annual production by as much as 400,000 kilos via construction project halts and the aforementioned Exeter sale. A significant writedown -- one that might be larger than its current market cap -- seems inevitable.
Image source: Getty Images.
Canopy Growth
The largest marijuana stock in the world by market cap, Canopy Growth (NYSE: CGC), is also very much on the radar for a substantial writedown. It ended the fiscal second quarter with CA$1.91 billion in goodwill, which equates to 23% of the company's total assets. And this percentage could continue to grow as Canopy's cash hoard dwindles.
Unlike Aurora Cannabis, Canopy Growth doesn't have one or two massive acquisitions that stand out as being grossly overpriced. Instead, Canopy has mostly made small to medium-sized buyouts that have added up over time.
What makes it unlikely that Canopy will recoup a significant portion of its goodwill is the current state of disarray evidenced by its income statement. This is a company that's losing more money than any other cannabis stock on an operating basis and that delivered a fiscal second-quarter report in which share-based compensation alone outpaced the company's net sales.
Costs have been out of control for the company for some time, and the hope is that incoming CEO David Klein can reduce expenditures and lessen Canopy's cash outflow. However, Klein lacks marijuana industry experience, meaning Canopy's long-term growth strategy is highly uncertain. This looks to be a recipe for future writedowns.
Image source: Getty Images.
iAnthus Capital Holdings
Don't think for a moment that goodwill is solely a problem with Canadian pot companies. Vertically integrated multistate operator (MSO) iAnthus Capital Holdings (OTC: ITHUF) wound up piling on the goodwill following the closing of its all-stock MPX Bioceutical acquisition in February 2019. As of Sept. 30, 2019, iAnthus was carrying around CA$440.4 million in goodwill, which accounts for 53% of its total assets.
On one hand, iAnthus is operating in the U.S., where supply issues aren't nearly as bad as in Canada. Although this means having to set up redundant operations in the 11 states where the company has a retail presence (interstate transport isn't allowed), iAnthus should see rapid sales growth. In total, iAnthus has 30 retail locations open as of January 2020 and has licenses to open up to 68 dispensaries.
On the other hand, most MSOs, including iAnthus, have come to lean on acquisitions as a means of expansion. Filing for cultivation and sales licenses takes time, which has encouraged consolidation. iAnthus Capital is therefore likely to continue overpaying for complementary businesses in an effort to gobble up market share in potential billion-dollar states. With 53% of total assets already tied up in goodwill and this figure potentially heading higher, I view a modest writedown as a likely outcome in the future.
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 There's not a marijuana stock with a bigger red flag than Aurora Cannabis (NYSE: ACB), which ended its fiscal first quarter with a whopping 3.17 billion Canadian dollars in goodwill. Aurora's chances of recouping CA$3.17 billion in goodwill, or anywhere close to this amount, are slim to none, especially with the company cutting its peak annual production by as much as 400,000 kilos via construction project halts and the aforementioned Exeter sale. Vertically integrated multistate operator (MSO) iAnthus Capital Holdings (OTC: ITHUF) wound up piling on the goodwill following the closing of its all-stock MPX Bioceutical acquisition in February 2019. | Aurora Cannabis There's not a marijuana stock with a bigger red flag than Aurora Cannabis (NYSE: ACB), which ended its fiscal first quarter with a whopping 3.17 billion Canadian dollars in goodwill. But that's not likely to happen in the cannabis space, with goodwill for some companies representing a substantial percentage of total assets. Canopy Growth The largest marijuana stock in the world by market cap, Canopy Growth (NYSE: CGC), is also very much on the radar for a substantial writedown. | Aurora Cannabis There's not a marijuana stock with a bigger red flag than Aurora Cannabis (NYSE: ACB), which ended its fiscal first quarter with a whopping 3.17 billion Canadian dollars in goodwill. Marijuana stock goodwill is soaring, and writedowns are in the offing You see, the pot industry has a goodwill problem. Canopy Growth The largest marijuana stock in the world by market cap, Canopy Growth (NYSE: CGC), is also very much on the radar for a substantial writedown. | Aurora Cannabis There's not a marijuana stock with a bigger red flag than Aurora Cannabis (NYSE: ACB), which ended its fiscal first quarter with a whopping 3.17 billion Canadian dollars in goodwill. It ended the fiscal second quarter with CA$1.91 billion in goodwill, which equates to 23% of the company's total assets. iAnthus Capital Holdings Don't think for a moment that goodwill is solely a problem with Canadian pot companies. |
37745.0 | 2020-01-15 00:00:00 UTC | Why Aurora Cannabis, Charlotte's Web, HEXO, and Sundial Growers Soared Today | ACB | https://www.nasdaq.com/articles/why-aurora-cannabis-charlottes-web-hexo-and-sundial-growers-soared-today-2020-01-15 | nan | nan | What happened
Shares of several cannabis stocks soared today on news that Democrat and Republican representatives introduced a bill in the U.S. House of Representatives that would allow hemp-derived cannabidiol (CBD) products to be marketed as dietary supplements. Charlotte's Web Holdings (OTC: CWBHF) was the biggest winner, with shares jumping 16.2% as of 2:57 p.m. EST on Wednesday. Shares of Aurora Cannabis (NYSE: ACB) were up 11.7%, while HEXO (NYSE: HEXO) and Sundial Growers (NASDAQ: SNDL) rose 13.2% and 11.7%, respectively.
So what
Investors have been concerned about the prospects for CBD sales growth since the U.S. Food and Drug Administration (FDA) issued a consumer update in November warning about the potential risks of CBD. This warning seemed to indicate that the FDA planned to take a hard stance against CBD food products. The consumer update was especially troubling for Charlotte's Web, the leader in the U.S. hemp CBD market.
Image source: Getty Images.
But now, Democratic Congressman Collin Peterson of Minnesota, who is chairman of the House Agriculture Committee, hopes to bypass the FDA altogether. Peterson, along with initial co-sponsors from both major political parties, filed a bill on Monday that would amend the Federal Food, Drug and Cosmetic Act to include CBD in the list of allowed dietary supplements.
Why did Aurora Cannabis, HEXO, and Sundial Growers enjoy bigger bounces than other Canadian marijuana stocks? It wasn't because they necessarily have more to gain than Canopy Growth (NYSE: CGC) and other rivals. However, Aurora, HEXO, and Sundial shares have been hammered more than their peers. Good news likely caused investors to pour more money into these beaten-down stocks as short-sellers headed for the sidelines.
Now what
The introduction of new legislation doesn't mean the bill will necessarily be passed. However, there's bipartisan support for allowing CBD food supplements. The new bill probably has a decent chance of passing in the U.S. House of Representatives and will likely receive strong support from Senate Majority Leader Mitch McConnell, whose home state of Kentucky has a thriving hemp farming market.
The FDA could take a long time -- even years -- to finalize regulations for hemp-based CBD food supplements. With Congress now seeking to streamline a path to market for these products, the stocks of companies with clear ties to the U.S. CBD industry could gain significant momentum over the next few months.
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 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. | Shares of Aurora Cannabis (NYSE: ACB) were up 11.7%, while HEXO (NYSE: HEXO) and Sundial Growers (NASDAQ: SNDL) rose 13.2% and 11.7%, respectively. Peterson, along with initial co-sponsors from both major political parties, filed a bill on Monday that would amend the Federal Food, Drug and Cosmetic Act to include CBD in the list of allowed dietary supplements. The new bill probably has a decent chance of passing in the U.S. House of Representatives and will likely receive strong support from Senate Majority Leader Mitch McConnell, whose home state of Kentucky has a thriving hemp farming market. | Shares of Aurora Cannabis (NYSE: ACB) were up 11.7%, while HEXO (NYSE: HEXO) and Sundial Growers (NASDAQ: SNDL) rose 13.2% and 11.7%, respectively. What happened Shares of several cannabis stocks soared today on news that Democrat and Republican representatives introduced a bill in the U.S. House of Representatives that would allow hemp-derived cannabidiol (CBD) products to be marketed as dietary supplements. Why did Aurora Cannabis, HEXO, and Sundial Growers enjoy bigger bounces than other Canadian marijuana stocks? | Shares of Aurora Cannabis (NYSE: ACB) were up 11.7%, while HEXO (NYSE: HEXO) and Sundial Growers (NASDAQ: SNDL) rose 13.2% and 11.7%, respectively. What happened Shares of several cannabis stocks soared today on news that Democrat and Republican representatives introduced a bill in the U.S. House of Representatives that would allow hemp-derived cannabidiol (CBD) products to be marketed as dietary supplements. So what Investors have been concerned about the prospects for CBD sales growth since the U.S. Food and Drug Administration (FDA) issued a consumer update in November warning about the potential risks of CBD. | Shares of Aurora Cannabis (NYSE: ACB) were up 11.7%, while HEXO (NYSE: HEXO) and Sundial Growers (NASDAQ: SNDL) rose 13.2% and 11.7%, respectively. However, there's bipartisan support for allowing CBD food supplements. The Motley Fool recommends Charlotte's Web and HEXO. |
37746.0 | 2020-01-15 00:00:00 UTC | 5 of the Most Popular Pot Stocks Won't Be Profitable Until 2022 (at the Earliest) | ACB | https://www.nasdaq.com/articles/5-of-the-most-popular-pot-stocks-wont-be-profitable-until-2022-at-the-earliest-2020-01-15 | nan | nan | It's truly incredible what a difference a year can make. Although the launch of dried flower in Canada didn't go as smoothly as expected, the widely held belief, as of Jan. 2019, was that cannabis stocks would be pushing into the profit column by the end of the year, if not early 2020.
However, the reality is that marijuana stocks are, for the most part, nowhere near profitability. In fact, some of the most popular pot stocks have reversed course and are even worse off than they were at this time last year, in terms of their bottom lines. According to Wall Street's consensus, the following five pot stocks have no chance of generating a recurring profit until 2022, at the earliest.
Image source: Getty Images.
Aurora Cannabis
Being the most popular marijuana stock in the world can only take a company so far. Despite Aurora Cannabis (NYSE: ACB) being the most-held stock on online investing app Robinhood, the tide has most definitely turned on Wall Street, with a handful of analysts anointing the company with a sell rating.
Pretty much all of Canada has been adversely impacted by supply issues in a number of key provinces. For example, Ontario had only approved 24 dispensaries at the one-year anniversary of the adult-use sales commencing (Oct. 17, 2019). This works out to one open retail location for every 604,000 people in the province. It's led to a significant supply backlog in Canada's most-populous province, and it's caused a number of producers, including Aurora Cannabis, to significantly cut back on production in the interim.
Perhaps the bigger concern for Aurora is that Wall Street doesn't believe the company has enough cash on hand to meet its debt obligations and ongoing expenses. Aurora has made a habit of issuing its stock like Monopoly money to fund acquisitions and ongoing expansion activity, but this doesn't look too feasible any longer with its share price sinking well over 80% in 10 months.
Long story short, Aurora Cannabis is a long shot to push into profitability before 2022.
Image source: Getty Images.
Canopy Growth
Canopy Growth (NYSE: CGC), the largest pot stock in the world by market cap, is another cannabis stock that looks to have virtually no shot at recurring profitability prior to 2022. In fact, Wall Street's consensus per-share loss estimates have continued to worsen over the past three months.
In terms of operating losses, Canopy Growth has led the pack -- and this isn't a category a company wants to lead the field in. Canopy's expansion has led to a number of new hires, which, along with marketing expenses, have shot the company's expenditures through the roof.
Of course, the biggest culprit just might be share-based compensation. Prior to being fired in early July, former co-CEO Bruce Linton believed that giving employees long-term-vesting stock was the best way to keep them motivated and loyal to the company. Unfortunately, this stock is expressed as an expense on the company's income statement, and it alone totaled more than net sales did during the fiscal second quarter.
Canopy Growth does have a new CEO at the helm who'll undoubtedly focus on tightening the company's belt. Nevertheless, reducing expenditures is going to be a challenging and drawn-out process liable to lead to operating losses in 2020 and 2021.
Image source: Getty Images.
HEXO
Once viewed as a top-tier buy in the marijuana space, Quebec-based HEXO (NYSE: HEXO) has had a big fall from grace. Wall Street is now counting on HEXO to lose $0.10 Canadian per share in 2021, down from an estimated CA$0.13 per share profit just three months ago.
As with all Canadian growers, HEXO has been bottlenecked by supply issues. The inability of Ontario to effectively open retail stores has allowed black market producers to thrive. For HEXO, this has meant the need to drastically cut production and expenses. The company has completely idled its Niagara grow farm, acquired via the Newstrike Brands purchase, and plans to idle 200,000 square feet of its 1.3-million-square-foot Gatineau campus. My guess is this reduces HEXO's peak annual production potential by a third.
The company is also one of a small handful of cannabis stocks to announce job cuts. Despite the marijuana industry being a major job creator in recent years, HEXO is paring down its workforce by 200 employees from a variety of departments.
With HEXO CEO Sebastien St-Louis recently commenting that his company would need a whopping 20% market share throughout Canada to be profitable, near-term prospects don't look promising.
Image source: Getty Images.
MedMen Enterprises
Keep in mind that it's not just Canadian pot stocks that are feeling the pinch. Vertically integrated multistate operator MedMen Enterprises (OTC: MMNFF) also looks highly unlikely to generate a profit any time before 2022.
MedMen's issues are twofold. First, the company has a significant presence in California, the largest cannabis market in the world by annual sales. The issue is that the Golden State is passing along an exorbitant tax rate associated with marijuana, leading consumers to stick with illicit growers. Making matters worse, more than 80% of California's jurisdictions have banned retailers from setting up shop to sell adult-use cannabis. These actions have fueled the black market and notably slowed MedMen's growth rate.
The other issue for MedMen is that its expenditures have been off the charts high. MedMen has tried to do too much, too quickly. Even with general and administrative expenses being cut by 30% as of the fourth quarter from where they began the fiscal year, MedMen still lost $231.7 million on an operating basis in 2019.
Facing funding concerns that are similar to Aurora Cannabis, MedMen does not have the look of a viable long-term investment.
Image source: Getty Images.
Tilray
Last, but not least, Tilray (NASDAQ: TLRY) should continue its money-losing ways for the foreseeable future. Wall Street now expects the company to lose nearly $1 per share in 2020, which is close to 33% more than it was expected to lose on a per-share basis as recently as three months ago.
Aside from contending with the same supply issues as its peers, Tilray's been put at a significant margin disadvantage. You see, unlike Aurora and Canopy Growth, Tilray was late to the party when it comes to expanding its production capacity. This has left the company to purchase wholesale cannabis in recent quarters to meet its supply needs. The issue is that wholesale cannabis costs are much higher than if Tilray were growing enough pot for itself, and is, thus, cutting into its margins.
The other head-scratcher here is that Wall Street is unsure of Tilray's long-term strategy. Last March, CEO Brendan Kennedy announced plans to de-emphasize big investments in Canada and instead focus on expanding into the U.S. and Europe. It was an odd move to make considering that adult-use sales had only commenced in Canada six months prior. Now having to establish needed supply chain infrastructure in international markets, Tilray has further pushed out any chance of becoming profitable.
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. | Despite Aurora Cannabis (NYSE: ACB) being the most-held stock on online investing app Robinhood, the tide has most definitely turned on Wall Street, with a handful of analysts anointing the company with a sell rating. Although the launch of dried flower in Canada didn't go as smoothly as expected, the widely held belief, as of Jan. 2019, was that cannabis stocks would be pushing into the profit column by the end of the year, if not early 2020. Aurora has made a habit of issuing its stock like Monopoly money to fund acquisitions and ongoing expansion activity, but this doesn't look too feasible any longer with its share price sinking well over 80% in 10 months. | Despite Aurora Cannabis (NYSE: ACB) being the most-held stock on online investing app Robinhood, the tide has most definitely turned on Wall Street, with a handful of analysts anointing the company with a sell rating. Canopy Growth Canopy Growth (NYSE: CGC), the largest pot stock in the world by market cap, is another cannabis stock that looks to have virtually no shot at recurring profitability prior to 2022. In fact, Wall Street's consensus per-share loss estimates have continued to worsen over the past three months. | Despite Aurora Cannabis (NYSE: ACB) being the most-held stock on online investing app Robinhood, the tide has most definitely turned on Wall Street, with a handful of analysts anointing the company with a sell rating. Canopy Growth Canopy Growth (NYSE: CGC), the largest pot stock in the world by market cap, is another cannabis stock that looks to have virtually no shot at recurring profitability prior to 2022. 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. | Despite Aurora Cannabis (NYSE: ACB) being the most-held stock on online investing app Robinhood, the tide has most definitely turned on Wall Street, with a handful of analysts anointing the company with a sell rating. According to Wall Street's consensus, the following five pot stocks have no chance of generating a recurring profit until 2022, at the earliest. Aurora Cannabis Being the most popular marijuana stock in the world can only take a company so far. |
37747.0 | 2020-01-14 00:00:00 UTC | Avoid Aurora Stock, Buy Canopy Growth Stock for Cannabis Exposure | ACB | https://www.nasdaq.com/articles/avoid-aurora-stock-buy-canopy-growth-stock-for-cannabis-exposure-2020-01-14 | nan | nan | At some point, Aurora Cannabis (NYSE:) has to be a buy. Right? Perhaps eventually, it will be. But until Aurora stock shows signs that its downtrend is ending, why stick with a loser?
Source: ElRoi / Shutterstock.com
I couldnâÂÂt have been more clear about how I feel about cannabis stocks at this point. While many of these companies have explosive opportunities over the next 12 to 48 months, many others lack the financial strength to survive over that time frame.
As a result, investors need to blend the technicals and fundamentals â hand-picking which ones are most likely to survive, then thrive. In the summer when support gave way, I waved a . After the washout and subsequent bounce in November, I said to avoid Aurora stock as it struggled to rebound.
I donâÂÂt write that to showboat â trust me, IâÂÂve had more than enough servings of humble pie. Instead, I write it to drive home the same point: If youâÂÂre going to speculate with cannabis stocks, donâÂÂt do it with the losers.
Avoid Aurora Stock
Source: Chart courtesy of
The first problem with ACB stock? The chart.
Aurora stock continues to make new low after new low. In mid-November, the stock plunged to new lows. ACB stock bottomed at $2.14 and within days, shares were up about 50% â hitting a high of $3.25.
However, the 20-day moving average remained stiff resistance, and Aurora stock was unable to reclaim prior range support near $3.50. That right there was the first sign that ACB stock was to be avoided.
The next sign came when it failed to hold the $2.40 area, which quickly sent Aurora stock back down to new lows. Those lows now continue to break, leading to lower prices. I donâÂÂt know when ACB stock will bottom, but until it puts in a low and reverses trend, IâÂÂm not interested in buying it.
Then, there are the financials.
Despite explosive revenue growth and â quite frankly â solid gross margins, Aurora Cannabis is losing tons of money. Trailing revenue of 293.5 million CAD has produced a gross profit of 205.5 million CAD. Solid right? It is, but a trailing net loss of 383.5 million CAD is a red flag.
Total cash went from about 316 million CAD at the end of June to 191.9 million CAD at the end of September. Current liabilities weigh in at about 464.6 million CAD, while current assets of 588.3 million CAD.
Will ACB face a liquidity issue? IâÂÂm not sure. I just know that it lacks the same financial firepower as some of its peers, while the charts remain detrimental to the bull case.
If Not Aurora Stock, Then Who?
I like several other names more than ACB stock, including Canopy Growth (NYSE:) and Aphria (NYSE:). CanopyâÂÂs thesis and chart can be viewed here, while AphriaâÂÂs .
While neither stock is robust at the moment, they are making much better strides that Aurora stock.
First, both have broken over downtrend resistance. In CanopyâÂÂs case, the stock is maintaining over the 20-day and 50-day moving averages as well. For Aphria, the stock is just over these key moving averages, and remaining above them would be a victory for the bulls. Second, these stocks are not only avoiding new lows, they are holding key support marks.
If that changes, itâÂÂs an opportunity for speculators to consider stopping out and limiting the damage. With Aurora stock, we donâÂÂt have key support holding up â so we donâÂÂt have a way to measure risk.
Now, look at the balance sheet difference (all figures in CAD).
Current Assets Current Liabilities Ratio (Current) Total Assets Total Liabilities CGC 3.6B 425.8M 8.4 8.2B 2.6B APHA 780.8M 138.5M 6.0 2.4B 708.4M ACB 588.3M 464.6M 1.3 5.6B 1.1B
Are these companies perfect? Not by any means. Canopy has a strong balance sheet, but negative free cash flow. Aphria has a smaller balance and is not yet generating positive free cash flow, but has turned a profit in seven of the last nine quarters.
These are not slam dunks, but APHA and CGC have better setups than Aurora stock. That said, they are still speculative stocks.
Bret Kenwell is the manager and author of and is on Twitter @BretKenwell. As of this writing, Bret Kenwell is long APHA.
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. | Avoid Aurora Stock Source: Chart courtesy of The first problem with ACB stock? ACB stock bottomed at $2.14 and within days, shares were up about 50% â hitting a high of $3.25. That right there was the first sign that ACB stock was to be avoided. | Avoid Aurora Stock Source: Chart courtesy of The first problem with ACB stock? I like several other names more than ACB stock, including Canopy Growth (NYSE:) and Aphria (NYSE:). Current Assets Current Liabilities Ratio (Current) Total Assets Total Liabilities CGC 3.6B 425.8M 8.4 8.2B 2.6B APHA 780.8M 138.5M 6.0 2.4B 708.4M ACB 588.3M 464.6M 1.3 5.6B 1.1B Are these companies perfect? | Avoid Aurora Stock Source: Chart courtesy of The first problem with ACB stock? ACB stock bottomed at $2.14 and within days, shares were up about 50% â hitting a high of $3.25. That right there was the first sign that ACB stock was to be avoided. | That right there was the first sign that ACB stock was to be avoided. Avoid Aurora Stock Source: Chart courtesy of The first problem with ACB stock? ACB stock bottomed at $2.14 and within days, shares were up about 50% â hitting a high of $3.25. |
37748.0 | 2020-01-14 00:00:00 UTC | There's a New Most-Hated Pot Stock on Wall Street | ACB | https://www.nasdaq.com/articles/theres-a-new-most-hated-pot-stock-on-wall-street-2020-01-14 | nan | nan | Heading into 2019, marijuana stocks looked to be set up for success. Canada had recently legalized recreational marijuana, derivative pot products were set to hit dispensary shelves later in the year, and legalization momentum in the U.S. seemingly couldn't be stopped. The table appeared set for the green rush to produce "the green" by year-end. However, things didn't go as planned.
To our north, supply issues have remained persistent since day one of legalization in October 2018, with Ontario issuing far too few licenses and Health Canada struggling mightily to work through an enormous backlog of cultivation and sales license applications. Health Canada also delayed the launch of derivatives, pushing any chance of profitability for Canadian pot stocks out even further.
Meanwhile, marijuana stocks in the U.S. have been clobbered by high tax rates in select states, the ability of jurisdictions to deny retailers a presence, and a resilient black market. In California, for instance, legal weed sales have just about been stagnant over the past two years.
As the near-term outlook for cannabis stocks has worsened, Wall Street's ratings have also soured. Once an industry filled with buy and speculative buy ratings, pot stocks are now a minefield of hold and sell ratings.
Image source: Getty Images.
This was Wall Street's most-hated cannabis stock in 2019
For much of 2019, Cronos Group (NASDAQ: CRON) proved to be Wall Street's most-hated pot stock. At one time last year, Cronos had four Wall Street ratings that were the equivalent of a sell.
On one hand, Cronos garnered a lot of attention after snagging a $1.8 billion equity investment from Altria Group, which closed in March. It had less than $25 million in cash and cash equivalents on its balance sheet prior to the closing of this deal, meaning that Cronos essentially put any sort of cash concerns in the rearview mirror by completing this equity investment. Since closing its deal, Cronos has made one notable acquisition -- a $300 million deal to buy Redwood Holdings, the owner of the Lord Jones brand of CBD-infused beauty products.
However, Cronos' stock more than doubled in a span of two months between December 2018 and February 2019 and it didn't sit well with Wall Street -- especially considering the supply issues Canada was contending with. Noting that Cronos was significantly behind its peers in the production and sales departments, most Wall Street firms tempered their expectations for the company or flat-out rated it as a sell.
But Cronos Group shareholders will be happy to know that their company is no longer the most hated on Wall Street. That title now belongs to Aurora Cannabis (NYSE: ACB), which has accrued three sell ratings and a price target of $0 from one off-Wall Street analyst.
Image source: Getty Images.
Here's why Aurora Cannabis is now Wall Street's least-liked pot stock
What you might find most interesting about Aurora is the incredible bifurcation in thinking between Wall Street and retail investors. As noted, there's not a marijuana stock out there with more sell ratings than Aurora Cannabis. Yet there's also not a stock more millennial investors own on online investing app Robinhood than Aurora Cannabis.
The biggest issue Wall Street has taken is with the company's balance sheet. Despite having access to $400 million in at-the-market offerings (i.e., common stock issuances or convertible debt offerings), as well as $360 million Canadian in credit lines from the Bank of Montreal, Aurora's overzealous expansion has left it with insufficient cash to meet its existing debt obligations, as well as ongoing expansion costs.
Gordon Johnson, the aforementioned off-Wall Street analyst at GLJ Research, placed a $0 price target on Aurora last month, noting that he believes the company is worthless and won't be able to meet its debt obligations by as soon as July.
There are certainly apparent signs that Aurora's balance sheet isn't in the best of health. For example, Aurora announced that it was completely halting construction at its 1.62 million square-foot Aurora Sun grow facility in Alberta and its 1 million square-foot Aurora Nordic 2 cultivation farm in Denmark. Only 238,000 square feet of growing space will be utilized in the interim from Aurora Sun.
The company is also putting its Exeter greenhouse up for sale, with a CA$17 million asking price. Exeter was acquired in the CA$2.64 billion purchase of MedReleaf, and its eventual 105,000 kilos of peak annual output was expected to provide the bulk of MedReleaf's production. Assuming this sale goes through, and including Aurora's production halt at two of its core facilities, the company's peak production has declined from north of 625,000 kilos to around 225,000 kilos. That's a massive cut.
Image source: Getty Images.
Wall Street is overlooking another big concern
Unfortunately, Wall Street seems to be overlooking another unsightly figure on the company's balance sheet: its goodwill.
Aurora Cannabis ended its most recent quarter with CA$3.17 billion ($2.43 billion) in goodwill. For context, the company's market cap as of this past weekend was just $1.76 billion. What this figure tells investors is that Aurora Cannabis (and really the entire industry) did a poor job of evaluating and valuing its acquisitions.
As pointed out earlier, the MedReleaf deal was made for CA$2.64 billion. But Aurora never wound up developing the 1 million square-foot Exeter greenhouse or the acreage that surrounded Exeter. This pretty much means that, assuming Aurora gets is CA$17 million asking price, it'll have spent about CA$2.62 billion (net) to acquire the Markham and Bradford cultivation farms, which are capable of 35,000 kilos of combined peak output, and MedReleaf's portfolio of products. By comparison, there are a number of premium and ultra-premium cannabis growers with market caps well under $200 million right now that could yield up to 50,000 kilos per year.
There's almost no doubt in my mind that Aurora Cannabis has no chance of recouping anywhere close to its CA$3.17 billion in goodwill, which in all likelihood would lead to a writedown that may surpass its market cap.
While I'm not sure if I share the extreme pessimism of Gordon Johnson, I'm in agreement with the Wall Street sell-side analysts that Aurora should be avoided at all costs by 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. | That title now belongs to Aurora Cannabis (NYSE: ACB), which has accrued three sell ratings and a price target of $0 from one off-Wall Street analyst. Meanwhile, marijuana stocks in the U.S. have been clobbered by high tax rates in select states, the ability of jurisdictions to deny retailers a presence, and a resilient black market. Gordon Johnson, the aforementioned off-Wall Street analyst at GLJ Research, placed a $0 price target on Aurora last month, noting that he believes the company is worthless and won't be able to meet its debt obligations by as soon as July. | That title now belongs to Aurora Cannabis (NYSE: ACB), which has accrued three sell ratings and a price target of $0 from one off-Wall Street analyst. Canada had recently legalized recreational marijuana, derivative pot products were set to hit dispensary shelves later in the year, and legalization momentum in the U.S. seemingly couldn't be stopped. It had less than $25 million in cash and cash equivalents on its balance sheet prior to the closing of this deal, meaning that Cronos essentially put any sort of cash concerns in the rearview mirror by completing this equity investment. | That title now belongs to Aurora Cannabis (NYSE: ACB), which has accrued three sell ratings and a price target of $0 from one off-Wall Street analyst. This was Wall Street's most-hated cannabis stock in 2019 For much of 2019, Cronos Group (NASDAQ: CRON) proved to be Wall Street's most-hated pot stock. Here's why Aurora Cannabis is now Wall Street's least-liked pot stock What you might find most interesting about Aurora is the incredible bifurcation in thinking between Wall Street and retail investors. | That title now belongs to Aurora Cannabis (NYSE: ACB), which has accrued three sell ratings and a price target of $0 from one off-Wall Street analyst. It had less than $25 million in cash and cash equivalents on its balance sheet prior to the closing of this deal, meaning that Cronos essentially put any sort of cash concerns in the rearview mirror by completing this equity investment. Here's why Aurora Cannabis is now Wall Street's least-liked pot stock What you might find most interesting about Aurora is the incredible bifurcation in thinking between Wall Street and retail investors. |
37749.0 | 2020-01-13 00:00:00 UTC | Why Canopy Growth, Cronos Group, and Most Other Top Canadian Pot Stocks Are Jumping Today | ACB | https://www.nasdaq.com/articles/why-canopy-growth-cronos-group-and-most-other-top-canadian-pot-stocks-are-jumping-today | nan | nan | What happened
Shares of Canopy Growth (NYSE: CGC) were jumping 11.1% higher as of 3:25 p.m. EST on Monday. That nice gain trailed behind that of HEXO (NYSE: HEXO), which was up by 12.7%. Aphria (NYSE: APHA), Cronos Group (NASDAQ: CRON), Organigram Holdings (NASDAQ: OGI), and Tilray (NASDAQ: TLRY) were also up by 8.4%, 9.3%, 9.4%, and 8.7%, respectively. The only one of the top Canadian pot stocks that wasn't moving significantly higher was Aurora Cannabis (NYSE: ACB), with its shares up only 2%.
But none of these Canadian cannabis producers announced any news today, so what lit a fire beneath their stocks? The best guess is that it's a combination of several factors. Both Aphria and Organigram announce their latest quarterly results tomorrow. Investors could be looking for positive news about the Cannabis 2.0 market launch. Canopy Growth's new CEO, David Klein, takes the helm tomorrow as well.
There's also a real possibility that investors think that the beaten-down valuations of stocks in the cannabis sector are ready to bounce back. The Cannabis 2.0 market and the expansion of pot retail infrastructure in Ontario could be fueling increased optimism.
Image source: Getty Images.
So what
Volatility for marijuana stocks, even when there's no clear news catalyst, is not unusual. Perhaps the main takeaway from today's jump is that there truly seems to be more optimism in the air than there was in the last half of 2019.
Although neither Aphria nor Organigram will report Cannabis 2.0 sales in their quarterly updates tomorrow (their quarters ended before products began shipping for the new market), their management teams could provide reason to be hopeful for a strong 2020. Expect a more bullish tone about opportunities in Ontario as well.
Investors cheered the announcement that David Klein would be Canopy Growth's new CEO. Klein, who previously served as CFO for Constellation Brands, Canopy's partner and largest shareholder, is expected to bring much-needed financial discipline to the company.
So why didn't Aurora perform as well as its peers? Probably because investors remain worried about its balance sheet, and the prospect that it could have to raise additional capital in ways that dilute the value of existing shares -- even more than they're already diluted.
Now what
Tuesday will be an important day for the entire Canadian cannabis industry. The clues that Aphria and Organigram give about how the Cannabis 2.0 market is going so far will be important for every Canadian marijuana stock. But after a tumultuous 2019, it's quite possible that 2020 will be a much better 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.
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, 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. | The only one of the top Canadian pot stocks that wasn't moving significantly higher was Aurora Cannabis (NYSE: ACB), with its shares up only 2%. Klein, who previously served as CFO for Constellation Brands, Canopy's partner and largest shareholder, is expected to bring much-needed financial discipline to the company. 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 only one of the top Canadian pot stocks that wasn't moving significantly higher was Aurora Cannabis (NYSE: ACB), with its shares up only 2%. What happened Shares of Canopy Growth (NYSE: CGC) were jumping 11.1% higher as of 3:25 p.m. EST on Monday. The Motley Fool recommends Constellation Brands, HEXO, and OrganiGram Holdings. | The only one of the top Canadian pot stocks that wasn't moving significantly higher was Aurora Cannabis (NYSE: ACB), with its shares up only 2%. The clues that Aphria and Organigram give about how the Cannabis 2.0 market is going so far will be important for every Canadian 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. | The only one of the top Canadian pot stocks that wasn't moving significantly higher was Aurora Cannabis (NYSE: ACB), with its shares up only 2%. Investors could be looking for positive news about the Cannabis 2.0 market launch. The clues that Aphria and Organigram give about how the Cannabis 2.0 market is going so far will be important for every Canadian marijuana stock. |
37750.0 | 2020-01-13 00:00:00 UTC | Why 2020 Could Be an Even Uglier One for Aurora Stock | ACB | https://www.nasdaq.com/articles/why-2020-could-be-an-even-uglier-one-for-aurora-stock-2020-01-13 | nan | nan | ItâÂÂs no secret 2019 wasnâÂÂt a good one for cannabis stocks. Some investors might be asking the question: Is now be a good time to gain industry exposure with Aurora Cannabis (NYSE:)? LetâÂÂs see what happening off and on the price chart to reach a stronger risk-adjusted determination in 2020âÂÂs early going.
Source: Shutterstock
Last year was a painful one for Aurora stock. Not that the marijuana producer was alone. From former standout Tilray (NASDAQ:) to the industryâÂÂs largest Canopy Growth (NYSE:), or niche players such as Aphria (NASDAQ:), most cannabis companies shares went up in smoke in 2019. For its part ACB stock plunged 67%.
To be clear, much of the bearish price action in Aurora wasnâÂÂt without cause. Over the period there were plenty of quarterly misses and losses to contend with. But the real albatross weighing on shares in 2019 was AuroraâÂÂs precarious debt situation within a much more challenging cannabis market than investors anticipated. And right now
Analyst Take on ACB
Late last week two analysts came out with âÂÂsellâ ratings on ACB. Investment bank Piper Jaffrey cited a poor balance sheet and weak EU sales as risks for the company. The firm also issued a $1 price target for the stock.
The firm warned Aurora Cannabis isnâÂÂt likely to achieve positive cash flow until the third quarter of 2021. In the interim, it sees the companyâÂÂs debt growing by roughly $152 million. Worse yet, the liability is on top the outfitâÂÂs existing need to refinance approximately $274 million in debt due August 2021.
On Friday Bank of America Merrill Lynch chimed in with similar reservations. In their estimation, the pot producerâÂÂs debt obligations wonâÂÂt be covered and supersede ACBâÂÂs strong position in CanadaâÂÂs recreational marijuana market.
Aurora Cannabis Stock Monthly Chart
Source:
The monthly chart of ACB stock largely supports Wall StreetâÂÂs sell-side at this juncture. ACB stock is down in nine of its last ten months. Worse and technically, shares have broken most every conceivable layer of bullish price, pattern and Fibonacci support along the way. Aurora is now in strong position to challenge 2017âÂÂs key low of $1.38 which followed the initial run-up in shares.
At this time thereâÂÂs little reason to see this next technical test as having an outcome any different than ACBâÂÂs multiple failures in 2019. The bears are in control with no signs of letting up. Moreover, in 2020 I wouldnâÂÂt dismiss or discount PiperâÂÂs $1 price target and the threat of shares once again becoming an actual penny stock.
Market MakerâÂÂs Edge: Despite the obvious admonitions off and on the price chart, IâÂÂm not keen on shorting sub $2 stocks. As a former options market maker, IâÂÂd stress buying a bear put spread. This kind of position smartly limits and reduces the positionâÂÂs Greeks while allowing for solid profit potential.
For investors wanting to buck todayâÂÂs overwhelming bearish warnings, IâÂÂd first recommend waiting on monthly chart confirmation a bottom is in Aurora Cannabis. Right now, that would mean waiting until February and a rally above JanuaryâÂÂs high of $2.27 before considering a position. From there, a longer-dated married put strategy or out-of-the-money long call play due to potential asymmetric risk is where IâÂÂd begin looking for long delta exposure.
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. | For its part ACB stock plunged 67%. And right now Analyst Take on ACB Late last week two analysts came out with âÂÂsellâ ratings on ACB. In their estimation, the pot producerâÂÂs debt obligations wonâÂÂt be covered and supersede ACBâÂÂs strong position in CanadaâÂÂs recreational marijuana market. | Aurora Cannabis Stock Monthly Chart Source: The monthly chart of ACB stock largely supports Wall StreetâÂÂs sell-side at this juncture. For its part ACB stock plunged 67%. And right now Analyst Take on ACB Late last week two analysts came out with âÂÂsellâ ratings on ACB. | Aurora Cannabis Stock Monthly Chart Source: The monthly chart of ACB stock largely supports Wall StreetâÂÂs sell-side at this juncture. For its part ACB stock plunged 67%. And right now Analyst Take on ACB Late last week two analysts came out with âÂÂsellâ ratings on ACB. | Aurora Cannabis Stock Monthly Chart Source: The monthly chart of ACB stock largely supports Wall StreetâÂÂs sell-side at this juncture. For its part ACB stock plunged 67%. And right now Analyst Take on ACB Late last week two analysts came out with âÂÂsellâ ratings on ACB. |
37751.0 | 2020-01-12 00:00:00 UTC | The 10 Largest Marijuana Stocks in 2020 | ACB | https://www.nasdaq.com/articles/the-10-largest-marijuana-stocks-in-2020-2020-01-12 | nan | nan | Last year was supposed to be when marijuana stocks proved their worth to Wall Street by translating substantial sales growth into recurring profits. Unfortunately for these companies, and their investors, it didn't work out as planned. Supply issues throughout Canada and high tax rates in a number of legalized U.S. states dumped fuel on the fire that's allowed the black market to thrive. The end result was that pot stock investors were creamed.
At one point in 2019, more than $40 billion in market value had evaporated from the industry's highs. As we move headlong into 2020, the following marijuana stocks are what remain as the industry's largest.
Image source: Getty Images.
1. Canopy Growth: $6.99 billion market cap
Consistent with the trend we've seen for a long time, Canopy Growth (NYSE: CGC) is the largest pot stock by a significant margin. At peak production, Canopy is likely the second-largest producer, and it has the second-broadest international reach, with a presence in 16 countries outside of Canada. The company's $2.1 billion in cash and short-term investments has certainly helped buoy its valuation in recent months, but steep ongoing losses and the hiring of a new CEO raise plenty of uncertainty surrounding the company's future.
2. GW Pharmaceuticals: $3.21 billion
Although its management team doesn't want to be lumped in with other "marijuana stocks," cannabinoid-focused drug developer GW Pharmaceuticals (NASDAQ: GWPH) has wiggled its way up to the No. 2 spot in market cap. Despite a rough 2019, GW Pharmaceuticals' leading cannabidiol-based oral drug, Epidiolex, has seen its net sales soar following its November 2018 launch. Having secured broad insurance coverage for Epidiolex, it's even possible that GW Pharma could become profitable on a recurring basis this year.
3. Curaleaf Holdings: $2.75 billion
Among U.S. vertically integrated multistate operators (MSO), none is larger than Curaleaf (OTC: CURLF). On a pro forma basis (i.e., assuming its pending acquisitions close), Curaleaf will have 131 retail licenses spanning 19 states. The acquisition of Select, as well as privately held MSO Grassroots, may even give Curaleaf a shot at $1 billion in annual sales this year, according to the company's management team. Look for the November elections to play a big role in drumming up investor interest in U.S. MSOs this year.
Image source: Getty Images.
4. Cronos Group: $2.33 billion
For much of the past year, Cronos Group (NASDAQ: CRON) has also found itself as a top-five pot stock by market cap. Although its production is nowhere near on par with its equally sized peers, and the company continues to lose money on an operating basis, it did receive a $1.8 billion equity investment from Altria Group in March 2019. With $1.53 billion in cash and short-term investments still on its balance sheet (as of the end of its most recent quarter), it's the second-most cash-rich pot stock in the industry, and is somewhat able to use its cash as a downside buffer.
5. Aurora Cannabis: $2.13 billion
Perhaps the biggest surprise is the absolute throttling Aurora Cannabis' (NYSE: ACB) valuation took last year. Between mid-March and year's end, Aurora shed more than $7 billion in market cap. Though it's the largest pot producer at peak capacity, and has a broader international presence than even Canopy Growth, the company's cash position appears insufficient to cover its many ongoing expansion projects. Furthermore, Aurora has racked up $3.17 billion Canadian in goodwill following more than a dozen acquisitions since Aug. 2016. This looks to be a massive writedown waiting to happen.
6. Green Thumb Industries: $1.89 billion
That's it! Just five cannabis stocks that are mid-caps. Every other weed company is a small-cap or micro-cap company, with U.S. MSO Green Thumb Industries (OTC: GTBIF) next in line. As of December, Green Thumb had 34 open Rise retail locations, as well as 96 total retail licenses across 12 states. This gives GTI, as the company is known, an addressable market of 151 million people in the United States. Green Thumb should have an especially active year with Illinois commencing adult-use sales on Jan. 1. GTI will look to open the maximum number of allowable stores (10) in the Land of Lincoln.
Image source: Getty Images.
7. Tilray: $1.55 billion
Another perfect example of "how the mighty have fallen," is presented by Tilray (NASDAQ: TLRY). After listing its stock at $17 in its July 2018 initial public offering, and rallying to $300 on the dot by September 2018, Tilray has come full circle, and now sits at less than $16 a share. Management's de-emphasis on investing in the Canadian market has been a bit of a head-scratcher, as has been the company's regular purchases of wholesale marijuana. Tilray's late start to boosting production capacity has left it dependent on other growers to meet its own supply, thereby crushing its gross margin.
8. Aphria: $1.22 billion
Canada's third-largest grower by peak production potential, Aphria (NYSE: APHA), spent most of 2019 trying to regain investors' trust. That's because allegations of fraud, which were levied in December 2018 and mostly turned out to be false, did uncover conflicts of interest with some executives surrounding the company's purchase of Latin American assets. This led to the departure of longtime Aphria CEO Vic Neufeld. Thankfully, the purchase of pharmaceutical distribution business CC Pharma has somewhat counteracted these concerns by providing a steady stream of sales for Aphria.
9. Trulieve Cannabis: $1.18 billion
The last of the billion-dollar pot stocks is U.S. MSO Trulieve Cannabis (OTC: TCNNF). Unlike most MSOs, Trulieve has focused most of its attention on a single state: Florida. The company has opened 40 dispensaries in the Sunshine State, thereby keeping its costs close to the vest, and allowing it to effectively build up its brand. Trulieve's third-quarter report was truly a thing of beauty, with the company generating a no-nonsense operating profit of $23.6 million, if all one-time benefits and fair-value adjustments are removed from the equation. To date, it's the biggest true operating profit we've seen from a marijuana stock.
Image source: Getty Images.
10. Harvest Health & Recreation: $0.93 billion
Lastly, there's U.S. MSO Harvest Health & Recreation (OTC: HRVSF), with a market cap of $930 million. Harvest Health has around 210 total licenses on a pro forma basis, with around 130 of those licenses giving it the right to open retail locations in 18 states. The company has a particularly robust presence in Arizona, which looks to be on the verge of legalizing adult-use cannabis in the Nov. 2020 elections. Harvest Health's key to rejoining the billion-dollar club will be whether the company can push into recurring profitability later this 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.
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: $2.13 billion Perhaps the biggest surprise is the absolute throttling Aurora Cannabis' (NYSE: ACB) valuation took last year. Although its production is nowhere near on par with its equally sized peers, and the company continues to lose money on an operating basis, it did receive a $1.8 billion equity investment from Altria Group in March 2019. Though it's the largest pot producer at peak capacity, and has a broader international presence than even Canopy Growth, the company's cash position appears insufficient to cover its many ongoing expansion projects. | Aurora Cannabis: $2.13 billion Perhaps the biggest surprise is the absolute throttling Aurora Cannabis' (NYSE: ACB) valuation took last year. As of December, Green Thumb had 34 open Rise retail locations, as well as 96 total retail licenses across 12 states. Trulieve Cannabis: $1.18 billion The last of the billion-dollar pot stocks is U.S. MSO Trulieve Cannabis (OTC: TCNNF). | Aurora Cannabis: $2.13 billion Perhaps the biggest surprise is the absolute throttling Aurora Cannabis' (NYSE: ACB) valuation took last year. Canopy Growth: $6.99 billion market cap Consistent with the trend we've seen for a long time, Canopy Growth (NYSE: CGC) is the largest pot stock by a significant margin. Cronos Group: $2.33 billion For much of the past year, Cronos Group (NASDAQ: CRON) has also found itself as a top-five pot stock by market cap. | Aurora Cannabis: $2.13 billion Perhaps the biggest surprise is the absolute throttling Aurora Cannabis' (NYSE: ACB) valuation took last year. Aphria: $1.22 billion Canada's third-largest grower by peak production potential, Aphria (NYSE: APHA), spent most of 2019 trying to regain investors' trust. Trulieve Cannabis: $1.18 billion The last of the billion-dollar pot stocks is U.S. MSO Trulieve Cannabis (OTC: TCNNF). |
37752.0 | 2020-01-11 00:00:00 UTC | Profitability Will Make Aphria a Top-Tier Cannabis Stock | ACB | https://www.nasdaq.com/articles/profitability-will-make-aphria-a-top-tier-cannabis-stock-2020-01-11 | nan | nan | Aphria (NYSE: APHA), like most of its peers in the cannabis industry, faced both stock declines and business-related struggles in 2019. A massive supply glut has led to weak pricing. Moreover, a slow path to legalization outside of Canada has dampened much of the optimism. Furthermore, taxation and regulation have helped to keep the black market in business. The company saw less of a stock price decline than its peers. Still, Aphria stock has still fallen by more than 55% from its 52-week high.
However, despite the massive declines, revenues across the industry continue their enormous growth. Though it missed forecasts, Aphria posted year-over-year revenue growth of more than 849% in the previous quarter. This and the company's profitability should position Aphria for long-term growth as weaker peers close their doors and the march toward legalization across the world continues.
Image Source: Getty Images
Aphria's position in Canada
Amid discussion of the top four cannabis companies--Canopy Growth, Aurora Cannabis, Cronos Group, and Tilray--Aphria receives less attention. However, Aphria is one of the few major cannabis firms yielding a profit. Moreover, it comes out ahead of its top-four peers on revenue.
REVENUES OF TOP CANADIAN MARIJUANA FIRMS, LAST REPORTED QUARTER
Company
Revenue (in millions of CAD)
Aphria (NYSE: APHA)
CA$126.1
Aurora Cannabis (NYSE: ACB)
CA$75.2
Canopy Growth (NYSE: CGC)
CA$76.6
Cronos Group (NASDAQ: CRON)
CA$12.7
Tilray (NASDAQ: TLRY)
CA$48.2
Data Source: Company Filings
Much of this revenue comes from the company's production capacity. Analysts estimate that Aphria can now produce 255,000 kilograms of dried cannabis annually. This lags only Aurora Cannabis and Canopy Growth, who hold production capacity of 662,000 kilos and 500,000-550,000 kilos of capacity, respectively. Unlike most of its peers, Aphria has also signed a supply agreement with every Canadian province.
However, the buzz surrounding marijuana companies has led to a severe supply glut in Canada. In September 2019, retailers sold 12,922 kilograms of cannabis, well below the 64,151 kilograms of finished inventory and 316,515 kilograms of unfinished inventory. Worse, with marijuana only partially legal in other countries, exports only offer a limited outlet. This makes production capacity more of a liability than an asset for now. However, improving conditions could turn production into an asset again soon.
The growth of Aphria
The Canadian cannabis industry has seen slower-than-expected growth. Fortunately for Aphria, profitability, and expansion abroad have softened the impact. Wall Street forecasts earnings of seven Canadian cents per share for the current fiscal year, with 200% growth. Moreover, its CC Pharma acquisition accounted for 74% of the company's revenue in the previous quarter, driving most of the previously mentioned 849% year-over-year growth in revenue. In the German market, Aphria benefited from both high demand for medicinal cannabis (Aphria can only sell its medicinal cannabis there) and a supply shortage in that country.
Derivative cannabis products such as beverages, edibles, vapes became legal on October 17th. Still, markets have only benefited slowly. October 17th served as the day when companies could begin the 60-day approval process to sell derivative products. Hence, Aphria and its peers did not see any sales from derivatives until mid-December. Since Aphria's 3rd quarter of 2020 ends on February 28th, financials from those sales may not come out until April.
The case for Aphria stock
In terms of valuation, Aphria has not been a typical marijuana stock. The current price places Aphria's price-to-sales multiple at only about 6.75. Even after significant price drops in 2019, Canopy Growth sells for around 27 times sales. Tilray's P/S ratio is about 11 despite falling more than 90% from its all-time high. Sales multiples could remain elevated for some time to come. Nonetheless, this drop may indicate that the days of triple-digit P/S ratios in the cannabis industry may have ended.
APHA PS Ratio data by YCharts
It could also present an opportunity for Aphria as some of the so-called "top tier" stocks face financial troubles. Repeated sales of stock and the resulting dilution illustrate these issues. Aphria diluted its shares by 381% over the last five years. While Aphria's dilution is well above average relative to most stocks, it still stands in stark contrast to Aurora Cannabis. Aurora diluted its shares by more than 956% over the same period.
Aphria used its proceeds on acquisitions such as Germany-based CC Pharma. Aurora Cannabis made several acquisitions. They also became the world's largest producer by investing in facilities capable of at least 662,000 kg of production. This has hurt the company as the industry struggles with an oversupply of dried cannabis. Due to these losses and the dilution, Aurora Cannabis sells for $1.70 per share level as of the time of this writing, a drop of almost 87% from its all-time high. With losses projected until at least 2022, it may have to sell some of its production capacity to stay afloat.
Tilray, which once traded as high as $300 per share, also faces a grim fate. Now trading in the $16 per share range, it is down, it has fallen by almost 95% from the $300 per share high in 2018. A lack of profits or options to attract outside funding could take it much lower.
Though Aphria isn't perfect, it at least earns a profit. Admittedly, investors may want to place an asterisk on these profits. The company raised debt in the previous quarter, and its "profit" in its most recent quarter came from non-operating income. However, forecasts point to profit increases, and the debt should help cover the operating shortfalls until the operations side of the company reports positive earnings.
Should you buy Aphria stock?
Profitability will give Aphria a long-term advantage as the funding struggles of its peers create an opportunity to gain market share. The pain across the marijuana industry has not left Aphria untouched. However, even with its profits coming from outside of its operations, it remains in better shape than some of the so-called "top tier" cannabis stocks.
Yes, Aphria's production capacity has become temporarily unattractive as a supply glut persists. However, revenues should continue to register massive growth. Moreover, the Canadian government will likely make progress in some of the regulatory roadblocks that hampered the industry. With this, the market conditions that hurt Aphria stock in 2019 should help to send it higher in 2020.
10 stocks we like better than Aphria Inc.
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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) This and the company's profitability should position Aphria for long-term growth as weaker peers close their doors and the march toward legalization across the world continues. APHA PS Ratio data by YCharts It could also present an opportunity for Aphria as some of the so-called "top tier" stocks face financial troubles. | Aurora Cannabis (NYSE: ACB) Image Source: Getty Images Aphria's position in Canada Amid discussion of the top four cannabis companies--Canopy Growth, Aurora Cannabis, Cronos Group, and Tilray--Aphria receives less attention. In the German market, Aphria benefited from both high demand for medicinal cannabis (Aphria can only sell its medicinal cannabis there) and a supply shortage in that country. | Aurora Cannabis (NYSE: ACB) Image Source: Getty Images Aphria's position in Canada Amid discussion of the top four cannabis companies--Canopy Growth, Aurora Cannabis, Cronos Group, and Tilray--Aphria receives less attention. In the German market, Aphria benefited from both high demand for medicinal cannabis (Aphria can only sell its medicinal cannabis there) and a supply shortage in that country. | Aurora Cannabis (NYSE: ACB) The growth of Aphria The Canadian cannabis industry has seen slower-than-expected growth. Due to these losses and the dilution, Aurora Cannabis sells for $1.70 per share level as of the time of this writing, a drop of almost 87% from its all-time high. |
37753.0 | 2020-01-10 00:00:00 UTC | Why Aurora Cannabis Stock Fell 11% Today | ACB | https://www.nasdaq.com/articles/why-aurora-cannabis-stock-fell-11-today-2020-01-10 | nan | nan | What happened
Pity shareholders in Aurora Cannabis (NYSE: ACB), once a highflier on the cannabis scene.
In a one-two punch to investor sentiment on Thursday, analysts at investment bank Piper Sandler cut their rating on Aurora Cannabis stock to underweight, TheFly.com reported. And today, Bank of America followed up with its own downgrade to underperform.
Both analysts predict a $1 price target for Aurora Cannabis stock, and with shares down 11% as of 3:07 p.m. EST on Friday, the stock already seems to be moving in that direction.
Image source: Getty Images.
So what
Piper Sandler says that a slowdown in Germany, where regulators have halted Aurora's cannabis sales pending evaluation of its sterilization procedures, is putting a strain on the company's finances. Aurora's cash from operations will probably run negative (and free cash flow even more so) "until F3Q21" at best, Piper Sandler said.
To plug the hole in its balance sheet, Piper Sandler notes that Aurora has already sold enough shares to raise 80 million Canadian dollars ($61.3 million), yet will need to raise CA$200 million more. This could prove difficult, however, in this capital environment, Piper Sandler said. Lenders aren't enthusiastic about lending money to unprofitable cannabis producers right now. And that probably leaves additional share issuances (and additional dilution) as the most likely solution.
Now what
Bank of America's concerns also center on Aurora's balance sheet risk. Although so far, neither analyst is using the word "bankruptcy," BofA notes that it "struggles to envision a scenario where shares have sustainable support."
Even after losing more than 80% of its stock market value in less than a year, Aurora Cannabis could still go lower.
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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 Pity shareholders in Aurora Cannabis (NYSE: ACB), once a highflier on the cannabis scene. In a one-two punch to investor sentiment on Thursday, analysts at investment bank Piper Sandler cut their rating on Aurora Cannabis stock to underweight, TheFly.com reported. So what Piper Sandler says that a slowdown in Germany, where regulators have halted Aurora's cannabis sales pending evaluation of its sterilization procedures, is putting a strain on the company's finances. | What happened Pity shareholders in Aurora Cannabis (NYSE: ACB), once a highflier on the cannabis scene. In a one-two punch to investor sentiment on Thursday, analysts at investment bank Piper Sandler cut their rating on Aurora Cannabis stock to underweight, TheFly.com reported. To plug the hole in its balance sheet, Piper Sandler notes that Aurora has already sold enough shares to raise 80 million Canadian dollars ($61.3 million), yet will need to raise CA$200 million more. | What happened Pity shareholders in Aurora Cannabis (NYSE: ACB), once a highflier on the cannabis scene. In a one-two punch to investor sentiment on Thursday, analysts at investment bank Piper Sandler cut their rating on Aurora Cannabis stock to underweight, TheFly.com reported. Both analysts predict a $1 price target for Aurora Cannabis stock, and with shares down 11% as of 3:07 p.m. EST on Friday, the stock already seems to be moving in that direction. | What happened Pity shareholders in Aurora Cannabis (NYSE: ACB), once a highflier on the cannabis scene. Now what Bank of America's concerns also center on Aurora's balance sheet risk. 10 stocks we like better than Aurora Cannabis Inc. |
37754.0 | 2020-01-10 00:00:00 UTC | Analyst Knocks Aurora Cannabis Price Target Down to $1 | ACB | https://www.nasdaq.com/articles/analyst-knocks-aurora-cannabis-price-target-down-to-%241-2020-01-10 | nan | nan | Marijuana stock Aurora Cannabis (NYSE: ACB) is trading down by more than 10% on Friday, following a highly critical analysis from an investment bank.
Late Thursday, Piper Sandler published a note saying it downgraded its recommendation to underweight (sell, in plain English) from the previous neutral rating (hold). The investment bank also took an ax to the price target, slicing it from $3 to $1.
Image source: Getty Images
In its note, Piper Sandler expressed concern about the poor state of Aurora's balance sheet, and its cash flow issues. Of the latter, it does not expect cash from operations to land in the black until the company's Q3 of fiscal 2021. It is currently in Q3 of 2020.
Another negative is weak sales in Europe, due in no small part to a recent suspension to Aurora's activities in Germany.
One positive note in Piper Sandler's note is that the company remains a powerhouse on the Canadian market. However, Canada has significant issues that must be overcome, including an acute cannabis supply problem.
Aurora has not yet commented on this latest withering analysis.
The company is hardly an analyst darling these days. Less than a month ago, another investment bank analysis determined that the stock's value was exactly $0. In launching coverage of Aurora in December, GLJ Research cited concerns similar to those of Piper Sandler, while highlighting the company's significant cash burn and its high indebtedness.
The company's list of internal and external challenges is long, meanwhile it continues to cope with fresh challenges. Recently, for example, Aurora lost two high-ranking executives.
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. | Marijuana stock Aurora Cannabis (NYSE: ACB) is trading down by more than 10% on Friday, following a highly critical analysis from an investment bank. Late Thursday, Piper Sandler published a note saying it downgraded its recommendation to underweight (sell, in plain English) from the previous neutral rating (hold). In launching coverage of Aurora in December, GLJ Research cited concerns similar to those of Piper Sandler, while highlighting the company's significant cash burn and its high indebtedness. | Marijuana stock Aurora Cannabis (NYSE: ACB) is trading down by more than 10% on Friday, following a highly critical analysis from an investment bank. Image source: Getty Images In its note, Piper Sandler expressed concern about the poor state of Aurora's balance sheet, and its cash flow issues. One positive note in Piper Sandler's note is that the company remains a powerhouse on the Canadian market. | Marijuana stock Aurora Cannabis (NYSE: ACB) is trading down by more than 10% on Friday, following a highly critical analysis from an investment bank. In launching coverage of Aurora in December, GLJ Research cited concerns similar to those of Piper Sandler, while highlighting the company's significant cash burn and its high indebtedness. 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. | Marijuana stock Aurora Cannabis (NYSE: ACB) is trading down by more than 10% on Friday, following a highly critical analysis from an investment bank. One positive note in Piper Sandler's note is that the company remains a powerhouse on the Canadian market. The Motley Fool has no position in any of the stocks mentioned. |
37755.0 | 2020-01-10 00:00:00 UTC | Stock Market News: Aurora Goes to Pot; No Fun for Six Flags | ACB | https://www.nasdaq.com/articles/stock-market-news%3A-aurora-goes-to-pot-no-fun-for-six-flags-2020-01-10 | nan | nan | The stock market continued to make modest gains on Friday morning, sending most major benchmarks to new record levels. Enthusiasm about the prospects for continued economic growth have many investors feeling more confident than ever. As of 10:45 a.m. EST, the Dow Jones Industrial Average (DJINDICES: ^DJI) had climbed 15 points to 28,972 after having been above 29,000 briefly earlier in the session. The S&P 500 (SNPINDEX: ^GSPC) gained 5 points to 3,280, and the Nasdaq Composite (NASDAQINDEX: ^IXIC) picked up 27 points to 9,229.
Marijuana stocks have been stuck in reverse for much of the past year, and Aurora Cannabis (NYSE: ACB) just got votes of no confidence from Wall Street analysts that could point to tougher times ahead. Meanwhile, Six Flags Entertainment (NYSE: SIX) is well known for its theme parks, but concerns about how well it could do internationally weighed heavily on the stock today.
Analysts see Aurora dimming
Shares of Aurora Cannabis fell 7% Friday morning, continuing to lose ground after a horrific 2019. Analysts are starting to lose confidence in the cannabis company, and shareholders aren't taking the news well.
Image source: Getty Images.
The latest dour forecasts came from analysts at two companies. Piper Sandler cut its rating on Aurora from neutral to underweight, slashing its price target by 67% to $1 per share. Analysts there pointed to a combination of balance sheet uncertainty and a tough environment for marijuana companies trying to raise capital as problematic for Aurora over the next couple of years.
Meanwhile, Bank of America also cut its rating on Aurora from neutral to underperform, setting a price target of just over $1. It raised some of the same concerns as Piper Sandler, noting that it's getting harder for the cannabis company to continue meeting financial covenants on its outstanding credit facilities. Having to renegotiate those facilities in the current environment could be especially difficult.
Aurora is still one of the biggest players in cannabis, but from a business perspective, it's facing a lot of unanswered questions. Until things get clearer, it'll be tough for Aurora's stock to rebound from its plunge over the past year.
China hurts Six Flags
Meanwhile, shares of Six Flags Entertainment dropped like a roller coaster, falling 19%. The company issued a warning that raised some big questions about its plans for expansion in the Chinese market.
Six Flags disclosed in a filing with the Securities and Exchange Commission that it has "encountered continued challenges" in its development of theme parks in China. A key partner has defaulted on payment obligations to Six Flags, and as a result, the theme park operator expects no revenue from China and will see negative adjustments and charges related to the business there. If the default isn't taken care of, then Six Flags might see no revenue from China in 2020, either.
Six Flags also pointed to weak performance in its core North American market. Poor season-pass and membership sales weighed on the business, especially over the holidays. That'll lead to lower revenue in the fourth quarter than during the prior-year period.
Six Flags pays a healthy dividend, but today's drop shows some of the vulnerabilities the theme park operator has. If China doesn't pan out as a growth opportunity, then it'll be tough for Six Flags to pick up the slack elsewhere.
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. | Marijuana stocks have been stuck in reverse for much of the past year, and Aurora Cannabis (NYSE: ACB) just got votes of no confidence from Wall Street analysts that could point to tougher times ahead. Analysts there pointed to a combination of balance sheet uncertainty and a tough environment for marijuana companies trying to raise capital as problematic for Aurora over the next couple of years. A key partner has defaulted on payment obligations to Six Flags, and as a result, the theme park operator expects no revenue from China and will see negative adjustments and charges related to the business there. | Marijuana stocks have been stuck in reverse for much of the past year, and Aurora Cannabis (NYSE: ACB) just got votes of no confidence from Wall Street analysts that could point to tougher times ahead. The stock market continued to make modest gains on Friday morning, sending most major benchmarks to new record levels. Analysts see Aurora dimming Shares of Aurora Cannabis fell 7% Friday morning, continuing to lose ground after a horrific 2019. | Marijuana stocks have been stuck in reverse for much of the past year, and Aurora Cannabis (NYSE: ACB) just got votes of no confidence from Wall Street analysts that could point to tougher times ahead. Analysts see Aurora dimming Shares of Aurora Cannabis fell 7% Friday morning, continuing to lose ground after a horrific 2019. Analysts there pointed to a combination of balance sheet uncertainty and a tough environment for marijuana companies trying to raise capital as problematic for Aurora over the next couple of years. | Marijuana stocks have been stuck in reverse for much of the past year, and Aurora Cannabis (NYSE: ACB) just got votes of no confidence from Wall Street analysts that could point to tougher times ahead. Meanwhile, Six Flags Entertainment (NYSE: SIX) is well known for its theme parks, but concerns about how well it could do internationally weighed heavily on the stock today. Analysts see Aurora dimming Shares of Aurora Cannabis fell 7% Friday morning, continuing to lose ground after a horrific 2019. |
37756.0 | 2020-01-10 00:00:00 UTC | Aurora Cannabis Stock May Already Have a U.S. Problem | ACB | https://www.nasdaq.com/articles/aurora-cannabis-stock-may-already-have-a-u.s.-problem-2020-01-10 | nan | nan | The hits keep on coming for Aurora Cannabis (NYSE:) stock. Amid earnings disappointments, management changes and sector pressure, Aurora stock continues to slide, reaching its lowest point in over two years this week.
Source: Jarretera / Shutterstock.com
ThereâÂÂs a case to be made that the declines will end at some point. Balance sheet concerns are real but as I detailed last month, bankruptcy is an . ACB stock isnâÂÂt âÂÂcheap,â even below $2: considering Aurora CannabisâÂÂs debt and a market capitalization thatâÂÂs still near $2 billion, it trades at more than seven times its fiscal 2020 revenue estimates. But thereâÂÂs a huge opportunity for cannabis plays across the board, with regulatory improvements and âÂÂâ likely to boost demand in the Canadian market.
And of course, the U.S. market looms. The Canadian market is attractive, and Aurora has , but itâÂÂs U.S. consumers who could really move the needle for ACB stock, and for the cannabis sector as a whole.
Federal legalization of cannabis seems likely at some point in the future, given steady progress at the state level. A regulated national market in the U.S. would support years, if not decades, of growth for the likes of Aurora, and justify what still look like reasonably high valuations across the sector.
But itâÂÂs becoming increasingly clear that Aurora Cannabis stock is not the play for investors bullish on the U.S. cannabis opportunity â particularly not right now. That in turn creates a key question: if Aurora Cannabis isnâÂÂt a U.S. play, are other, smaller, markets enough?
The Catalyst Problem for ACB Stock
The first issue with treating Aurora stock as a play on U.S. cannabis is that shifts in federal policy are highly unlikely any time soon. âÂÂThe biggest legislative changes of 2020 will be the enforcement of existing laws,â cannabis industry attorney Scot C. Crow of Dickinson Wright told InvestorPlace. And the upcoming presidential election will put a hold on any major changes to federal policy on marijuana.
âÂÂThis will be a year of increased friction and enforcement as federal legislation largely stalls due to the presidential election cycle,â said Crow. âÂÂIRS enforcement actions against legitimate state businesses could increase the possibility of meaningful federal action, but not realistically until after the election cycle.âÂÂ
The SAFE Banking Act, which working with cannabis companies in states with legalized, regulated cannabis, passed the House of Representatives in November, but Senate passage seems unlikely in 2020, if at all. Instead, itâÂÂs possible that the federal-state battle over cannabis will accelerate, according to CrowâÂÂs prediction of âÂÂincreased friction and enforcementâ in 2020.
âÂÂFederal and state agencies enforcing existing laws will expose non-compliant state operators,â Dickinson Wright Attorney Benton B. Bodamer told InvestorPlace. âÂÂLegitimate competition will bring risk of failure in select markets, testing state and federal enforceability of contracts and receivership and bankruptcy protections, even further than last year.âÂÂ
If anything, state-level markets may look less attractive by the end of this year. WeâÂÂve already seen in markets like Oregon. As Bodamer notes, itâÂÂs possible that producers will fail in response. Those failures could expose the issues, such as still-patchwork regulation and unsettled contract law, that persist in state-level markets.
On the whole then, the U.S. cannabis market is likely set for a rocky 2020. And so investors buying any cannabis stock based on U.S. opportunities would do well to exercise patience until after the elections at least.
AuroraâÂÂs U.S. Exposure
For Aurora Cannabis in particular, the problem is more significant. Right now, the company simply doesnâÂÂt have a path to a legitimate presence in the U.S. market.
Aurora does have exposure to the American market in two ways. First, the company has an agreement with Australis Capital (OTCMKTS:) to buy a significant stake in Australis in the event of U.S. legalization. Australis was spun out from Aurora in 2019, and primarily works in the U.S. cannabis market, including real estate assets. The existing partnership also suggests Australis could be a customer for Canadian-produced cannabis if U.S. regulations end up allowing for imports.
Second, Aurora has a partnership with the Ultimate Fighting Championship mixed martial arts league to research the effects of cannabidiol (CBD) on athletes. That partnership, as detailed on AuroraâÂÂs , aims to âÂÂgenerate the data required to establish CBD as an accepted therapeutic ingredient.âÂÂ
Per management, both efforts are part of a broader strategy focused on the U.S.
Aurora Chairman Michael Singer said on the that when the U.S. strategy is announced some time in the future, âÂÂitâÂÂs going to be very clear as to how this ties together.âÂÂ
The U.S. Problem for ACB Stock
But investors should be highly skeptical of that statement. Aurora CannabisâÂÂs current U.S. presence isnâÂÂt nearly enough. And itâÂÂs hamstrung in its ability to expand into the U.S. in force.
The two announced U.S. efforts are going to have minimal impact on ACB stock. AuroraâÂÂs option on Australis is being affected by that companyâÂÂs with privately held Folium Biosciences, a deal that would give Australis just 11% ownership of the combined company. Aurora can only buy a piece of that equity â or a low single-digit percentage of the merged business. Even if Australis and Folium combine to become a game-changer for the U.S. market, Aurora wonâÂÂt benefit enough to move the needle on ACB stock.
As for the CBD opportunity, a research partnership is nothing close to an actual profit-generating operation. And the U.S. CBD market is a mess, with unclear regulation from the Food and Drug Administration (FDA) and a patchwork of state-level regulations. Even industry leader CharlotteâÂÂs Web (OTCMKTS:) has seen its stock decline 71% just since Aug. 5.
And even if the market does become clearer, Aurora has no real edge and competition will be intense. CharlotteâÂÂs Web, Cronos (NASDAQ:), Canopy Growth (NYSE:) and many others have their eye on the market. ItâÂÂs asking a lot for Aurora to outperform so many rivals, including companies that have already established supply and distribution chains when Aurora has not.
The Cash Issue
ThereâÂÂs another issue, of course: cash. Again, it doesnâÂÂt seem like Aurora is going bankrupt any time soon, but it does need to conserve capital, and a decent chunk of the cash itâÂÂs currently holding is going to be burned as the operating business runs at a loss. If Aurora Cannabis wants to enter the U.S. market in earnest, it will either have to spend big and build out its business or acquire an existing operator.
Either option would be difficult, since Aurora just doesnâÂÂt have the balance sheet for a big move, and raising more cash will be exceedingly difficult at this point. The company has already . Quality sellers are not likely to take risky ACB stock if they can get shares of, say, Cronos, still flush with cash from an investment by Altria Group (NYSE:).
So itâÂÂs quite difficult to see how Aurora Cannabis could enter the U.S. market in force any time soon. It doesnâÂÂt have the leeway to make an acquisition, and it may not even have the capital to invest heavily by 2022 or 2024. Its existing domestic market presence is minimal.
That seems like a significant problem for ACB stock going forward, especially when its peers do have U.S. optionality. Most notably, Canopy with Acreage Holdings (OTCMKTS:) to enter the U.S. market in force as soon as federal legalization arrives. Cronos and even Tilray (NASDAQ:) will have dry powder to make their own moves.
Aurora has no such luxury, with its share price depressed and balance sheet stretched. It will take years to fix both problems. And until then, investors bullish on the U.S. simply need to look elsewhere.
As of this writing, Vince Martin did not hold a position in any of the securities mentioned above.
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 stock isnâÂÂt âÂÂcheap,â even below $2: considering Aurora CannabisâÂÂs debt and a market capitalization thatâÂÂs still near $2 billion, it trades at more than seven times its fiscal 2020 revenue estimates. The Canadian market is attractive, and Aurora has , but itâÂÂs U.S. consumers who could really move the needle for ACB stock, and for the cannabis sector as a whole. The Catalyst Problem for ACB Stock The first issue with treating Aurora stock as a play on U.S. cannabis is that shifts in federal policy are highly unlikely any time soon. | ACB stock isnâÂÂt âÂÂcheap,â even below $2: considering Aurora CannabisâÂÂs debt and a market capitalization thatâÂÂs still near $2 billion, it trades at more than seven times its fiscal 2020 revenue estimates. The Canadian market is attractive, and Aurora has , but itâÂÂs U.S. consumers who could really move the needle for ACB stock, and for the cannabis sector as a whole. The Catalyst Problem for ACB Stock The first issue with treating Aurora stock as a play on U.S. cannabis is that shifts in federal policy are highly unlikely any time soon. | The Canadian market is attractive, and Aurora has , but itâÂÂs U.S. consumers who could really move the needle for ACB stock, and for the cannabis sector as a whole. The Catalyst Problem for ACB Stock The first issue with treating Aurora stock as a play on U.S. cannabis is that shifts in federal policy are highly unlikely any time soon. ACB stock isnâÂÂt âÂÂcheap,â even below $2: considering Aurora CannabisâÂÂs debt and a market capitalization thatâÂÂs still near $2 billion, it trades at more than seven times its fiscal 2020 revenue estimates. | The Catalyst Problem for ACB Stock The first issue with treating Aurora stock as a play on U.S. cannabis is that shifts in federal policy are highly unlikely any time soon. ACB stock isnâÂÂt âÂÂcheap,â even below $2: considering Aurora CannabisâÂÂs debt and a market capitalization thatâÂÂs still near $2 billion, it trades at more than seven times its fiscal 2020 revenue estimates. The Canadian market is attractive, and Aurora has , but itâÂÂs U.S. consumers who could really move the needle for ACB stock, and for the cannabis sector as a whole. |
37757.0 | 2020-01-10 00:00:00 UTC | Piper Sandler Plays a Dirge for Aurora Cannabis (ACB) Stock | ACB | https://www.nasdaq.com/articles/piper-sandler-plays-a-dirge-for-aurora-cannabis-acb-stock-2020-01-10 | nan | nan | As recently as March 2019, when Aurora Cannabis (ACB) was still a $10 stock, everybody who was anybody in marijuana investing wanted to know Aurora, which was still one of the most popular stocks on the Street.
Today, the stock is down more than 80% from that height, and selling for less than $2 a stub (American -- it costs a bit more in Canadian dollars, or "C$"). And now, it seems Aurora has lost one of its few remaining fans on Wall Street, as Piper Sandler analyst Michael Lavery pulls even his half-hearted hold rating, downgrades to "underweight," and assigns a new price target ... of just $1. (To watch Lavery's track record, click here)
What's got the analyst playing this new, and sadder tune?
As Lavery explains, Aurora is still a big player in the Canadian cannabis market, with "industry leading production capacity" and a likely revenue growth rate of anywhere from 30% to 35% through 2021. Problem is, this rate that Lavery projects is only "about half of consensus," which raises very real risks that in future earnings reports, Aurora will "miss" expectations -- with dire results for its stock.
What could cause this to happen?
For one thing, Aurora depends heavily upon medical marijuana sales in Germany, where it sells its "highest priced and highest margin products." But German regulators have halted sales of its products pending a review of the company's "sterilization process." The longer this sales halt continues, the greater the danger to Aurora's "revenue and margin mix."
Lavery worries further that the company’s cannabis derivatives business (vapes, edibles, and so on) poses a "risk to our top-line outlook" -- which as already noted, is only half as bright as what other analysts are looking for. Vape sales in Alberta particularly, "one of the most popular derivative products are now postponed indefinitely," and it's not clear when they will begin.
Result: Already, Lavery has been forced to reduce his revenue projection for Aurora from C$340 million to C$335 million in fiscal 2020. But that's not the worst of it. Looking ahead to fiscal 2021, he now worries that sales initially expected to approximate C$635 million could come in as low as C$440 million instead -- a haircut of more than 30%.
Meanwhile, Aurora's oft-mentioned cash crunch looms as an overarching concern. Despite recently raising $80 million in cash from dilutive stock sales, Lavery notes that Aurora will probably be cash flow-negative through at least fiscal Q3 2021. And to be clear, Lavery is speaking here of negative operating cash flow. Actual free cash flow will probably remain negative even longer, prolonging the company's cash burn.
Unable to raise enough cash from its business operations, Lavery warns that Aurora will run a C$200 million cash deficit. Some way, somehow, the company is going to have to find a way to plug that gap.
Realistically, given lenders' reluctance to throw good money after bad in this struggling industry, that probably means more stock sales -- and more dilution of Aurora's long-suffering shareholders.
The majority of the Street sides with the Piper Sandler analyst's cautious take on the cannabis player, as TipRanks analytics demonstrate ACB as a Hold. Out of 10 analysts polled in the last 3 months, 3 are bullish on Aurora stock, 3 remain sidelined, while 4 are bearish on the stock. With a return potential of 64%, the stock's consensus target price stands at $3.06. (See Aurora stock analysis on TipRanks)
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | As recently as March 2019, when Aurora Cannabis (ACB) was still a $10 stock, everybody who was anybody in marijuana investing wanted to know Aurora, which was still one of the most popular stocks on the Street. The majority of the Street sides with the Piper Sandler analyst's cautious take on the cannabis player, as TipRanks analytics demonstrate ACB as a Hold. And now, it seems Aurora has lost one of its few remaining fans on Wall Street, as Piper Sandler analyst Michael Lavery pulls even his half-hearted hold rating, downgrades to "underweight," and assigns a new price target ... of just $1. | As recently as March 2019, when Aurora Cannabis (ACB) was still a $10 stock, everybody who was anybody in marijuana investing wanted to know Aurora, which was still one of the most popular stocks on the Street. The majority of the Street sides with the Piper Sandler analyst's cautious take on the cannabis player, as TipRanks analytics demonstrate ACB as a Hold. For one thing, Aurora depends heavily upon medical marijuana sales in Germany, where it sells its "highest priced and highest margin products." | As recently as March 2019, when Aurora Cannabis (ACB) was still a $10 stock, everybody who was anybody in marijuana investing wanted to know Aurora, which was still one of the most popular stocks on the Street. The majority of the Street sides with the Piper Sandler analyst's cautious take on the cannabis player, as TipRanks analytics demonstrate ACB as a Hold. Despite recently raising $80 million in cash from dilutive stock sales, Lavery notes that Aurora will probably be cash flow-negative through at least fiscal Q3 2021. | The majority of the Street sides with the Piper Sandler analyst's cautious take on the cannabis player, as TipRanks analytics demonstrate ACB as a Hold. As recently as March 2019, when Aurora Cannabis (ACB) was still a $10 stock, everybody who was anybody in marijuana investing wanted to know Aurora, which was still one of the most popular stocks on the Street. The longer this sales halt continues, the greater the danger to Aurora's "revenue and margin mix." |
37758.0 | 2020-01-10 00:00:00 UTC | This Is the Worst Marijuana Acquisition in History | ACB | https://www.nasdaq.com/articles/this-is-the-worst-marijuana-acquisition-in-history-2020-01-10 | nan | nan | For years, marijuana has been among the fastest-growing industries. Between 2014 and 2018, legal weed sales more than tripled between 2014 and 2018 to $10.9 billion, with various Wall Street estimates calling for at least $50 billion in annual worldwide pot sales by 2030.
This rapid growth was the impetus behind the rise in cannabis stock valuations, as well as the catalyst that led to a wave of marijuana acquisitions throughout 2018 and the first half of 2019. However, as investors have come to learn, most of these acquisitions were grossly overpriced -- none more so than Aurora Cannabis' (NYSE: ACB) deal to buy Ontario's MedReleaf, which closed in July 2018.
Image source: Getty Images.
This is, hands down, the worst cannabis deal of all time
Not counting equity investments, such as Constellation Brands taking a stake worth $4 billion in Canopy Growth (NYSE: CGC) in Nov. 2018, Aurora's all-stock purchase of MedReleaf, totaling 2.64 billion Canadian dollars ($2.03 billion U.S.), is the largest acquisition to have been completed in the marijuana space. But we've come to learn just how incredibly overpriced this deal was, relative to what Aurora received.
The expectation had been that Aurora's acquisition of MedReleaf would boost its peak annual production capacity by a minimum of 140,000 kilos, if not north of 250,000 kilos. It acquired two of MedReleaf's existing cultivation farms -- the 210,000-square-foot Bradford facility, which is capable of 28,000 kilos per year, and the 55,000-square-foot Markham campus, capable of 7,000 kilos year. It also inherited the Exeter vegetable-growing greenhouse, which was to be retrofit to grow cannabis. At 1 million square feet, it was estimated to yield 105,000 kilos of cannabis per year. Additionally, 95 acres of adjacent land was also acquired with the Exeter facility, providing MedReleaf (and then Aurora, following the buyout) the opportunity to construct another facility that was 1.5 times the size of Exeter.
On paper, this acquisition seemed transformative. However, we learned this past week just how egregiously Aurora overpaid for MedReleaf.
Image source: Getty Images.
With Aurora Cannabis facing a bit of a cash crunch, the company announced on Monday, Jan. 6, that it was putting its Exeter facility up for sale for the low, low price of CA$17 million. Interestingly, it's not even clear if the company will get its ask of CA$17 million considering how most major growers have reduced peak production estimates and idled construction projects.
This sale is a slap in the face on multiple accounts. For one, MedReleaf paid about CA$26 million in a cash-and-stock deal to acquire Exeter and its adjacent acreage. Aurora may wind up selling the facility and its land for at least a 35% discount to what MedReleaf paid for it. And this assumes that Aurora never put a dime into the facility, which is unclear at this point.
Furthermore, this sale reduces peak production estimate for the MedReleaf acquisition from at least 140,000 kilos to just 35,000 kilos from the two existing cultivation farms. To add some context to this, Flowr and Supreme Cannabis Company both have about 50,000 kilos of domestic peak annual production capacity, and their respective market caps are currently $172 million and $145 million. Aurora paid more than $2 billion for MedReleaf!
In addition to the more than one dozen other acquisitions Aurora Cannabis has completed over the past 3.5 years, the company's balance sheet has ballooned to recognize CA$3.17 billion ($2.43 billion) in goodwill. This represents 57% of the company's total assets, and it's considerably larger than Aurora's current market cap (as of Wednesday, Jan. 8) of $2.04 billion. In other words, the Exeter sale all but assures that Aurora Cannabis will take a massive writedown in the not-so-distant future.
Image source: Getty Images.
Don't worry Aurora, you're not alone
Although Aurora Cannabis stands out as being particularly awful at properly valuing its acquisitions, it's certainly not the only pot stock that deserves a finger wag. In fact, I'm not certain there's been a single deal conducted in the cannabis space over the past two years where the acquirer hasn't overpaid. A quick look at rising goodwill levels on marijuana stock balance sheets confirms this.
The aforementioned Canopy Growth, the largest pot stock by market cap, has been a pretty avid acquirer as well. According to its balance sheet, as of its most recent quarter, Canopy had CA$1.91 billion in goodwill, which accounts for 23% of the company's total assets. What's worrisome is that this percentage continues to climb, which is primarily the result of the ongoing decline in Canopy's cash balance due to its massive operating losses.
Aphria (NYSE: APHA) has been another culprit, with almost CA$670 million in goodwill recognized on its balance sheet as of its most recent quarter. Much of this derives from Aphria's purchases of Nuuvera and its Latin American assets in 2018. What's particularly noteworthy about Aphria is that it's already taken a CA$50 million writedown on its Latin American acquisition, and yet still has 28% of its total assets tied up in goodwill.
The point is that marijuana stocks have done a very poor job of evaluating their purchases, and it's shareholders who are going to pay the price, with writedowns looking like a near certainty for a number of major producers. Of course, no cannabis company may ever top Aurora's buyout blunder.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | However, as investors have come to learn, most of these acquisitions were grossly overpriced -- none more so than Aurora Cannabis' (NYSE: ACB) deal to buy Ontario's MedReleaf, which closed in July 2018. What's worrisome is that this percentage continues to climb, which is primarily the result of the ongoing decline in Canopy's cash balance due to its massive operating losses. The point is that marijuana stocks have done a very poor job of evaluating their purchases, and it's shareholders who are going to pay the price, with writedowns looking like a near certainty for a number of major producers. | However, as investors have come to learn, most of these acquisitions were grossly overpriced -- none more so than Aurora Cannabis' (NYSE: ACB) deal to buy Ontario's MedReleaf, which closed in July 2018. This is, hands down, the worst cannabis deal of all time Not counting equity investments, such as Constellation Brands taking a stake worth $4 billion in Canopy Growth (NYSE: CGC) in Nov. 2018, Aurora's all-stock purchase of MedReleaf, totaling 2.64 billion Canadian dollars ($2.03 billion U.S.), is the largest acquisition to have been completed in the marijuana space. Furthermore, this sale reduces peak production estimate for the MedReleaf acquisition from at least 140,000 kilos to just 35,000 kilos from the two existing cultivation farms. | However, as investors have come to learn, most of these acquisitions were grossly overpriced -- none more so than Aurora Cannabis' (NYSE: ACB) deal to buy Ontario's MedReleaf, which closed in July 2018. This is, hands down, the worst cannabis deal of all time Not counting equity investments, such as Constellation Brands taking a stake worth $4 billion in Canopy Growth (NYSE: CGC) in Nov. 2018, Aurora's all-stock purchase of MedReleaf, totaling 2.64 billion Canadian dollars ($2.03 billion U.S.), is the largest acquisition to have been completed in the marijuana space. With Aurora Cannabis facing a bit of a cash crunch, the company announced on Monday, Jan. 6, that it was putting its Exeter facility up for sale for the low, low price of CA$17 million. | However, as investors have come to learn, most of these acquisitions were grossly overpriced -- none more so than Aurora Cannabis' (NYSE: ACB) deal to buy Ontario's MedReleaf, which closed in July 2018. Additionally, 95 acres of adjacent land was also acquired with the Exeter facility, providing MedReleaf (and then Aurora, following the buyout) the opportunity to construct another facility that was 1.5 times the size of Exeter. In addition to the more than one dozen other acquisitions Aurora Cannabis has completed over the past 3.5 years, the company's balance sheet has ballooned to recognize CA$3.17 billion ($2.43 billion) in goodwill. |
37759.0 | 2020-01-09 00:00:00 UTC | ACB February 28th Options Begin Trading | ACB | https://www.nasdaq.com/articles/acb-february-28th-options-begin-trading-2020-01-09 | nan | nan | Investors in Aurora Cannabis Inc (Symbol: ACB) saw new options begin trading today, for the February 28th expiration. At Stock Options Channel, our YieldBoost formula has looked up and down the ACB options chain for the new February 28th 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 12 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 $1.38 (before broker commissions). To an investor already interested in purchasing shares of ACB, that could represent an attractive alternative to paying $1.80/share today.
Because the $1.50 strike represents an approximate 17% 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 79%. 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 8.00% return on the cash commitment, or 58.40% 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 16 cents. If an investor was to purchase shares of ACB stock at the current price level of $1.80/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 20.00% if the stock gets called away at the February 28th 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 11% 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 61%. 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 8.89% boost of extra return to the investor, or 64.89% annualized, which we refer to as the YieldBoost.
The implied volatility in the put contract example is 181%, while the implied volatility in the call contract example is 151%.
Meanwhile, we calculate the actual trailing twelve month volatility (considering the last 252 trading day closing values as well as today's price of $1.80) to be 72%. 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 11% 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 today, for the February 28th 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 11% 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 today, for the February 28th expiration. At Stock Options Channel, our YieldBoost formula has looked up and down the ACB options chain for the new February 28th 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 11% 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 today, for the February 28th expiration. At Stock Options Channel, our YieldBoost formula has looked up and down the ACB options chain for the new February 28th 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 February 28th 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 11% 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 today, for the February 28th expiration. |
37760.0 | 2020-01-09 00:00:00 UTC | Why Marijuana Stock Innovative Industrial Properties Returned 73% in 2019 | ACB | https://www.nasdaq.com/articles/why-marijuana-stock-innovative-industrial-properties-returned-73-in-2019-2020-01-09 | nan | nan | What happened
Shares of Innovative Industrial Properties (NYSE: IIPR), a cannabis sector-focused real estate investment trust (REIT), returned 72.5% in 2019, according to data from S&P Global Market Intelligence. For context, the S&P 500 index returned 31.5% last year.
Image source: Innovative Industrial Properties.
So what
We can attribute Innovative Industrial Properties stock's strong 2019 performance to the company's robust financial performance and to management's boosting of the attractive dividend.
In the third quarter, as reported in early November, rental revenue soared 201% year over year to $11.2 million, driven largely by acquisitions. During the quarter, IIP added 10 new properties, bringing its portfolio's total to 31 fully leased properties at the quarter's end. Earnings per share (EPS) rocketed 162% to $0.55, and adjusted funds from operations (FFO) per share jumped 126% to $0.86. (FFO is a closely watched metric for REITs, as it's the driver of dividend changes.) Wall Street was looking for EPS of $0.47 on revenue of $10.7 million, so the company easily beat both expectations.
IIP's year-over-year revenue growth has accelerated throughout 2019: 201% in Q3, 155% in Q2, and 111% in Q1.
The company paid a quarterly dividend of $0.78 per share on Oct. 15 to stockholders of record as of Sept. 30, an increase of 30% from the previous quarter and 123% from the year-ago period. As of the market's close on Jan. 8, the stock's dividend yield is 5.4%.
Innovative Industrial Properties' great financial performance and meaty dividend allowed it to buck the cannabis space's downtrend last year. Shares of leading Canadian cannabis growers Canopy Growth, Aurora Cannabis, and Cronos declined 21.5%, 56.5%, and 26.2%, respectively, in 2019.
Now what
IIP doesn't provide guidance. For the fourth quarter, Wall Street is anticipating EPS of $0.57 on revenue of $14.6 million, representing growth of 138% and 205%, respectively, year over year.
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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), returned 72.5% in 2019, according to data from S&P Global Market Intelligence. Innovative Industrial Properties' great financial performance and meaty dividend allowed it to buck the cannabis space's downtrend last year. * 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! | So what We can attribute Innovative Industrial Properties stock's strong 2019 performance to the company's robust financial performance and to management's boosting of the attractive dividend. For the fourth quarter, Wall Street is anticipating EPS of $0.57 on revenue of $14.6 million, representing growth of 138% and 205%, respectively, year over year. The Motley Fool recommends Innovative Industrial Properties. | What happened Shares of Innovative Industrial Properties (NYSE: IIPR), a cannabis sector-focused real estate investment trust (REIT), returned 72.5% in 2019, according to data from S&P Global Market Intelligence. So what We can attribute Innovative Industrial Properties stock's strong 2019 performance to the company's robust financial performance and to management's boosting of the attractive dividend. 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. | For the fourth quarter, Wall Street is anticipating EPS of $0.57 on revenue of $14.6 million, representing growth of 138% and 205%, 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. The Motley Fool recommends Innovative Industrial Properties. |
37761.0 | 2020-01-09 00:00:00 UTC | 5 Marijuana Stocks With the Most Cash in 2020 | ACB | https://www.nasdaq.com/articles/5-marijuana-stocks-with-the-most-cash-in-2020-2020-01-09 | nan | nan | It's pretty safe to say that last year did not go as planned for a majority of marijuana stock investors.
The belief had been that cannabis stocks would push decisively into the green, led by skyrocketing dried cannabis sales in Canada, the subsequent launch of derivatives, and more legalizations in select U.S. states. But supply issues constrained legal product in Canada, derivatives launched two months later than expected (in mid-December), and high tax rates have stymied adult-use sales in a number of U.S. states. Ultimately, most pot stocks lost money in 2019, and may continue to do so in 2020.
While the cannabis industry should make strides in 2020, it's pretty clear how important having adequate cash on hand has become. As we push headlong into the new year, the following five marijuana stocks currently boast the most cash on their balance sheets (as of the end of their most recent quarter). Note that "cash" includes cash, cash equivalents, and marketable securities, but not restricted cash.
Image source: Getty Images.
1. Canopy Growth: $2.11 billion
As has been the case for some time now, Canopy Growth (NYSE: CGC) leads all pot stocks in the cash department with a little over $2.1 billion. Subtracting Canopy's debt would mean that approximately 18% of the company's current market cap is entirely covered by its cash.
Most of Canopy Growth's cash derives from its November 2018-completed equity investment from Constellation Brands, the maker of Modelo and Corona beer. Constellation's $4 billion investment netted the company a 37% stake in Canopy (this actually marked its third such investment), all while giving Canopy the capital needed to make acquisitions and expand into new markets. For instance, Canopy is using its cash hoard to build a hemp processing facility in New York State.
But the company has also been burning through its cash at an incredible pace. Over the past three quarters, Canopy's cash, cash equivalents, and marketable securities have declined by about $1.7 billion. Yes, acquisitions are part of the reason for this decline. But another notable culprit is the company's massive operating losses. A big jump in hiring and marketing costs has whittled away at Canopy's enviable cash position and will likely do so again in 2020, even with a cost-conscious David Klein set to take over as CEO.
Image source: Getty Images.
2. Cronos Group: $1.53 billion
The only other cannabis stock that's carrying around more than $1 billion in cash is Cronos Group (NASDAQ: CRON). Like Canopy Growth, it was also lucky enough to attract an equity investor, which is why it has $1.53 billion in cash at its disposal.
In mid-March 2019, Cronos closed an equity investment from tobacco giant Altria Group for $1.8 billion. The deal gave Altria a 45% stake in Cronos, as well as a means to expand its sales channels beyond just U.S. tobacco. As a reminder, adult cigarette smoking rates have declined to an all-time low in the United States, which certainly encouraged Altria to seek out the lucrative long-term growth opportunity that cannabis offers.
To date, Cronos Group has only made one major acquisition, the $300 million deal to buy Redwood Holdings, the owner of the Lord Jones brand of beauty products infused with cannabidiol (CBD). Three-quarters of the purchase price of this deal was cash. Although Cronos Group continues to lose money on an operating basis, its losses are nowhere near the level of Canopy Growth. That gives it an outside chance of becoming the cash leader in the marijuana space by the end of 2020.
Image source: GW Pharmaceuticals.
3. GW Pharmaceuticals: $554.7 million
Even though management doesn't enjoy its company being lumped in with marijuana stocks, cannabinoid-focused drug developer GW Pharmaceuticals (NASDAQ: GWPH) is rolling in the green. It ended its most recent quarter with nearly $555 million in cash at its disposal.
As the only non-grower on this list, it's not really a big surprise that GW has this much cash at the ready. Drug developers need a lot of capital to research new therapies, run clinical studies, launch new drugs, and properly market them if approved. Don't forget that Epidiolex, the company's leading oral treatment for two rare types of childhood-onset epilepsy, launched in November 2018. This means the company is still working hard to ensure proper insurance coverage and physician awareness of this top-selling drug.
GW Pharmaceuticals will be looking to expand Epidiolex's label, as well as garner success beyond its potential long-term blockbuster. This year might also be when the company makes its first push into profitability, but only time (and Epidiolex's ongoing ramp-up) will tell.
Image source: Getty Images.
4. Aphria: $357.5 million
Ontario-based Aphria (NYSE: APHA) is also sitting on a seemingly hearty pile of cash, with a little over $357 million in its coffers. As a potential top-three producer when fully operational, this cash would seemingly come in handy.
But Aphria has contended with a number of challenges. The company's flagship joint venture that's capable of 140,000 kilos in peak output per year, the Aphria Diamond campus, only recently received the nod to begin planting. It took north of 18 months for Health Canada to give Aphria the OK to grow cannabis. Likewise, its home province of Ontario only had 24 open dispensaries as of Oct. 17, 2019, the one-year anniversary of adult-use sales commencing in Canada. Aphria has very much needed this cash to balance out some of the uncertainty the industry has dealt with.
Furthermore, the company generated the bulk of this cash by pricing a $350 million convertible debt offering in April 2019. This means that while Aphria is cash-rich, it's also lugging around nearly the same amount of debt on its balance sheet. This is something prospective investors will want to keep in mind.
Image source: Getty Images.
5. Aurora Cannabis: $147.8 million
The most popular marijuana stock on the planet, Aurora Cannabis (NYSE: ACB), ended its fiscal first quarter with almost $148 million in cash, not counting restricted cash.
Aurora isn't a surprising name to find on this list given just how many projects it has ongoing. The company has 15 production facilities; has made more than a dozen acquisitions since August 2016; and boasts a production, export, research, or partnership presence in 24 countries outside of Canada. Aurora has been, arguably, more aggressive than any other pot stock in terms of expansion, and having an ample amount of capital on hand has been imperative in making this happen.
But similar to Aphria, it's important to note that Aurora Cannabis is also carrying a lot of debt on its balance sheet. At the end of the previous quarter, the company had roughly $465 million in net debt. On the plus side, subsequent to the end of its fiscal Q1 2020, Aurora took care of its $177 million convertible note coming due in March 2020. Nevertheless, issuing common stock appears to be the only way that Aurora has of raising substantive amounts of cash. In doing so, the company continues to dilute its shareholders. I don't expect this to change much in 2020.
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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: $147.8 million The most popular marijuana stock on the planet, Aurora Cannabis (NYSE: ACB), ended its fiscal first quarter with almost $148 million in cash, not counting restricted cash. But supply issues constrained legal product in Canada, derivatives launched two months later than expected (in mid-December), and high tax rates have stymied adult-use sales in a number of U.S. states. As a reminder, adult cigarette smoking rates have declined to an all-time low in the United States, which certainly encouraged Altria to seek out the lucrative long-term growth opportunity that cannabis offers. | Aurora Cannabis: $147.8 million The most popular marijuana stock on the planet, Aurora Cannabis (NYSE: ACB), ended its fiscal first quarter with almost $148 million in cash, not counting restricted cash. Most of Canopy Growth's cash derives from its November 2018-completed equity investment from Constellation Brands, the maker of Modelo and Corona beer. Over the past three quarters, Canopy's cash, cash equivalents, and marketable securities have declined by about $1.7 billion. | Aurora Cannabis: $147.8 million The most popular marijuana stock on the planet, Aurora Cannabis (NYSE: ACB), ended its fiscal first quarter with almost $148 million in cash, not counting restricted cash. Note that "cash" includes cash, cash equivalents, and marketable securities, but not restricted cash. Canopy Growth: $2.11 billion As has been the case for some time now, Canopy Growth (NYSE: CGC) leads all pot stocks in the cash department with a little over $2.1 billion. | Aurora Cannabis: $147.8 million The most popular marijuana stock on the planet, Aurora Cannabis (NYSE: ACB), ended its fiscal first quarter with almost $148 million in cash, not counting restricted cash. But supply issues constrained legal product in Canada, derivatives launched two months later than expected (in mid-December), and high tax rates have stymied adult-use sales in a number of U.S. states. Over the past three quarters, Canopy's cash, cash equivalents, and marketable securities have declined by about $1.7 billion. |
37762.0 | 2020-01-08 00:00:00 UTC | Aurora Cannabis (ACB): Selling a Facility Is a Big Step Forward | ACB | https://www.nasdaq.com/articles/aurora-cannabis-acb%3A-selling-a-facility-is-a-big-step-forward-2020-01-08 | nan | nan | The reorganization has apparently started at Aurora Cannabis (ACB) without any formal announcement by the Canadian cannabis LP. The latest news is a surprise listing of a future cultivation facility for sale. The move appears wise considering cash constraints, but it also leaves the company as a sudden laggard in the sector with an unclear path forward.
Exeter Greenhouse
Earlier this week, the market caught wind that Aurora Cannabis had listed their Exeter, Ontario facility for sale. The 22-acre greenhouse on 70 acres is listed for sale at C$17 million. The property has another 95 acres of additional land for sale at C$2 million for potential total proceeds of C$19 million.
The facility was inherited in the acquisition of Medreleaf in 2018. Reportedly, Medreleaf paid C$26 million for the facility justy back in 2018 before the buyout by Aurora Cannabis.
The implications for Aurora Cannabis are that the Exeter facility was listed with a potential of 105,000 kg of future cultivation capacity. When combined with halted construction of the Aurora Sky 2 in Edmonton and the Aurora Nordic 2 in Denmark, the company has taken three of the four facilities with expected annual production in excess of 100,000 kg off the market.
The company once forecasted industry leading capacity of 625,000 kg by mid-2020 and will now have production capacity somewhere below 200,000 kg. The Aurora Sky 2 and Aurora Nordic 2 facilities are in still inline for completion in the future once global cannabis demand improves and the company has the funds.
Mixed News
The departure of the CCO Cam Battley and the decision to sell the Exeter facility are the initial steps in a needed large reorganization. The Canadian cannabis sector needs a major reset and other companies have already made similar moves.
The problem facing Aurora Cannabis is that a C$19 million cash infusion (if the company can even sell the facility and adjacent land) doesn’t drastically alter the cash needs.
The bigger issue is the market realization that the company will no longer be the industry cultivation leader. Both Aphria (APHA) and Canopy Growth (CGC) have plans to exceed 250,000 kg in annual cultivation capacity. A big industry key is how Canopy Growth choses to reset corporate goals with the new CEO. A real possibility is the industry giant using a large cash balance to press for market share.
As mentioned in prior articles, investors should brace for a large write-off considering the ~C$4 billion balance assigned to the Goodwill and Intangible categories on the balance sheet. In addition, investors should hope for a reduction in operating expenses in order to set the company up to turn EBITDA positive off a lower reset of expectations for the sector due to the ongoing lack of Ontario stores and weak start to Cannabis 2.0.
Consensus Verdict
According to TipRanks, the consensus on Wall Street is that Aurora stock is a “hold” for investors. But TipRanks might as well have said “buy” — because analysts, on average, think the stock, currently at $1.78, could zoom ahead to $3.43 within a year, delivering 93% profits to new investors. (See Aurora stock analysis on TipRanks)
Takeaway
The key investor takeaway is that Aurora Cannabis has a lot of positive catalysts to play out in 2020, but the company needs to reorganize the firm to reduce operating expenses following delayed catalyst in 2020. Once the company gets the business better aligned with market realities, investors can own the stock knowing the catalysts will benefit shareholders going forward.
To find good ideas for cannabis stocks trading at fair value or better, 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. | The reorganization has apparently started at Aurora Cannabis (ACB) without any formal announcement by the Canadian cannabis LP. The move appears wise considering cash constraints, but it also leaves the company as a sudden laggard in the sector with an unclear path forward. Mixed News The departure of the CCO Cam Battley and the decision to sell the Exeter facility are the initial steps in a needed large reorganization. | The reorganization has apparently started at Aurora Cannabis (ACB) without any formal announcement by the Canadian cannabis LP. Exeter Greenhouse Earlier this week, the market caught wind that Aurora Cannabis had listed their Exeter, Ontario facility for sale. The implications for Aurora Cannabis are that the Exeter facility was listed with a potential of 105,000 kg of future cultivation capacity. | The reorganization has apparently started at Aurora Cannabis (ACB) without any formal announcement by the Canadian cannabis LP. When combined with halted construction of the Aurora Sky 2 in Edmonton and the Aurora Nordic 2 in Denmark, the company has taken three of the four facilities with expected annual production in excess of 100,000 kg off the market. The problem facing Aurora Cannabis is that a C$19 million cash infusion (if the company can even sell the facility and adjacent land) doesn’t drastically alter the cash needs. | The reorganization has apparently started at Aurora Cannabis (ACB) without any formal announcement by the Canadian cannabis LP. The implications for Aurora Cannabis are that the Exeter facility was listed with a potential of 105,000 kg of future cultivation capacity. The Canadian cannabis sector needs a major reset and other companies have already made similar moves. |
37763.0 | 2020-01-08 00:00:00 UTC | Aurora Stock Chart Is Screaming ‘Stay Away’ | ACB | https://www.nasdaq.com/articles/aurora-stock-chart-is-screaming-stay-away-2020-01-08 | nan | nan | If youâÂÂre looking for an optimistic take on Aurora Cannabis (NYSE:), then move along. You wonâÂÂt find any positivity in todayâÂÂs piece, as Aurora stock remains a widowmaker.
Source: Shutterstock
The absence of even an ounce of bullish commentary isnâÂÂt for lack of trying. IâÂÂve scoured every time frame and filtered through countless indicators; Yet, the evidence remains clear and wholly one-sided. Aurora stock is bearish, and banking on lower prices is still the best bet.
LetâÂÂs begin with the price trend, which has been locked in a death spiral since last March. The weekly, daily and even intraday time frames are all pointing lower. Such is usually the case when a stock is courting 52-week lows. The 200-day, 50-day, and 20-day moving averages are careening lower and sit heavy atop the stock.
Initially, rallies ascended to the 50-day before turning lower, but now sellers are rejecting rebounds swiftly at the 20-day. From peak-to-trough, ACB stock has fallen 82% from last MarchâÂÂs peak.
Aurora Stock Indicators
The downtrendâÂÂs momentum leaves much to be desired, as well. Though the Relative Strength Index (RSI) indicator could be starting to form a bullish divergence, I wouldnâÂÂt put much faith in it. WeâÂÂve seen other such rays of hope quickly fail during this ten-month downward spiral.
Besides, the November RSI downswing that Aurora stock shares have failed to match during the current drop was driven by a . ItâÂÂs hard to match that type of momentum on the next downswing.
Source: The thinkorswimî platform from TD Ameritrade
As for volume, weâÂÂve seen a few accumulation days crop up over the past two months, but these high volume up days have proven powerless in the face of the steroid-injecting bears that now dominate the field. Plus, a broader view reveals theyâÂÂve been outnumbered by distribution days â confirming sellers still very much hold the high ground.
Even nasty downtrends can experience robust rebounds when they stretch too far, though. This is where measures of overbought and oversold come into play. Unfortunately, we canâÂÂt even make the case that Aurora stock is oversold! Because of the steady drumbeat of selling over the past month, the decline has been gradual, and it still sits close to the descending 20-day moving average.
The Worst Pot Stock
The final nail in the coffin comes from comparing the price action of ACB stock to that of its peers â namely, Canopy Growth Corp (NYSE:) and Cronos Group (NASDAQ:). Technicians call thisàrelative performance. Remember, if youâÂÂre shopping for marijuana stocks, you have choices â and a side-by-side comparison reveals Aurora stock is the worst of the bunch. CGC stock is the best looking right now, boasting a price trend that is trying to turn a corner. It has also just above its 50-day moving average, and has stabilized over the past quarter.
Source: The thinkorswimî platform from TD Ameritrade
CRON stock is also slightly better-looking because it hasnâÂÂt yet fallen back to last NovemberâÂÂs lows. That said, it is back below its major moving averages and likely headed to new lows eventually.
Aurora Stock Option Trade
IâÂÂm obviously not a fan of buying Aurora Cannabis stock here, but bearish trades have some issues due to the stockâÂÂs extremely low price. You could short stock with a stop above the pivot high of $2.27. Buying puts is also an option, but theyâÂÂre pricing in a pretty big move so youâÂÂd need the stock to drop beneath $1 to really win big. IâÂÂd suggest the $2 or $3 strike puts out to March.
As of this writing, Tyler Craig didnâÂÂt hold positions in any of the aforementioned securities. For a free trial to the best trading community on the planet and TylerâÂÂs current home, !
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | From peak-to-trough, ACB stock has fallen 82% from last MarchâÂÂs peak. The Worst Pot Stock The final nail in the coffin comes from comparing the price action of ACB stock to that of its peers â namely, Canopy Growth Corp (NYSE:) and Cronos Group (NASDAQ:). Besides, the November RSI downswing that Aurora stock shares have failed to match during the current drop was driven by a . | From peak-to-trough, ACB stock has fallen 82% from last MarchâÂÂs peak. The Worst Pot Stock The final nail in the coffin comes from comparing the price action of ACB stock to that of its peers â namely, Canopy Growth Corp (NYSE:) and Cronos Group (NASDAQ:). Besides, the November RSI downswing that Aurora stock shares have failed to match during the current drop was driven by a . | The Worst Pot Stock The final nail in the coffin comes from comparing the price action of ACB stock to that of its peers â namely, Canopy Growth Corp (NYSE:) and Cronos Group (NASDAQ:). From peak-to-trough, ACB stock has fallen 82% from last MarchâÂÂs peak. Remember, if youâÂÂre shopping for marijuana stocks, you have choices â and a side-by-side comparison reveals Aurora stock is the worst of the bunch. | From peak-to-trough, ACB stock has fallen 82% from last MarchâÂÂs peak. The Worst Pot Stock The final nail in the coffin comes from comparing the price action of ACB stock to that of its peers â namely, Canopy Growth Corp (NYSE:) and Cronos Group (NASDAQ:). LetâÂÂs begin with the price trend, which has been locked in a death spiral since last March. |
37764.0 | 2020-01-07 00:00:00 UTC | Two Key Questions for Canopy Growth Stock in 2020 | ACB | https://www.nasdaq.com/articles/two-key-questions-for-canopy-growth-stock-in-2020-2020-01-07 | nan | nan | For Canopy Growth (NYSE:) stock, 2019 was a year to forget. Canopy Growth stock declined 21% for the year, but even that understates how disappointing its performance was.
Source: Shutterstock
After all, CGC stock fell sharply toward the end of 2018 and rose quickly at the beginning of 2019. Even with its year-end rally, CGC ended the year 55% below its 52-week high. After trading weakly at the very beginning of 2020, Canopy Growth stock is about 60% below its all-time high, reached in October 2018.
CGC could rebound in 2020, even if IâÂÂm on it just yet. Canopy Growth still has a fortress balance sheet. The Canadian cannabis market should become healthier this year. The company can grow over the long-term, even if its growth might not be quite as strong as bulls hoped it would be fifteen months ago.
However, significant questions loom for CGC. And Canopy Growth will need to deliver a strong performance for the shares to do better in 2020 than they did in 2019.
Will CGCâÂÂs New Management Change the CompanyâÂÂs Outlook?
Investors cheered when Canopy announced last month that David Klein would be its . Canopy Growth stock bounced 14% on the news, likely for two reasons.
First, Klein is coming from Constellation Brands (NYSE:,NYSE:STZ.B), where he held the title of chief financial officer. Constellation, of course, owns a huge stake in Canopy. KleinâÂÂs hiring has raised hopes that the beer giant might acquire the shares of CGC it doesnâÂÂt already own.
But if Constellation doesnâÂÂt acquire CGC, the fact that Klein is an experienced and well-respected executive should be encouraging to the owners of Canopy Growth stock. And, given his experience as a CFO, he should bring much-needed spending discipline to CGC. Canopy, after all, still has 2.7 billion CAD in cash on its balance sheet after Constellation the company in 2018.
That said, itâÂÂs not clear what exactly Klein plans to doàor what he can do with that cash. Valuations across the industry are at or near their lows. That might actually make it more difficult for Canopy to buy companies.
Sellers may not want to settle for a price that represents a discount to levels seen just a year ago. Investors may prefer that Canopy wait for a potential shakeout in the sector, rather than buying any companies now.
ItâÂÂs likely that Klein will look to reduce CGCâÂÂs costs. And that may be positive for Canopy Growth stock, since the owners of marijuana stocks oddly decided to last year. But Canopy needs to spend to increase the sales of its branded products, and there may not be as much fat to cut as some may believe. Even if itàcuts its cost, Canopy is a long way from profitability. For CGC stock to bounce this year, investors will have to be patient again.
Will Cannabis 2.0 Move the Needle for Canopy Growth Stock?
The optimism towards KleinâÂÂs hire already has faded to some extent. CGC stock has given back more than half of the amount it gained on the day his hiring was announced.
And thereâÂÂs only so much Klein can do if demand doesnâÂÂt cooperate. So Canopy Growth needs so-called âÂÂCannabis 2.0â products like vapes. beverages and edibles to boost its growth.
I detailed to Canopy Growth stock last month. The success or failure of those products should start moving CGC stock in the coming days. Retail stores in Ontario should receive the products starting this week, and they will begin to be sold online on Jan. 16.
According to The Financial Post, Canopy will of cannabis-infused milk chocolate available for the initial launch of Cannabis 2.0. But the company detailed its Cannabis 2.0 portfolio in a late November press release, and it will launch many more products in 2020.
These products arenâÂÂt going to suddenly catapult Canopy Growth into profitability. The revenue they generate wonâÂÂt even contribute to its third-quarter results, sinceàits Q3 ended on Dec. 31. But they will have an impact on Canopy Growth stock in the near-term.
Cannabis-infused food and beverages are pretty much the only catalyst that can offset the growth concerns which have plagued cannabis stocks for the past eight months. If demand for these products is strong early on, investors could become more upbeat about marijuana stocks. And as the largest name in the sector, CGC no doubt would benefit from such a development.
The revenue generated by CanopyâÂÂs food and beverages, meanwhile, almost certainly will be a point of focus on CGCâÂÂs Q3 conference call in mid-February. If Canopy â and the industry â can convince investors that its new products will drive strong growth in 2020, then the stabilization of marijuana stocks that occurred at the end of 2019 could turn into a rally in 2020.
Why Investors Should Be Cautious About CGC Stock
The issue at the moment is that thereâÂÂs still not much evidence that Canopy Growth is going to capitalize on its opportunities. KleinâÂÂs hiring is good news, but the new CEO will have a lot of work to do. Cannabis 2.0 will expand the market,àbut CGC stock will still be expensive.
And Canopy Growth stock will not necessarily be the best play if the sector recovers. Aphria (NYSE:) is delivering the profitability the market appears to be seeking. Aurora Cannabis (NYSE:) remains the highest-risk name, but also the highest-reward play, among marijuana stocks. And for investors who believe that Canopy Growth is going to make acquisitions, the smarter play might be to look for potential targets whose shares would soar if they are acquired.
CGC stock is intriguing below $20. But itâÂÂs not as if its decline has been unjustified. There are real concerns and real risks when it comes to Canopy Growth stock. The companyâÂÂs mission in 2020 will be to ease those concerns.
As of this writing, Vince Martin has no positions in any securities mentioned.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | But if Constellation doesnâÂÂt acquire CGC, the fact that Klein is an experienced and well-respected executive should be encouraging to the owners of Canopy Growth stock. Cannabis-infused food and beverages are pretty much the only catalyst that can offset the growth concerns which have plagued cannabis stocks for the past eight months. If Canopy â and the industry â can convince investors that its new products will drive strong growth in 2020, then the stabilization of marijuana stocks that occurred at the end of 2019 could turn into a rally in 2020. | And that may be positive for Canopy Growth stock, since the owners of marijuana stocks oddly decided to last year. The success or failure of those products should start moving CGC stock in the coming days. There are real concerns and real risks when it comes to Canopy Growth stock. | But if Constellation doesnâÂÂt acquire CGC, the fact that Klein is an experienced and well-respected executive should be encouraging to the owners of Canopy Growth stock. And that may be positive for Canopy Growth stock, since the owners of marijuana stocks oddly decided to last year. If Canopy â and the industry â can convince investors that its new products will drive strong growth in 2020, then the stabilization of marijuana stocks that occurred at the end of 2019 could turn into a rally in 2020. | For CGC stock to bounce this year, investors will have to be patient again. I detailed to Canopy Growth stock last month. Cannabis-infused food and beverages are pretty much the only catalyst that can offset the growth concerns which have plagued cannabis stocks for the past eight months. |
37765.0 | 2020-01-07 00:00:00 UTC | Why 1 Analyst Thinks Aurora Cannabis Stock Could Double | ACB | https://www.nasdaq.com/articles/why-1-analyst-thinks-aurora-cannabis-stock-could-double-2020-01-07 | nan | nan | For Aurora Cannabis (NYSE: ACB), 2019 was a horrible, rotten, no-good, very bad year. The Canadian marijuana stock plunged more than 56%, much worse than most of its top rivals.
But at least one analyst thinks that Aurora could potentially have a "fantastic 2020." Pablo Zuanic with Cantor Fitzgerald even projects a one-year price target for Aurora that's double the stock's current level. Here's why Zuanic believes this beaten-down pot stock could see better days ahead.
Image source: Getty Images.
Two ingredients for Aurora's success
Zuanic suggests that Aurora could do two things that would cause the stock to skyrocket.
First, he'd like for Nelson Peltz to take a more active role. Aurora brought the billionaire strategic advisor on board last year to help line up partners from outside the cannabis industry. In particular, Zuanic thinks that Peltz, a well-known activist investor, should push for Aurora to exercise more financial discipline. He also wants Peltz to find a consumer packaged goods (CPG) company that would buy a significant stake in Aurora.
Second, Zuanic wants Aurora to hire a new CEO along the lines of Canopy Growth's (NYSE: CGC) incoming CEO, David Klein. Investors reacted positively to Canopy's hiring of Klein, who has served as Constellation Brands' (NYSE: STZ) CFO and as chair of Canopy Growth's board of directors.
Should Aurora check off both of these boxes, Zuanic believes that its stock would at least double. However, he doesn't think everything is sunshine and roses for the company. Despite his general optimism about Aurora, Zuanic cut his one-year price target for the stock by nearly 15% after lowering sales projections for the cannabis producer.
The rest of the story
There are several things that investors need to consider with Cantor Fitzgerald's positive outlook for Aurora. Zuanic has stood out as one of the stock's biggest bulls for a while now. He has expressed more optimistic views about the stock than nearly any other analyst in the past.
While Zuanic wants Peltz to line up a major equity investor from the CPG industry, that's exactly the opposite of what Peltz has advocated in the past. In May 2019, Cam Battley, then Aurora's chief corporate officer, said that Peltz recommended that Aurora avoid a path where it could be gobbled up by a larger company.
However, it's possible that Peltz could change his tune after Aurora's meltdown in 2019. As part of his consulting deal, Peltz received options to buy nearly 20 million shares, with these options vesting on a quarterly basis beginning last year and going through the next three years. Peltz has ample motivation to push for Aurora to take steps that would boost its stock price. A major investment from a big CPG company would almost certainly do just that.
On the other hand, getting a large CPG company to invest lots of money in a cannabis producer is easier said than done. Constellation Brands has lost a boatload of money from its investment in Canopy Growth so far. Other CPG companies could look at Constellation's experience and be reluctant to put much skin in the game at this point.
Spurring Aurora to hire a new CEO could be an easier task. The departure of Cam Battley could be a hint that the company is looking to potentially make a change. In recent months, Battley was more involved with conference calls with analysts than CEO Terry Booth was.
But it doesn't seem necessary for Aurora to bring in a new CEO to exercise more fiscal discipline. The company already announced that it's suspending construction at its Aurora Nordic 2 and Aurora Sun facilities, moves that will reduce capital spending by around $190 million in Canadian dollars.
Will Aurora stock double?
My view is that Aurora Cannabis' shares could double as Zuanic predicts if the company finds a major equity partner and hires a new CEO. I'm skeptical, though, that Aurora will actually achieve the former goal. Neither am I convinced that the company will bring in a new top executive.
However, I do think that 2020 should be a better year for Canadian marijuana stocks, including Aurora, than 2019 was. The retail environment in Ontario is improving slowly but surely. The Cannabis 2.0 marijuana derivatives market should boost sales as well.
The big problem for Aurora is that it remains unprofitable and is likely to have to make dilution-causing moves to raise more cash in the future. While the company's long-term prospects could be great as the global cannabis industry expands, its current challenges could scare away many investors.
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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. | For Aurora Cannabis (NYSE: ACB), 2019 was a horrible, rotten, no-good, very bad year. Pablo Zuanic with Cantor Fitzgerald even projects a one-year price target for Aurora that's double the stock's current level. Despite his general optimism about Aurora, Zuanic cut his one-year price target for the stock by nearly 15% after lowering sales projections for the cannabis producer. | For Aurora Cannabis (NYSE: ACB), 2019 was a horrible, rotten, no-good, very bad year. Pablo Zuanic with Cantor Fitzgerald even projects a one-year price target for Aurora that's double the stock's current level. Second, Zuanic wants Aurora to hire a new CEO along the lines of Canopy Growth's (NYSE: CGC) incoming CEO, David Klein. | For Aurora Cannabis (NYSE: ACB), 2019 was a horrible, rotten, no-good, very bad year. Two ingredients for Aurora's success Zuanic suggests that Aurora could do two things that would cause the stock to skyrocket. In May 2019, Cam Battley, then Aurora's chief corporate officer, said that Peltz recommended that Aurora avoid a path where it could be gobbled up by a larger company. | For Aurora Cannabis (NYSE: ACB), 2019 was a horrible, rotten, no-good, very bad year. While Zuanic wants Peltz to line up a major equity investor from the CPG industry, that's exactly the opposite of what Peltz has advocated in the past. My view is that Aurora Cannabis' shares could double as Zuanic predicts if the company finds a major equity partner and hires a new CEO. |
37766.0 | 2020-01-07 00:00:00 UTC | 3 Marijuana Stock CEOs on the Hot Seat in 2020 | ACB | https://www.nasdaq.com/articles/3-marijuana-stock-ceos-on-the-hot-seat-in-2020-2020-01-07 | nan | nan | In what was supposed to be a prove-it year for marijuana stocks, 2019 turned out to be a complete dud. Although the scenario looked right for cannabis stocks to thrive, including the launch of derivative products in Canada (e.g., edibles, infused beverages, and topicals), shares ultimately face-planted due to a host of regulatory and internal issues.
For example, Canadian growers have been dealing with supply issues since day one of legalization. Health Canada has struggled to approve cultivation and sales licenses in a timely manner, while Ontario's retail lottery system has been a mess. Put simply, product hasn't reached the market, as expected, and the black market has proved ever-resilient. Meanwhile, high tax rates in the U.S. on pot products have made it very difficult for legal growers to compete with illicit producers. As a result, marijuana stocks went up in smoke in 2019.
But shareholders may not be the only casualty. It could be rightly argued that the drubbing pot stocks took in 2019 has put a number of high-profile marijuana CEOs in a shaky position. While I can't say with any certainty whether or not the following three CEOs will keep their jobs in 2020, my personal leaning is that they're on thin ice.
Image source: Getty Images.
Terry Booth, Aurora Cannabis CEO
I'll freely admit that it's difficult to "fire" a founder or co-founder, which is the case with all three CEOs on this list. But few leaders have done as poor a job of late creating value for investors as Terry Booth at Aurora Cannabis (NYSE: ACB).
Pardon the cheesy storybook intro, but Aurora looked to have it all. With 15 production facilities, it was expected to be the world's leading producer of cannabis. Also, with access to 25 countries, including Canada, no pot stock had greater international reach. But over the past nine months, it's all fallen apart.
Wall Street has really begun to focus on Aurora's balance sheet, which is in dire straits, according to some analysts. Aurora has so many projects on the table when it comes to production, derivatives, or within its supply chain, that its nearly $148 million in cash on hand probably won't be close to sufficient to cover its expenses. While the company does have access to $400 million in at-the-market offerings, and 360 million Canadian dollars ($277 million) in a line of credit, its cash position is clearly dicey. With Aurora using its common stock as Monopoly money, its shareholders have paid the price.
More damning is the fact that Aurora's more than one dozen acquisitions since August 2016 have ballooned the company's goodwill to CA$3.17 billion. In other words, it's pretty evident that Booth and his team did a poor job of valuing their acquisitions, and may now be forced to take mammoth writedowns as a result.
As the icing on the cake, Booth helped bring in billionaire activist investor Nelson Peltz as a strategic adviser in March 2019, and no major deals have been forged as of yet. With shares down 80% since Peltz was brought on board, Booth looks to have one foot out the door.
Image source: Getty Images.
Adam Bierman, MedMen Enterprises CEO
Booth is far from alone. MedMen Enterprises (OTC: MMNFF) co-founder and CEO Adam Bierman isn't exactly inspiring confidence in his shareholders, either.
If we wind back the clock to October 2018, MedMen was valued at close to $1 billion, and it had just announced an all-stock acquisition of privately held multistate operator (MSO) PharmaCann for $682 million. This deal was expected to double MedMen's state-level presence from six to 12, as well as give it extra retail licenses that it could use to open more dispensaries. This deal, along with its burgeoning presence in California, was supposed to make MedMen a major MSO. But it's become nothing of the sort.
Last October, just three days before the one-year anniversary of the PharmaCann buyout announcement, MedMen shelved the entire deal. The company offered up a number of reasons for no longer wanting to proceed, including that it would place MedMen into noncore markets. But the fact remains that MedMen didn't have the cash to take on PharmaCann's existing locations, or fund its expansion plans.
Despite reducing general and administrative expenses by 30%, MedMen is still losing a lot of money. Unlike most MSOs, which have seen their losses shrink or might even be profitable, MedMen delivered almost $232 million in full-year operating losses in fiscal 2019. That's a problem for a company whose current liabilities nearly outpaced its current assets by the end of fiscal 2019.
Even with up to $280 million in financing pledged by private equity firm Gotham Green Partners, there are no assurances this will be enough money to keep MedMen afloat for the long run. In short, Bierman's vision is quickly fading, and MedMen's 81% loss in 2019 is unlikely to keep him around much longer, in my view.
Image source: Getty Images.
Sebastien St-Louis, HEXO CEO
Lastly, the CEO of Quebec-based HEXO (NYSE: HEXO), Sebastien St-Louis, looks to be in hot water following a disastrous year where the stock retraced more than 80% from its late April highs, and ended the year lower by over 50%.
Like the other pot stocks here, a compelling argument in favor of buying HEXO could have been made during the first half of 2019. HEXO's acquisition of Newstrike Brands put it on track to be a top-tier marijuana producer, and its penchant for dealmaking appeared to have the company on track for CA$400 million in fiscal 2020 sales (a figure management stood by for much of 2019). Yet, by year's end, HEXO was among the worst performers.
Contending with persistent supply issues, HEXO announced in October that it would be idling its Niagara grow campus, acquired when it purchased Newstrike, as well as 200,000 square feet of its 1.3-million-square-foot Gatineau, Quebec, facility. I expect this to reduce the company's peak annual output by roughly a third, from 150,000 kilos to 100,000 kilos. HEXO also eliminated 200 jobs from various departments in order to reduce costs.
Just as troubling, St-Louis stated that the company would struggle to reach profitability without gobbling up 20% of Canada's market share, which is something that no marijuana grower looks to be on track to achieve -- at least for the time being. HEXO certainly has little chance at gobbling up market share in the current environment where supply is constrained by regulatory issues.
Although HEXO has made moves to substantially reduce its expenses, and presumably its operating losses, the damage to the company's reputation has been done. If things don't turn around quickly, HEXO could find itself delisted from the New York Stock Exchange (it's only about $0.50 above the minimum share price for continued listing), at which point I believe St-Louis would be shown the door.
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. | But few leaders have done as poor a job of late creating value for investors as Terry Booth at Aurora Cannabis (NYSE: ACB). Although the scenario looked right for cannabis stocks to thrive, including the launch of derivative products in Canada (e.g., edibles, infused beverages, and topicals), shares ultimately face-planted due to a host of regulatory and internal issues. Contending with persistent supply issues, HEXO announced in October that it would be idling its Niagara grow campus, acquired when it purchased Newstrike, as well as 200,000 square feet of its 1.3-million-square-foot Gatineau, Quebec, facility. | But few leaders have done as poor a job of late creating value for investors as Terry Booth at Aurora Cannabis (NYSE: ACB). Adam Bierman, MedMen Enterprises CEO Booth is far from alone. Sebastien St-Louis, HEXO CEO Lastly, the CEO of Quebec-based HEXO (NYSE: HEXO), Sebastien St-Louis, looks to be in hot water following a disastrous year where the stock retraced more than 80% from its late April highs, and ended the year lower by over 50%. | But few leaders have done as poor a job of late creating value for investors as Terry Booth at Aurora Cannabis (NYSE: ACB). Sebastien St-Louis, HEXO CEO Lastly, the CEO of Quebec-based HEXO (NYSE: HEXO), Sebastien St-Louis, looks to be in hot water following a disastrous year where the stock retraced more than 80% from its late April highs, and ended the year lower by over 50%. HEXO's acquisition of Newstrike Brands put it on track to be a top-tier marijuana producer, and its penchant for dealmaking appeared to have the company on track for CA$400 million in fiscal 2020 sales (a figure management stood by for much of 2019). | But few leaders have done as poor a job of late creating value for investors as Terry Booth at Aurora Cannabis (NYSE: ACB). MedMen Enterprises (OTC: MMNFF) co-founder and CEO Adam Bierman isn't exactly inspiring confidence in his shareholders, either. If we wind back the clock to October 2018, MedMen was valued at close to $1 billion, and it had just announced an all-stock acquisition of privately held multistate operator (MSO) PharmaCann for $682 million. |
37767.0 | 2020-01-06 00:00:00 UTC | Is Coca-Cola Looking to Get Into Cannabis? | ACB | https://www.nasdaq.com/articles/is-coca-cola-looking-to-get-into-cannabis-2020-01-06 | nan | nan | Cannabis beverages could soon become a lot more mainstream, at least in Canada, where the products are now legal. As of Oct. 17, edible and ingestible cannabis products are legal -- in some retail shops, they hit store shelves by December. Big beverage companies like Constellation Brands and Molson Coors have gotten involved in producing cannabis-infused beverages, with the former teaming up with Canopy Growth while HEXO has a joint venture with the Canadian arm of the latter.
Another big name that's also been rumored to be interested in cannabis: Coca-Cola (NYSE: KO).
YouTube video sparks rumors about company's interest
A recent and since-deleted YouTube video showed a Coca-Cola can with a childproof lid on it. In the video, the author claimed that his father works in bottling and that Coca-Cola was interested in developing drinks that contain cannabidiol (CBD). Edible products, including beverages, can be harmful to children and having a childproof lid is one way that a company could help prevent accidental consumption by minors.
It may sound convincing, but the company has denied any interest in CBD. There are also a couple of important reasons why it doesn't make a lot of sense for the company and why investors shouldn't read too much into these claims.
Image source: Getty Images.
The opportunity just isn't there
Coca-Cola was previously linked to the cannabis industry when in 2018 it was rumored to be looking at partnering with marijuana giant Aurora Cannabis (NYSE: ACB). Nothing came of that and it was never clear how close the two companies were to a deal, or if the soft drink giant was just kicking tires on the possibility.
Aurora hasn't partnered with a beverage company and, at this point, it's unlikely that will change, with the company previously stating that it didn't believe the market for cannabis beverages was large enough.
Fortune Business Insights estimates that by 2026 theglobal marketfor beverages will be just over $2 billion. While that's a significant increase from the $174 million the research company estimated the segment of the industry to be worth in 2018, it's still about the size of a rounding error for Coca-Cola, a company that in the past 12 months generated $33.6 billion in revenue.
Impact on branding could be significant
There's just not enough of a market for cannabis beverages at this point for it to make any sense for Coca-Cola to get involved and potentially upset its loyal customer base. That's one of the reasons one of the company's key investors, Warren Buffett, also doesn't believe that it would be a wise move for the company: it could damage the brand.
It's something that executives are also very cognizant of. In 2018, when asked about getting into cannabis, Starbucks CEO Kevin Johnson stated, "That's not anything we're considering or pursuing – I just don't feel it's accretive to our brand and kind of what our brand stands for."
Branding is an important consideration that companies are not taking lightly, and that's a key reason why companies like Coca-Cola and Starbucks aren't going to go into a controversial industry for not a whole lot of sales potential.
Key takeaways for investors
Coca-Cola probably isn't going to get into cannabis, and its business will continue to be just fine. While it would be earth-shattering news for a company like Aurora if it were able to land a big partner like that, the company has made it clear that a deal involving beverages is not in its cross-hairs. However, with billionaire investor Nelson Peltz still out there looking for other deals for the company, it's possible that there is a partnership for Aurora, just not in beverages.
As the cannabis industry continues to evolve and legalization progresses, there will be more companies that take an interest in marijuana. However, until it is legal at the federal level in the U.S., investors shouldn't expect to see any large national brands getting involved. One of the biggest deterrents it that it's not possible to move marijuana across state lines, even if the states have legalized pot. Getting into cannabis at this point would not be efficient and with the possibility that it hurts a brand's image, there are far more risks than there are potential rewards, especially for large organizations.
Investors shouldn't read anything into these latest rumors and remember that making an investment decision based on uncorroborated information can be very risky.
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 Starbucks. 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 opportunity just isn't there Coca-Cola was previously linked to the cannabis industry when in 2018 it was rumored to be looking at partnering with marijuana giant Aurora Cannabis (NYSE: ACB). Edible products, including beverages, can be harmful to children and having a childproof lid is one way that a company could help prevent accidental consumption by minors. Impact on branding could be significant There's just not enough of a market for cannabis beverages at this point for it to make any sense for Coca-Cola to get involved and potentially upset its loyal customer base. | The opportunity just isn't there Coca-Cola was previously linked to the cannabis industry when in 2018 it was rumored to be looking at partnering with marijuana giant Aurora Cannabis (NYSE: ACB). There are also a couple of important reasons why it doesn't make a lot of sense for the company and why investors shouldn't read too much into these claims. The Motley Fool recommends Constellation Brands and HEXO. | The opportunity just isn't there Coca-Cola was previously linked to the cannabis industry when in 2018 it was rumored to be looking at partnering with marijuana giant Aurora Cannabis (NYSE: ACB). Aurora hasn't partnered with a beverage company and, at this point, it's unlikely that will change, with the company previously stating that it didn't believe the market for cannabis beverages was large enough. That's one of the reasons one of the company's key investors, Warren Buffett, also doesn't believe that it would be a wise move for the company: it could damage the brand. | The opportunity just isn't there Coca-Cola was previously linked to the cannabis industry when in 2018 it was rumored to be looking at partnering with marijuana giant Aurora Cannabis (NYSE: ACB). Aurora hasn't partnered with a beverage company and, at this point, it's unlikely that will change, with the company previously stating that it didn't believe the market for cannabis beverages was large enough. While it would be earth-shattering news for a company like Aurora if it were able to land a big partner like that, the company has made it clear that a deal involving beverages is not in its cross-hairs. |
37768.0 | 2020-01-06 00:00:00 UTC | Is Pot Stock Aurora Cannabis a Buy in 2020? | ACB | https://www.nasdaq.com/articles/is-pot-stock-aurora-cannabis-a-buy-in-2020-2020-01-06 | nan | nan | Last year was expected to be when marijuana stocks finally proved to Wall Street that they deserved their lofty valuations. Unfortunately for investors, this wasn't the case.
Instead of pushing toward profitability, pot stocks wound up losing a lot of money, and it ultimately cost investors a lot of their green, too. Between supply issues in Canada, high tax rates in select U.S. states, and a persistent black market presence that made life difficult for legal producers, it was simply a bad year to be a cannabis investor.
But with pot stocks having fallen so far from their 2019 highs, it has investors wondering if they're now a bargain. This is especially true of Aurora Cannabis (NYSE: ACB), the most popular marijuana stock on the planet, and the most-held stock on online investing app Robinhood.
But is Aurora Cannabis a buy after shedding almost 80% of its value since hitting its yearly high in mid-March? As you're about to see, these declines appear to be very much deserved.
Image source: Getty Images.
Aurora Cannabis looks like it's holding a winning hand...
On one hand, an argument could very well be made that Aurora Cannabis is a bargain. If all 15 of its cultivation facilities were running at peak capacity, it would be the clear worldwide leader in production, with close to 700,000 kilos of marijuana per year. Being able to produce so much weed should make Aurora a popular company for provinces and foreign countries to forge supply deals with. Further, its large grow farms will be able to use economies of scale to push per-gram production costs well below the industry average.
Aurora also has an international presence that's unmatched. Not including Canada, it has an export, production, research, or partnership presence in 24 countries. Not only are these markets dealing with higher margin medical marijuana, but they'll probably come in handy if dried flower becomes oversupplied and commoditized in Canada.
Don't overlook the fact that Aurora also wound up hiring billionaire activist investor Nelson Peltz as a strategic advisor in March. Aurora has made no secret that it would like to land a partnership with a food or beverage company, which just so happens to be Peltz's area of expertise as an activist investor. Although a deal hasn't yet materialized, Peltz is the perfect person to help bridge an eventual deal.
Top-tier production, a broad-based international presence, and the possibility of a brand-name deal in 2020. Sounds great, right? Well, hold your horses.
Image source: Getty Images.
...but it's really nothing more than a bluff
Despite what looks like a winning hand of intangibles, Aurora Cannabis is actually a fundamental disaster that investors would be wise to avoid.
To begin with, Aurora (and the entire industry, for that matter) is contending with supply issues in Canada that won't disappear overnight. Dried cannabis flower supply has been constrained in a number of provinces since day one of dried flower legalization on Oct. 17, 2018. The biggest problem, arguably, is that Canada's most populated province, Ontario, had only 24 dispensaries open by the one-year anniversary of adult-use sales commencing. Even with Ontario getting rid of its lottery system for retail licenses in 2020, it's going to be some time before product can efficiently reach consumers.
This leads to the next point: Aurora is still losing quite a bit of money on an operating basis. Because of International Financial Reporting Standards (IFRS accounting), there are a number of one-time benefits and costs that tend to confuse investors and complicate pot stock earnings reports. What you really need to know is that once these one-time costs and benefits, including fair-value adjustments, are removed from the equation, Aurora Cannabis is still losing quite a bit of money on an operating basis. That's unlikely to change in 2020.
Aurora's balance sheet is also of serious concern. Despite having access to $400 million in at-the-market offerings (i.e., a fancy of way of saying the company could sell up to $400 million worth its common stock) and a $360 million Canadian credit line from Bank of Montreal, the company's cash position is worrisome considering the breadth of projects still ongoing. What's more, $3.17 billion Canadian in goodwill has been recognized following more than a dozen acquisitions. That's 57% of Aurora's total assets, and it's likely a massive writedown waiting to happen.
Image source: Getty Images.
What needs to happen for Aurora Cannabis to be worth buying?
Although Aurora Cannabis shouldn't be anywhere near your portfolio in 2020, it doesn't mean the company isn't worth keeping a close eye on. If a few things go Aurora's way, it could actually become an attractive company.
First, we'd need to see serious progress in Canada in correcting its supply problems. Ontario should be able to open around 20 dispensaries per month throughout most of 2020 thanks to a more traditional licensing approval process, and will likely end the year north of 250. This still isn't nearly enough retail locations to satisfy the number of potential recreational consumers in the province, but it'd be a good start. But if Ontario winds up opening dispensaries at a faster-than-expected pace, then it's possible Aurora and its peers could see their financials considerably improve.
Aurora would also have to land a brand-name partner and, preferably, an equity investment to go along with that partnership. Chances are that Aurora wouldn't see the same scale of investment as Canopy Growth received from Constellation Brands, or Cronos Group netted from Altria Group, where $4 billion and $1.8 billion were respectively invested. However, it's pretty clear that there are cash concerns surrounding Aurora, and an equity injection would help to restore investor faith in the company.
While Aurora is bound to remain a popular pot stock in 2020, it's best left on the sidelines.
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. | This is especially true of Aurora Cannabis (NYSE: ACB), the most popular marijuana stock on the planet, and the most-held stock on online investing app Robinhood. Between supply issues in Canada, high tax rates in select U.S. states, and a persistent black market presence that made life difficult for legal producers, it was simply a bad year to be a cannabis investor. The biggest problem, arguably, is that Canada's most populated province, Ontario, had only 24 dispensaries open by the one-year anniversary of adult-use sales commencing. | This is especially true of Aurora Cannabis (NYSE: ACB), the most popular marijuana stock on the planet, and the most-held stock on online investing app Robinhood. Instead of pushing toward profitability, pot stocks wound up losing a lot of money, and it ultimately cost investors a lot of their green, too. Between supply issues in Canada, high tax rates in select U.S. states, and a persistent black market presence that made life difficult for legal producers, it was simply a bad year to be a cannabis investor. | This is especially true of Aurora Cannabis (NYSE: ACB), the most popular marijuana stock on the planet, and the most-held stock on online investing app Robinhood. Aurora Cannabis looks like it's holding a winning hand... On one hand, an argument could very well be made that Aurora Cannabis is a bargain. Although Aurora Cannabis shouldn't be anywhere near your portfolio in 2020, it doesn't mean the company isn't worth keeping a close eye on. | This is especially true of Aurora Cannabis (NYSE: ACB), the most popular marijuana stock on the planet, and the most-held stock on online investing app Robinhood. Between supply issues in Canada, high tax rates in select U.S. states, and a persistent black market presence that made life difficult for legal producers, it was simply a bad year to be a cannabis investor. But with pot stocks having fallen so far from their 2019 highs, it has investors wondering if they're now a bargain. |
37769.0 | 2020-01-03 00:00:00 UTC | As 2 Executives Leave Aurora Cannabis, Should Investors Worry? | ACB | https://www.nasdaq.com/articles/as-2-executives-leave-aurora-cannabis-should-investors-worry-2020-01-03 | nan | nan | On Dec. 21, Aurora Cannabis (NYSE: ACB) announced that its chief corporate officer, Cam Battley, would be leaving the company to work for MedReleaf Australia. Aurora owns a 10% stake in MedReleaf and has 50% voting rights in the company.
Earlier in the month, Neil Belot also decided to leave the company, although Aurora made no formal announcement. It hired Belot in 2017 to be its chief global business development officer, helping with its international growth.
Anytime a company loses a key executive, let alone two (especially since it's struggling), it could be a cause for concern.
Was Battley just the fall guy?
Battley was often the face of Aurora, speaking for the organization and providing the news media with updates. And with the company falling short of expectations multiple times, he's likely drawn the ire of agitated investors as well, especially as the stock hit new 52-week lows several times last year. Over the past 12 months, Aurora's share price has fallen by 61%, which is even worse than how the Horizons Marijuana Life Sciences Index ETF performed, which declined by 41% during the same period.
Image source: Getty Images.
At least part of the frustration from investors comes with the company's projection that its EBITDA should be positive by now. A year ago, Battley told investors that profitability was in sight, stating that "we can project positive EBITDA in the second calendar quarter." That's in reference to the company's fourth-quarter earnings of fiscal 2019. The company would not come close to profitability, even at adjusted EBITDA, which was a loss of 11.7 million Canadian dollars ($9 million). Although it was an improvement from the third quarter, when Aurora lost CA$36.6 million, investors were disappointed.
With reports surfacing that Aurora forced Battley out, it could show that Aurora is trying to distance itself from its poor performances in 2019 and looking to start with a clean slate for the new year. While Battley may have just been the figurehead and not likely the one behind the forecasts themselves, it's an easy way for the company to try to separate itself from those aggressive projections.
Does Belot's departure mean Aurora will focus less on international growth?
It's unclear whether Aurora pushed out Belot as well, and it's unlikely we'll ever know the real reasons he exited the company. But with the departure being low key and Aurora not announcing his replacement, it could indicate that the company is shifting priorities away from theglobal marketfor cannabis and onto the domestic one. While Aurora is still active globally and prides itself on having a presence in 25 countries, cash flow has also been on the company's mind of late.
In a press release on Dec. 23 about its recent changes, the company said, "Aurora has taken steps to proactively rationalize capital expenditures, reduce near-term debt and bolster liquidity in an effort to position the Company for the long-term success." Moving cash flow and expenses away from its global strategy would align with that statement, especially as the company focuses on ingestible products, which are now legal in Canada.
What should investors do?
Turnover shouldn't come as a big surprise, especially given the challenges that Aurora has faced in the past year. With the company falling short of expectations, it was likely that there would be changes coming. And while investors may not be excited by the moves, they do make Aurora's management team leaner and perhaps more focused.
However, investors should wait until the company releases some positive results before buying shares. As poorly as the marijuana stock has performed, its low price isn't enough to make it a buy. All that matters is if Aurora is able to hit a positive EBITDA figure and if it can do that while continuing to grow. Right now, it hasn't demonstrated that it can, and until it does, investors should stay away from the 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
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. | On Dec. 21, Aurora Cannabis (NYSE: ACB) announced that its chief corporate officer, Cam Battley, would be leaving the company to work for MedReleaf Australia. Over the past 12 months, Aurora's share price has fallen by 61%, which is even worse than how the Horizons Marijuana Life Sciences Index ETF performed, which declined by 41% during the same period. Moving cash flow and expenses away from its global strategy would align with that statement, especially as the company focuses on ingestible products, which are now legal in Canada. | On Dec. 21, Aurora Cannabis (NYSE: ACB) announced that its chief corporate officer, Cam Battley, would be leaving the company to work for MedReleaf Australia. Over the past 12 months, Aurora's share price has fallen by 61%, which is even worse than how the Horizons Marijuana Life Sciences Index ETF performed, which declined by 41% during the same period. As poorly as the marijuana stock has performed, its low price isn't enough to make it a buy. | On Dec. 21, Aurora Cannabis (NYSE: ACB) announced that its chief corporate officer, Cam Battley, would be leaving the company to work for MedReleaf Australia. And with the company falling short of expectations multiple times, he's likely drawn the ire of agitated investors as well, especially as the stock hit new 52-week lows several times last year. In a press release on Dec. 23 about its recent changes, the company said, "Aurora has taken steps to proactively rationalize capital expenditures, reduce near-term debt and bolster liquidity in an effort to position the Company for the long-term success." | On Dec. 21, Aurora Cannabis (NYSE: ACB) announced that its chief corporate officer, Cam Battley, would be leaving the company to work for MedReleaf Australia. Does Belot's departure mean Aurora will focus less on international growth? As poorly as the marijuana stock has performed, its low price isn't enough to make it a buy. |
37770.0 | 2020-01-03 00:00:00 UTC | Aurora Cannabis (ACB): Will Nelson Peltz Save 2020? | ACB | https://www.nasdaq.com/articles/aurora-cannabis-acb%3A-will-nelson-peltz-save-2020-2020-01-03 | nan | nan | Aurora Cannabis (ACB) ended 2019 with an executive shuffle that might have just started. The Canadian cannabis LP is in need of a more streamlined expense structure to survive and thrive until mid-year 2020 catalysts boost the Canadian market. Until then, investors have to wonder if the promises of working with Nelson Peltz on CPG partnerships will ever bear fruit.
Executive Shuffle
Back on December 20, Chief Corporate Office Cam Battley stepped away from the company. Mr. Battley has long been the face of Aurora Cannabis despite not being the CEO or CFO.
The move is an interesting step for a company struggling to reach EBITDA positive. As recent as November 20, the company promoted individuals to the Chief Product Officer and Chief Integration Officer positions.
One has to question if Aurora Cannabis has too many chiefs and the additional costs for a company with revenues far under a $500 million run rate. In addition, CEO Terry Booth and CFO Glen Ibbott will need to take more active roles in promoting the company. In the lastearnings call Mr. Battley was the primary corporate spokesperson followed by the CFO. Both the CEO and Executive Chairman didn’t speak until the Q&A section.
The company has quarterly operating expenses of $67 million and analyst forecasts with gross profits only reaching into the $50 million range far into 2021. The company faces a scenario where revenues won’t reach levels to generate profits at the current operating expense level until maybe two years.
Aurora Cannabis needs to take this executive departure as part of a cost cutting move.
Mr. Peltz
The company signed a partnership with Mr. Peltz back last March. The investment activist has worked with many CPG firms to improve their operations, but Mr. Peltz was normally an activist investor and not a hired consultant.
Another issue is that Peltz signed up for the job via stock options priced far above current market prices. One has to even wonder, if he has the motivation to find Aurora Cannabis worthwhile deals when his 20 million stock options have exercise prices closer to $8 per share.
One has to imagine his firm has the incentive to purchase shares in the open market or rework the original deal before working out a partnership for Aurora Cannabis. Though, the holding of potential inside information might preclude an investment.
Aurora Cannabis is at a financial situation where a strategic investment of several hundred million dollars would help resolve a lot of the financial pressure on the company. The biggest issue is the level of dilution with the stock down to $2 and whether any highly respected CPG firm would even invest down here.
The best solution might be a partnership with a major CPG company wanting to expand in the cannabis sector starting in Canada. As 2020 progresses and Cannabis 2.0 products reach market, somebody should find working with an industry leader as appealing. If not, one has to wonder why Aurora Cannabis brought on Nelson Peltz when just about every other major Canadian cannabis player already has big partnerships.
Takeaway
The key investor takeaway is that Aurora Cannabis has a lot of positive catalysts to play out in 2020, but the company needs to reorganize the firm to reduce operating expenses following the departure of Cam Battley. Once the company gets the business better aligned with market realities, investors can own the stock knowing the catalysts will benefit shareholders.
Consensus Verdict
This troubled cannabis giant certainly has the Street divided, as TipRanks analytics indicate ACB as a Hold. Based on 10 analysts polled in the last 3 months, 3 rate Aurora stock a Buy, 4 say Hold, while 3 recommend Sell. However, the bulls still win out in the bigger picture, as the average price target of $3.49 marks over 70% upside from Friday's closing price. (See Aurora's stock analysis at TipRanks)
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) ended 2019 with an executive shuffle that might have just started. Consensus Verdict This troubled cannabis giant certainly has the Street divided, as TipRanks analytics indicate ACB as a Hold. In addition, CEO Terry Booth and CFO Glen Ibbott will need to take more active roles in promoting the company. | Aurora Cannabis (ACB) ended 2019 with an executive shuffle that might have just started. Consensus Verdict This troubled cannabis giant certainly has the Street divided, as TipRanks analytics indicate ACB as a Hold. Executive Shuffle Back on December 20, Chief Corporate Office Cam Battley stepped away from the company. | Aurora Cannabis (ACB) ended 2019 with an executive shuffle that might have just started. Consensus Verdict This troubled cannabis giant certainly has the Street divided, as TipRanks analytics indicate ACB as a Hold. One has to question if Aurora Cannabis has too many chiefs and the additional costs for a company with revenues far under a $500 million run rate. | Aurora Cannabis (ACB) ended 2019 with an executive shuffle that might have just started. Consensus Verdict This troubled cannabis giant certainly has the Street divided, as TipRanks analytics indicate ACB as a Hold. Executive Shuffle Back on December 20, Chief Corporate Office Cam Battley stepped away from the company. |
37771.0 | 2020-01-03 00:00:00 UTC | Did Canopy Growth Stock Just Have a Dead Cat Bounce? | ACB | https://www.nasdaq.com/articles/did-canopy-growth-stock-just-have-a-dead-cat-bounce-2020-01-03 | nan | nan | Canopy Growth (NYSE:) stock jumped more than 12% on the final day of 2019, its best single-day performance since early December.ÃÂ
Source: Shutterstock
While itâÂÂs easy to get excited about the one-day romp, most of the other major Canadian cannabis companies had good days on Dec. 31, with Aurora Cannabis (NYSE:) and Aphria (NYSE:APHA) gaining 13.1% and 10.4%, respectively. The fact that many names in the sector climbed indicates that the gains may have been nothing more than a much-needed relief rally.ÃÂ
So the question for Canopy Growth shareholders is whether the latest move was a dead-cat bounce or the beginning of something bigger.ÃÂ
Here are some arguments on both sides of the issue.ÃÂ
CanopyâÂÂs Latest Jump Is Temporary
Canopy GrowthâÂÂs most significant problem is the black market.ÃÂ
While wholesale prices of pot have dropped by approximately 17% since the legalization of dried cannabis in October 2018, black market prices have remained much lower than those of the legal retail stores in Canada. That situation, combined with a shortage of retail stores, is why the black market still accounts for a majority of Canadian cannabis sales.
âÂÂThereâÂÂs a very strong resistance to the legal stores in the sense that a) and b) there arenâÂÂt enough of them. (Buyers are)ànot close to them, so they just deal with their local guy like they always have,â said Robin Ellis, the co-founder of a Toronto cannabis retailer.ÃÂ
Producers of dried cannabis built up the capacity to meet projected demand, but the lack of retail locations in Ontario, CanadaâÂÂs most populous province, led to severe surpluses of legal cannabis supplies.ÃÂ
Although Ontario for awarding new retail stores in favor of an open-market system that allows anyone to apply to open stores, the new system only started on Jan. 1. It wonâÂÂt meaningfully increase cannabis sales until the second half of this year.ÃÂ
In the meantime, Canopy has ramped up its spending to get its beverages and edibles into the hands of consumers, ItâÂÂs also launched its first hemp-derived CBD product in the U.S.. But InvestorPlace contributor Mark Hake thinks these initiatives will continue to .ÃÂ
In the first six months of fiscal 2020, Canopy GrowthâÂÂs adjusted EBITDA losses were , three times larger than in the same period a year earlier.ÃÂ
Until the companyâÂÂs new products improve its results, itâÂÂs hard to imagine investors paying more than the current prices to own the companyâÂÂs stock.ÃÂ
CanopyâÂÂs Stock Will Rally MuchàFurther
In my last article about Canopy Growth in early December, I recommended that investors springing up against the company due to its falling stock price and increasing losses.ÃÂ
I felt that the company was wise to let its lawyers deal with the legal sideshow while it focused on growing its business. Most importantly, I thought it needed to hire a CEO who couldàhelp reignite the companyâÂÂs growth.
I didnâÂÂt believe that Canopy Growth would hire a new CEO by the end of the year.àBut true to its word, on Dec. 10 it announced that Constellation Brands (NYSE:) CFO David Klein would take over as CanopyâÂÂs permanent CEO on Jan. 14.ÃÂ
Portfolio manager Tim Seymour was upbeat about Klein.ÃÂ
âÂÂThis appointment of truly a consumer products CEO, someone who knows the CPG world very well and someone who knows this company very well, is very exciting, I think heâÂÂs the right man for the job,â Seymour told CNBC after the announcement.ÃÂ
I second that emotion.ÃÂ
KleinâÂÂs been chairman of Canopy Growth since November. Before that, as ConstellationâÂÂs CFO, he was very knowledgeable about Canopy, in which Constellation had invested billions of dollars. As a result,àhis transition into the CEO position will be easy. Furthermore, Canopy GrowthâÂÂs current CFO also came from Constellation, so its two top executives will already be well-acquainted with each other.ÃÂ
They can hit the ground running.
Over the long-term, I believe that Canopy GrowthâÂÂs current financial position puts it heads above most of its Canadian competitors. Now that it hasàthe right CEO in place, it can return to focusing on growth while also boosting its profitability.
Its pathway to profitability might be a little blurry at the moment, but it will get there. In the meantime, the volatility of its stock is unlikely to disappear anytime soon. That said, I do believe that the shares can reach $30 or more in the next 12 months.ÃÂ
I believe that CaopyâÂÂs rally will continue.
At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.
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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 fact that many names in the sector climbed indicates that the gains may have been nothing more than a much-needed relief rally.àSo the question for Canopy Growth shareholders is whether the latest move was a dead-cat bounce or the beginning of something bigger.àHere are some arguments on both sides of the issue.àCanopyâÂÂs Latest Jump Is Temporary Canopy GrowthâÂÂs most significant problem is the black market.àWhile wholesale prices of pot have dropped by approximately 17% since the legalization of dried cannabis in October 2018, black market prices have remained much lower than those of the legal retail stores in Canada. It wonâÂÂt meaningfully increase cannabis sales until the second half of this year.àIn the meantime, Canopy has ramped up its spending to get its beverages and edibles into the hands of consumers, ItâÂÂs also launched its first hemp-derived CBD product in the U.S.. But InvestorPlace contributor Mark Hake thinks these initiatives will continue to .àIn the first six months of fiscal 2020, Canopy GrowthâÂÂs adjusted EBITDA losses were , three times larger than in the same period a year earlier.àUntil the companyâÂÂs new products improve its results, itâÂÂs hard to imagine investors paying more than the current prices to own the companyâÂÂs stock.àCanopyâÂÂs Stock Will Rally MuchàFurther In my last article about Canopy Growth in early December, I recommended that investors springing up against the company due to its falling stock price and increasing losses.àI felt that the company was wise to let its lawyers deal with the legal sideshow while it focused on growing its business. | Canopy Growth (NYSE:) stock jumped more than 12% on the final day of 2019, its best single-day performance since early December.àSource: Shutterstock While itâÂÂs easy to get excited about the one-day romp, most of the other major Canadian cannabis companies had good days on Dec. 31, with Aurora Cannabis (NYSE:) and Aphria (NYSE:APHA) gaining 13.1% and 10.4%, respectively. The fact that many names in the sector climbed indicates that the gains may have been nothing more than a much-needed relief rally.àSo the question for Canopy Growth shareholders is whether the latest move was a dead-cat bounce or the beginning of something bigger.àHere are some arguments on both sides of the issue.àCanopyâÂÂs Latest Jump Is Temporary Canopy GrowthâÂÂs most significant problem is the black market.àWhile wholesale prices of pot have dropped by approximately 17% since the legalization of dried cannabis in October 2018, black market prices have remained much lower than those of the legal retail stores in Canada. That situation, combined with a shortage of retail stores, is why the black market still accounts for a majority of Canadian cannabis sales. | The fact that many names in the sector climbed indicates that the gains may have been nothing more than a much-needed relief rally.àSo the question for Canopy Growth shareholders is whether the latest move was a dead-cat bounce or the beginning of something bigger.àHere are some arguments on both sides of the issue.àCanopyâÂÂs Latest Jump Is Temporary Canopy GrowthâÂÂs most significant problem is the black market.àWhile wholesale prices of pot have dropped by approximately 17% since the legalization of dried cannabis in October 2018, black market prices have remained much lower than those of the legal retail stores in Canada. But InvestorPlace contributor Mark Hake thinks these initiatives will continue to .àIn the first six months of fiscal 2020, Canopy GrowthâÂÂs adjusted EBITDA losses were , three times larger than in the same period a year earlier.àUntil the companyâÂÂs new products improve its results, itâÂÂs hard to imagine investors paying more than the current prices to own the companyâÂÂs stock.àCanopyâÂÂs Stock Will Rally MuchàFurther In my last article about Canopy Growth in early December, I recommended that investors springing up against the company due to its falling stock price and increasing losses.àI felt that the company was wise to let its lawyers deal with the legal sideshow while it focused on growing its business. I didnâÂÂt believe that Canopy Growth would hire a new CEO by the end of the year.àBut true to its word, on Dec. 10 it announced that Constellation Brands (NYSE:) CFO David Klein would take over as CanopyâÂÂs permanent CEO on Jan. 14.àPortfolio manager Tim Seymour was upbeat about Klein.àâÂÂThis appointment of truly a consumer products CEO, someone who knows the CPG world very well and someone who knows this company very well, is very exciting, I think heâÂÂs the right man for the job,â Seymour told CNBC after the announcement.àI second that emotion.àKleinâÂÂs been chairman of Canopy Growth since November. | That situation, combined with a shortage of retail stores, is why the black market still accounts for a majority of Canadian cannabis sales. I didnâÂÂt believe that Canopy Growth would hire a new CEO by the end of the year.àBut true to its word, on Dec. 10 it announced that Constellation Brands (NYSE:) CFO David Klein would take over as CanopyâÂÂs permanent CEO on Jan. 14.àPortfolio manager Tim Seymour was upbeat about Klein.àâÂÂThis appointment of truly a consumer products CEO, someone who knows the CPG world very well and someone who knows this company very well, is very exciting, I think heâÂÂs the right man for the job,â Seymour told CNBC after the announcement.àI second that emotion.àKleinâÂÂs been chairman of Canopy Growth since November. As a result,àhis transition into the CEO position will be easy. |
37772.0 | 2020-01-02 00:00:00 UTC | February 14th Options Now Available For Aurora Cannabis (ACB) | ACB | https://www.nasdaq.com/articles/february-14th-options-now-available-for-aurora-cannabis-acb-2020-01-02 | nan | nan | Investors in Aurora Cannabis Inc (Symbol: ACB) saw new options begin trading today, for the February 14th expiration. At Stock Options Channel, our YieldBoost formula has looked up and down the ACB options chain for the new February 14th 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 2 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 $1.48 (before broker commissions). To an investor already interested in purchasing shares of ACB, that could represent an attractive alternative to paying $2.06/share today.
Because the $1.50 strike represents an approximate 27% 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 100%. 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 1.33% return on the cash commitment, or 11.32% 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 $2.50 strike price has a current bid of 3 cents. If an investor was to purchase shares of ACB stock at the current price level of $2.06/share, and then sell-to-open that call contract as a "covered call," they are committing to sell the stock at $2.50. Considering the call seller will also collect the premium, that would drive a total return (excluding dividends, if any) of 22.82% if the stock gets called away at the February 14th 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 $2.50 strike highlighted in red:
Considering the fact that the $2.50 strike represents an approximate 21% 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 74%. 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 1.46% boost of extra return to the investor, or 12.36% annualized, which we refer to as the YieldBoost.
The implied volatility in the call contract example above is 230%.
Meanwhile, we calculate the actual trailing twelve month volatility (considering the last 252 trading day closing values as well as today's price of $2.06) to be 72%. 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 $2.50 strike highlighted in red: Considering the fact that the $2.50 strike represents an approximate 21% 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 today, for the February 14th expiration. | Below is a chart showing ACB's trailing twelve month trading history, with the $2.50 strike highlighted in red: Considering the fact that the $2.50 strike represents an approximate 21% 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 today, for the February 14th expiration. At Stock Options Channel, our YieldBoost formula has looked up and down the ACB options chain for the new February 14th 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 $2.50 strike highlighted in red: Considering the fact that the $2.50 strike represents an approximate 21% 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 today, for the February 14th expiration. At Stock Options Channel, our YieldBoost formula has looked up and down the ACB options chain for the new February 14th 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 February 14th 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 $2.50 strike highlighted in red: Considering the fact that the $2.50 strike represents an approximate 21% 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 today, for the February 14th expiration. |
37773.0 | 2020-01-02 00:00:00 UTC | 3 Marijuana Stocks to Avoid Like the Plague in 2020 | ACB | https://www.nasdaq.com/articles/3-marijuana-stocks-to-avoid-like-the-plague-in-2020-2020-01-02 | nan | nan | There's no doubt that the marijuana industry has a bright future. We know this because tens of billions of dollars in annual sales are being conducted in the black market each year. As countries/states continue to legalize cannabis, legal-channel sales have an opportunity to soar. This is why varied Wall Street estimates have called for between $50 billion and $200 billion in annual sales by 2030, up from $10.9 billion worldwide in 2018.
But the fact remains that 2019 was not a good year for marijuana stocks. Supply issues in Canada, high tax rates in select U.S. states, and a resilient black market made life incredibly difficult for cannabis companies, and it was investors who paid the price.
Although the shellacking marijuana stocks took in 2019 has opened the door to some intriguing value within the industry, there are three well-known cannabis stocks you'd be wise to avoid like the plague in 2020.
Image source: Getty Images.
Aurora Cannabis
Alberta-based Aurora Cannabis (NYSE: ACB) is an absolute favorite among investors. But they quickly learned in 2019 that popularity is no guarantee of profitability.
Though Aurora does have a number of factors that are seemingly working in its favor, including the highest peak production potential of all growers, the broadest international reach, and landing billionaire activist investor Nelson Peltz as a strategic advisor in March 2019, the company's balance sheet is a complete disaster, and the supply issues impacting Canada are a long way from being resolved.
One aspect of Aurora's balance sheet that's concerning is the company's cash on hand. Even with access to $400 million in at-the-market funding (i.e., dilutive common stock offerings) and a credit line with the Bank of Montreal, there's real concern that Aurora may have bitten off more than it can chew on the expansion front. One Wall Street analyst believes Aurora could go belly up due to its lack of cash.
Perhaps a bigger problem is that Aurora grossly overpaid for its acquisitions, and the company has 3.17 billion Canadian dollars in goodwill on its balance sheet. This represents 57% of the company's total assets and is considerably higher than its current market cap. I find it highly unlikely that Aurora Cannabis will recoup a significant portion of this goodwill in the future, making a massive writedown likely.
And, of course, there are the supply issues in Canada that will take numerous quarters to resolve. These problems have led to a bottleneck of supply in Ontario, the country's most populous province. Meanwhile, most international markets are still formulating their medical marijuana regulations and are, thus, not importing a lot of pot at the moment. That means Aurora's hefty overseas investments are unlikely to pay dividends anytime soon.
Even with construction on two of its largest cultivation farms now idled (Aurora Sun and Aurora Nordic 2) to lower capital expenditures, Aurora looks doomed to lose money in fiscal 2020. That makes it a popular pot stock to avoid in my book.
Image source: Getty Images.
MedMen Enterprises
Another popular cannabis stock that was an utter train wreck in 2019 and should continue to crash and burn in 2020 is vertically integrated multistate operator (MSO) MedMen Enterprises (OTC: MMNFF).
The idea behind owning MedMen seemed simple. This was a company with a big focus on California, the largest cannabis market by sales in the world. With some of its locations in the Golden State generating more sales per square foot than Apple's stores, its branding seemed to be clearly resonating with consumers. Unfortunately, what could go wrong has gone wrong for MedMen.
The biggest worry for MedMen moving forward is financing. Although MedMen has secured up to $280 million from private equity firm Gotham Green Partners, there's little assurance that this'll be enough to see MedMen survive over the long run. Management has made strides in reducing general and administrative expenses by roughly 30%, but that didn't stop the company from losing $53.3 million in the fourth quarter and $231.7 million in 2019.
MedMen also went so far as to completely shelve its acquisition of privately held MSO PharmaCann in October, just three days before the one-year anniversary of announcing what was then a $682 million all-stock deal. MedMen justified terminating the acquisition as a means of not having to push into noncore markets, but it's blatantly apparent that the issue is MedMen doesn't have the capital to take on the operating expenses of PharmaCann's existing network of dispensaries and grow farms.
The icing on the cake for MedMen is that California's pot industry has been overrun by black-market producers. The Golden State is taxing the daylights out of consumers, which, when coupled with its Swiss-cheese-like legalization process throughout the state's nearly 500 jurisdictions, has constrained legal sales. In short, I genuinely question MedMen's ability to survive.
Image source: Getty Images.
Canopy Growth
Finally, it'd be a good idea for investors to keep their distance from Canopy Growth (NYSE: CGC), the largest marijuana stock in the world by market cap.
Similar to Aurora Cannabis, Canopy Growth appeared to have a laundry list of competitive advantages that would seemingly make it the pot stock to own. It's the second-largest producer by peak annual output, has operations in the second-most foreign countries (behind Aurora), has the best-known brand in Tweed, and is rolling in the dough following an equity investment from Constellation Brands. And yet the company is a mess.
There isn't a cannabis company out there that's losing more money on an operating basis than Canopy Growth. Even excluding a number of one-time costs, Canopy's operating loss hit a staggering CA$265.8 million in the fiscal second quarter. Mind you, this includes a more than CA$13 million benefit from fair-value adjustments. Aside from more employees leading to higher expenses, Canopy's share-based compensation has soared. Now-former co-CEO Bruce Linton believed that offering long-term-vesting stock was a smart move to keep employees loyal and motivated. Unfortunately, it's ballooned costs and made it virtually impossible for the company to get anywhere near operating profitability.
Like Aurora, Canopy Growth is also lugging around a lot of goodwill on its balance sheet. The company clearly overpaid for its acquisitions: Canopy's CA$1.91 billion in goodwill accounts for 23% of total assets. This looks to be a writedown just waiting to happen.
But the big question mark for 2020 is, what happens when incoming CEO David Klein takes over in January? Though it's a certainty we'll see some belt tightening, Klein doesn't have any experience in the cannabis industry. This leaves the company's future as a market share leader very much in limbo.
With profits nowhere in sight, I'd suggest avoiding Canopy Growth like the plague in 2020.
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Sean Williams has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple. 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. | Aurora Cannabis Alberta-based Aurora Cannabis (NYSE: ACB) is an absolute favorite among investors. Supply issues in Canada, high tax rates in select U.S. states, and a resilient black market made life incredibly difficult for cannabis companies, and it was investors who paid the price. Though Aurora does have a number of factors that are seemingly working in its favor, including the highest peak production potential of all growers, the broadest international reach, and landing billionaire activist investor Nelson Peltz as a strategic advisor in March 2019, the company's balance sheet is a complete disaster, and the supply issues impacting Canada are a long way from being resolved. | Aurora Cannabis Alberta-based Aurora Cannabis (NYSE: ACB) is an absolute favorite among investors. Supply issues in Canada, high tax rates in select U.S. states, and a resilient black market made life incredibly difficult for cannabis companies, and it was investors who paid the price. Perhaps a bigger problem is that Aurora grossly overpaid for its acquisitions, and the company has 3.17 billion Canadian dollars in goodwill on its balance sheet. | Aurora Cannabis Alberta-based Aurora Cannabis (NYSE: ACB) is an absolute favorite among investors. MedMen Enterprises Another popular cannabis stock that was an utter train wreck in 2019 and should continue to crash and burn in 2020 is vertically integrated multistate operator (MSO) MedMen Enterprises (OTC: MMNFF). Canopy Growth Finally, it'd be a good idea for investors to keep their distance from Canopy Growth (NYSE: CGC), the largest marijuana stock in the world by market cap. | Aurora Cannabis Alberta-based Aurora Cannabis (NYSE: ACB) is an absolute favorite among investors. That makes it a popular pot stock to avoid in my book. There isn't a cannabis company out there that's losing more money on an operating basis than Canopy Growth. |
37774.0 | 2020-01-01 00:00:00 UTC | Are Aurora Cannabis, HEXO, and Tilray Ready to Rebound in 2020? | ACB | https://www.nasdaq.com/articles/are-aurora-cannabis-hexo-and-tilray-ready-to-rebound-in-2020-2020-01-01 | nan | nan | Many investors in marijuana stocks are probably breathing a sigh of relief that 2019 is over. The year brought dismal performances for most pot stocks. To put things in perspective, the two leading cannabis-focused exchange-traded funds (ETFs) both plunged by at least 30%.
When ETFs fall that much, it means there are plenty of individual stocks that dropped even more. Three well-known pot stocks that performed especially badly in 2019 were Aurora Cannabis (NYSE: ACB), HEXO (NYSE: HEXO), and Tilray (NASDAQ: TLRY). But are these beaten-down marijuana stocks ready to rebound in 2020?
Image source: Getty Images.
A common denominator
Aurora Cannabis, HEXO, and Tilray performed much worse than other big Canadian cannabis producers last year. Aurora's shares sank close to 60%. HEXO didn't fare much better, with the stock falling more than 50%. Tilray was the biggest loser of the three, with its shares tanking by over 75%.
There was one major common denominator behind all three stocks' horrible results in 2019: too few retail cannabis stores in Canada. This lack of an adequate retail infrastructure wasn't as problematic early in the year; pent-up demand for legal recreational marijuana initially led to big sales jumps for Aurora, HEXO, Tilray, and their peers. Later in the year, though, the retail bottleneck began to impact the volume of products that provinces were ordering for their adult-use recreational cannabis markets.
Ontario presented the biggest challenge of all. It's the most heavily populated province in Canada, home to nearly four out of 10 residents of the country. But by late November, only 24 retail cannabis stores were open in Ontario. That's one store for every 600,000 residents -- not nearly enough to serve the market.
It's not surprising that the management teams at Aurora and HEXO pointed the finger at Ontario when their quarterly updates later in 2019 disappointed investors. Tilray's executives didn't single out the province, although CEO Brendan Kennedy stated on the company's third-quarter conference call in November that "the challenges in the Canadian market are ongoing, with a limited number of retail locations and a supply-demand imbalance."
Company-specific problems
But Ontario wasn't the only reason that Aurora, HEXO, and Tilray stocks plunged in 2019. Each faced company-specific problems as well.
Aurora made the age-old mistake of overpromising and underdelivering with its fiscal 2019 fourth-quarter results. The company provided guidance for its Q4 revenue without having adequate visibility for its ancillary non-cannabis revenue. Its revenue miss ended up being an embarrassment. Aurora's fiscal 2020 Q1 results were even worse, and led to the company cutting its spending on capital projects. In addition, Aurora closed out the year by having its license to sell medical cannabis products in Germany temporarily suspended, causing the company to lose at least six weeks of sales in the key European market.
HEXO also overpromised and underdelivered. CEO Sebastien St-Louis predicted that net revenue would double in Q4 from Q3, but the company didn't come close to achieving that goal. HEXO's CFO departed unexpectedly in October. The company withdrew its fiscal 2020 outlook. And in late December, HEXO added more dilution to the list of reasons why investors soured on the stock.
While Aurora and HEXO at least enjoyed a few months of big gains earlier in the year, Tilray lost its steam quickly in 2019. The company routinely missed Wall Street estimates in its quarterly results. The acquisition of Manitoba Harvest, a maker of hemp-based foods, weighed on Tilray's margins. Probably the biggest issue for Tilray, though, was that it started out the year with a lofty valuation that simply wasn't sustainable.
Ready to rebound in 2020?
The good news for all three of these companies and their peers is that the retail environment in Canada should improve. Ontario is issuing around 20 licenses for new stores each month, beginning in March, following an initial wave of more than 40 new stores.
Another tailwind is that the Cannabis 2.0 derivatives market will ramp up in earnest in 2020. Aurora, HEXO, and Tilray are offering a range of products in this new market that should boost sales significantly in the new year.
My hunch is that these positive factors will spur many investors to jump back on the cannabis bandwagon, leading to solid rebounds for many Canadian marijuana stocks. I suspect that Aurora, HEXO, and Tilray will enjoy nice bounces.
However, the prospect of further dilution is likely to hover like a dark cloud over all three of these stocks in 2020. Unless the companies can demonstrate that they're clearly on a path to profitability, don't be surprised if the rebounds for their stocks fade.
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 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. | Three well-known pot stocks that performed especially badly in 2019 were Aurora Cannabis (NYSE: ACB), HEXO (NYSE: HEXO), and Tilray (NASDAQ: TLRY). This lack of an adequate retail infrastructure wasn't as problematic early in the year; pent-up demand for legal recreational marijuana initially led to big sales jumps for Aurora, HEXO, Tilray, and their peers. Tilray's executives didn't single out the province, although CEO Brendan Kennedy stated on the company's third-quarter conference call in November that "the challenges in the Canadian market are ongoing, with a limited number of retail locations and a supply-demand imbalance." | Three well-known pot stocks that performed especially badly in 2019 were Aurora Cannabis (NYSE: ACB), HEXO (NYSE: HEXO), and Tilray (NASDAQ: TLRY). A common denominator Aurora Cannabis, HEXO, and Tilray performed much worse than other big Canadian cannabis producers last year. This lack of an adequate retail infrastructure wasn't as problematic early in the year; pent-up demand for legal recreational marijuana initially led to big sales jumps for Aurora, HEXO, Tilray, and their peers. | Three well-known pot stocks that performed especially badly in 2019 were Aurora Cannabis (NYSE: ACB), HEXO (NYSE: HEXO), and Tilray (NASDAQ: TLRY). This lack of an adequate retail infrastructure wasn't as problematic early in the year; pent-up demand for legal recreational marijuana initially led to big sales jumps for Aurora, HEXO, Tilray, and their peers. Company-specific problems But Ontario wasn't the only reason that Aurora, HEXO, and Tilray stocks plunged in 2019. | Three well-known pot stocks that performed especially badly in 2019 were Aurora Cannabis (NYSE: ACB), HEXO (NYSE: HEXO), and Tilray (NASDAQ: TLRY). A common denominator Aurora Cannabis, HEXO, and Tilray performed much worse than other big Canadian cannabis producers last year. Company-specific problems But Ontario wasn't the only reason that Aurora, HEXO, and Tilray stocks plunged in 2019. |
37775.0 | 2020-01-01 00:00:00 UTC | Is Cronos the Cheapest Pot Stock to Buy? | ACB | https://www.nasdaq.com/articles/is-cronos-the-cheapest-pot-stock-to-buy-2020-01-01 | nan | nan | Valuations are a touchy subject in the cannabis industry. That's because many pot stocks are wildly overvalued, and investors are still struggling to determine what they're worth today. One stock that could enter the discussion as one of the cheaper options is Cronos Group (NASDAQ: CRON). A stock that's trading at less than seven times its earnings and 1.4 times its book value would seem to tick many of the boxes Warren Buffett-type investors look for. That's where Cronos finds itself today but is the stock really an excellent value?
Profitable for three straight quarters
While many cannabis companies have struggled to turn a profit even once, Cronos has done so in three successive quarters. Over the past nine months, the company's net income totaled a cumulative 1.5 billion Canadian dollars. It's an incredible streak, but it warrants an asterisk next to it.
During those three quarters combined, Cronos incurred an operating loss of CA$75 million on net revenue of just CA$29 million. The company was able to stay out of the red thanks to its other income and expenses. Specifically, Cronos benefited from gains on the revaluation of its derivative liabilities to the tune of more than CA$1.5 billion. That line item has grossly inflated the company's profitability and allowed it to showcase a very attractive price-to-earnings ratio in the process.
Image Source: Getty Images.
It's a prime example of how misleading financial statements can be. The derivative liabilities relate to cigarette maker Altria's investment in the company. Cronos has classified Altria's warrants and pre-emptive rights as derivative liabilities. And since Cronos' share price has been falling for much of 2019, the value of those liabilities has been dropping as well, resulting in fair value gains for the company.
Very expensive when looking at sales
Gains and other income can easily distort a company's earnings and its price-to-earnings ratio. However, it's a lot more difficult for the price-to-sales ratio to mislead, since it reflects the sales a company has earned during a period. Cronos' top line has unfortunately not been a strong point; revenue was above CA$10 million in only two of its past four quarters.
That's a trivial amount given the stock's market cap of $2.5 billion. By comparison, Aurora Cannabis (NYSE: ACB) has a lower market cap of $2.1 billion, and the lowest its sales have reached in any of the past four quarters was CA$54 million; over the trailing 12 months, Aurora's sales topped nearly CA$300 million. Its price-to-sales multiple of 9.5 pales in comparison to that of Cronos, which trades at nearly 90 times its revenue.
Cronos has fallen around 40% in 2019, right in line with how the Horizons Marijuana Life Sciences ETF performed during that time. Remarkably, even though it generated much more in revenue, Aurora's stock price declined by more than 63%.
If not Cronos, then what?
By now it's clear that Cronos isn't the great value buy that it appears to be at first glance. While the temptation may be to say that Aphria is a better value buy, as it has also been profitable for consecutive periods, nonoperating items have been inflating its bottom line as well. However, its price-to-sales multiple of 4.6 looks like a bargain compared to both Aurora and Cronos. It could be one of the better buys in the industry today, but even Aphria is still a bit of a risky investment, at least until it can prove that it can stay in the black without needing assistance from items below its operating income.
It's still a delicate time in the industry, and investors might be well advised to wait a while before investing in cannabis companies, at least until they prove that they're able to produce consistent and sustainable profits.
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. | By comparison, Aurora Cannabis (NYSE: ACB) has a lower market cap of $2.1 billion, and the lowest its sales have reached in any of the past four quarters was CA$54 million; over the trailing 12 months, Aurora's sales topped nearly CA$300 million. It could be one of the better buys in the industry today, but even Aphria is still a bit of a risky investment, at least until it can prove that it can stay in the black without needing assistance from items below its operating income. It's still a delicate time in the industry, and investors might be well advised to wait a while before investing in cannabis companies, at least until they prove that they're able to produce consistent and sustainable profits. | By comparison, Aurora Cannabis (NYSE: ACB) has a lower market cap of $2.1 billion, and the lowest its sales have reached in any of the past four quarters was CA$54 million; over the trailing 12 months, Aurora's sales topped nearly CA$300 million. Over the past nine months, the company's net income totaled a cumulative 1.5 billion Canadian dollars. During those three quarters combined, Cronos incurred an operating loss of CA$75 million on net revenue of just CA$29 million. | By comparison, Aurora Cannabis (NYSE: ACB) has a lower market cap of $2.1 billion, and the lowest its sales have reached in any of the past four quarters was CA$54 million; over the trailing 12 months, Aurora's sales topped nearly CA$300 million. Profitable for three straight quarters While many cannabis companies have struggled to turn a profit even once, Cronos has done so in three successive 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. | By comparison, Aurora Cannabis (NYSE: ACB) has a lower market cap of $2.1 billion, and the lowest its sales have reached in any of the past four quarters was CA$54 million; over the trailing 12 months, Aurora's sales topped nearly CA$300 million. Profitable for three straight quarters While many cannabis companies have struggled to turn a profit even once, Cronos has done so in three successive quarters. If not Cronos, then what? |
37776.0 | 2019-12-31 00:00:00 UTC | These Pot Stocks May Be Delisted From the NYSE in 2020 | ACB | https://www.nasdaq.com/articles/these-pot-stocks-may-be-delisted-from-the-nyse-in-2020-2019-12-31 | nan | nan | As 2019 comes to a close, it'll go down as a great year for the broader market and a miserable year for marijuana stocks. What's so crazy about the latter is that pot stocks opened the year with jaw-dropping gains throughout the first quarter, but logged substantial double-digit declines since the end of March.
Pretty much everything that could go wrong has gone wrong for pot stocks. Supply issues in Canada have kept legal product from reaching consumers, while high tax rates in select U.S. states have made it impossible for legal weed to compete with the black market. As a result, marijuana stocks have continued to lose money at a time when most of Wall Street foresaw the industry pushing into the green.
Image source: Getty Images.
NYSE delisting could be a real possibility for a handful of cannabis stocks in 2020
Pot stocks have a lot to be concerned with in the upcoming year, including pricing pressures and a persistent black market presence. But a handful of pot stocks can also add a possible delisting from the New York Stock Exchange (NYSE) to their growing list of concerns.
As some folks are likely aware, it's not easy for marijuana stocks to uplist to, or go the initial public offering (IPO) route on, a major U.S. exchange, such as the NYSE or Nasdaq. Both exchanges have a laundry list of financial, volume, and other intangible factors that are considered when a company files the required paperwork to uplist from the over-the-counter (OTC) exchange or to do an IPO. But the real issue is that, since marijuana is an illicit substance in the U.S. at the federal level, no company that directly deals with the cannabis plant in the U.S. is allowed to list their common stock on the NYSE or Nasdaq. This factor, along with the financial and volume requirements, excludes most pot stocks from uplisting.
Nevertheless, more than a dozen direct and ancillary marijuana stocks have made the move over the past three years. In doing so, they've improved their visibility, bolstered their volume-based liquidity, and garnered far more Wall Street coverage and/or investments than they would have if they remained listed on the OTC exchange or remained private.
But for three pot stocks, this dream could being ending in 2020.
Image source: Getty Images.
CannTrust Holdings
The most logical delisting candidate is Ontario-based CannTrust (NYSE: CTST), which is currently failing two ongoing listing requirements. This includes a share price that's been below $1 per share for a period of 30 days, as well as the fact that the company hasn't filed its quarterly operating results since May. Although both insufficiencies could get CannTrust booted from the NYSE, the latter is far more concerning. It's likely the company will be shown the NYSE exit door in the first half of 2020.
As you may know, CannTrust dropped a bombshell on Wall Street in July by admitting that it illegally grew cannabis in five unlicensed rooms for a period of six months between October 2018 and March 2019. As a result of these findings, the company's CEO was fired, and Health Canada suspended CannTrust's cultivation and sales licenses in September. In theory, this leaves the door open for the company to regain its license in 2020, assuming it meets a laundry list of requirements laid out by Health Canada. But in the meantime, CannTrust is burning through cash and is unable to sell a gram of cannabis.
Even if CannTrust were to do a reverse split in order to get its share price back above $1, the fact that it's failed to report its quarterly results looks to be the dooming factor that'll banish it back to the OTC exchange.
Image source: Getty Images.
HEXO
Quebec-based HEXO (NYSE: HEXO) is another popular pot stock that's starting to inch toward dangerous territory.
Last week, HEXO announced a direct offering of nearly 15 million shares of stock at a 15% discount to the previous day's closing price. Although the offering is going to raise $25 million in gross proceeds, it wound up clobbering the company's share price. As of Thursday, Dec. 26, HEXO closed at a mere $1.53, down 82% from its all-time high set eight months ago. This is notable because $1 is the minimum listing price on the NYSE.
In recent months, HEXO has seriously walked back lofty expectations. The company had been calling for $400 million Canadian in sales for the upcoming year, but has since pulled that guidance. Further, HEXO is idling about a third of its run-rate peak output. The Niagara cultivation campus, acquired when the company bought Newstrike Brands earlier this year, will be idled, with 200,000 square feet of growing space at Gatineau also shut down for the time being. HEXO has also announced 200 job cuts in an effort to better align its costs with the current demand environment.
While HEXO isn't in violation of NYSE listing requirements for now, it wouldn't take much for its share price to drop below $1 (and stay there) at this point.
Image source: Getty Images.
Aurora Cannabis
Yes, even the most popular marijuana stock on the planet, Aurora Cannabis (NYSE: ACB), could be facing delisting from the NYSE in 2020. Like HEXO, Aurora's share price has declined more than 80% since hitting its yearly high in March. Now valued at $2 per share as of Dec. 26, Aurora is creeping closer to dipping below the NYSE's minimum listing price.
Aurora, like HEXO, has also taken steps to reduce its expenses in the wake of subdued demand and Canadian supply problems. In the company's first-quarter operating results, Aurora announced plans to halt construction at Aurora Sun in Alberta and Aurora Nordic 2 in Denmark. Utilizing just six grow rooms at Aurora Sun, the company will likely see its "at least 625,000 kilos" in projected run-rate annual output by the end of fiscal 2020 halved.
There's also no masking that Aurora Cannabis' balance sheet is a mess. Some on Wall Street have suggested that the company's cash position isn't sufficient to meet its expansionary costs. Meanwhile, Aurora's aggressive acquisition strategy over the past three-plus years has left the company with CA$3.17 billion in goodwill. Representing 57% of total assets, Aurora's goodwill looks like a ticking time bomb that'll eventually lead to a writedown.
In other words, with plenty of downside catalysts still in the offing, a continued drop in Aurora's share price, perhaps below $1, can't be discounted.
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 Nasdaq. 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 Yes, even the most popular marijuana stock on the planet, Aurora Cannabis (NYSE: ACB), could be facing delisting from the NYSE in 2020. But the real issue is that, since marijuana is an illicit substance in the U.S. at the federal level, no company that directly deals with the cannabis plant in the U.S. is allowed to list their common stock on the NYSE or Nasdaq. As you may know, CannTrust dropped a bombshell on Wall Street in July by admitting that it illegally grew cannabis in five unlicensed rooms for a period of six months between October 2018 and March 2019. | Aurora Cannabis Yes, even the most popular marijuana stock on the planet, Aurora Cannabis (NYSE: ACB), could be facing delisting from the NYSE in 2020. Both exchanges have a laundry list of financial, volume, and other intangible factors that are considered when a company files the required paperwork to uplist from the over-the-counter (OTC) exchange or to do an IPO. Last week, HEXO announced a direct offering of nearly 15 million shares of stock at a 15% discount to the previous day's closing price. | Aurora Cannabis Yes, even the most popular marijuana stock on the planet, Aurora Cannabis (NYSE: ACB), could be facing delisting from the NYSE in 2020. NYSE delisting could be a real possibility for a handful of cannabis stocks in 2020 Pot stocks have a lot to be concerned with in the upcoming year, including pricing pressures and a persistent black market presence. But the real issue is that, since marijuana is an illicit substance in the U.S. at the federal level, no company that directly deals with the cannabis plant in the U.S. is allowed to list their common stock on the NYSE or Nasdaq. | Aurora Cannabis Yes, even the most popular marijuana stock on the planet, Aurora Cannabis (NYSE: ACB), could be facing delisting from the NYSE in 2020. But for three pot stocks, this dream could being ending in 2020. CannTrust Holdings The most logical delisting candidate is Ontario-based CannTrust (NYSE: CTST), which is currently failing two ongoing listing requirements. |
37777.0 | 2019-12-31 00:00:00 UTC | Why Aurora Cannabis, Canopy Growth, and Other Top Canadian Marijuana Stocks Soared Today | ACB | https://www.nasdaq.com/articles/why-aurora-cannabis-canopy-growth-and-other-top-canadian-marijuana-stocks-soared-today | nan | nan | What happened
Several top Canadian marijuana stocks soared by double-digit percentages on Tuesday. Shares of Aurora Cannabis (NYSE: ACB) were up by 12.3% as of 3:08 p.m. EST. Canopy Growth (NYSE: CGC) stock was jumping 12.1%. Tilray's (NASDAQ: TLRY) gain for the day was in the same ballpark, with shares up 12.5%. Aphria (NYSE: APHA) lagged behind slightly, with the stock rising 10.6%.
Two of the biggest winners, though, were Cronos Group (NASDAQ: CRON) and Sundial Growers (NASDAQ: SNDL), with shares vaulting 16.8% and 22.6% higher, respectively.
What lit a fire beneath these Canadian marijuana stocks on the last day of 2019? There wasn't any major news today. Probably the biggest factor behind today's spike is that the Cannabis 2.0 market for cannabis derivative products is picking up steam. Most of the stocks that jumped also have double-digit short percentages of shares outstanding, so any upward movement can result in short-sellers closing out their positions, contributing to even greater increases in share prices.
Image source: Getty Images.
So what
All of the big marijuana stocks with big moves today have taken a shellacking in 2019, with the exception of Aphria, which fell only slightly during the year. The lack of an adequate retail infrastructure, particularly in Ontario, has presented a major obstacle for Canadian cannabis producers. However, the year is ending on a positive note; Ontario is taking steps to open more retail stores at the same time the Cannabis 2.0 market is shifting into gear.
There's a good reason for investors to be optimistic about the potential for these stocks in the Cannabis 2.0 market. Professional services organization Ernst & Young projects the market could reach close to 6 billion Canadian dollars by 2025.
It's still very early, though. Today's jump stems from anticipation and hopes, instead of hard sales numbers. Still, many investors could be justified in thinking that the 2019 sell-off for Canadian pot stocks could have been overdone, in light of the improving environment that should be on the way in 2020.
Now what
Watch for reports of how well sales in the Cannabis 2.0 market are going early in the new year. Aphria will be the first major Canadian cannabis producer to announce earnings results, on Jan. 14, 2020. Although those results are for the quarter ending in November and won't include any Cannabis 2.0 sales, the company's management could provide some insight into how the launch of its new products is 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
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 up by 12.3% as of 3:08 p.m. EST. However, the year is ending on a positive note; Ontario is taking steps to open more retail stores at the same time the Cannabis 2.0 market is shifting into gear. Although those results are for the quarter ending in November and won't include any Cannabis 2.0 sales, the company's management could provide some insight into how the launch of its new products is going. | Shares of Aurora Cannabis (NYSE: ACB) were up by 12.3% as of 3:08 p.m. EST. What happened Several top Canadian marijuana stocks soared by double-digit percentages on Tuesday. So what All of the big marijuana stocks with big moves today have taken a shellacking in 2019, with the exception of Aphria, which fell only slightly during the year. | Shares of Aurora Cannabis (NYSE: ACB) were up by 12.3% as of 3:08 p.m. EST. Most of the stocks that jumped also have double-digit short percentages of shares outstanding, so any upward movement can result in short-sellers closing out their positions, contributing to even greater increases in share prices. So what All of the big marijuana stocks with big moves today have taken a shellacking in 2019, with the exception of Aphria, which fell only slightly during the year. | Shares of Aurora Cannabis (NYSE: ACB) were up by 12.3% as of 3:08 p.m. EST. Aphria (NYSE: APHA) lagged behind slightly, with the stock rising 10.6%. Now what Watch for reports of how well sales in the Cannabis 2.0 market are going early in the new year. |
37778.0 | 2019-12-31 00:00:00 UTC | Is Canopy Growth a Worthy Investment in 2020? | ACB | https://www.nasdaq.com/articles/is-canopy-growth-a-worthy-investment-in-2020-2019-12-31 | nan | nan | Canopy Growth (NYSE:) is up 35% from its November lows. Based on that data point alone, some investors may glean that the stock is doing quite well. Because most investors know how bad cannabis stocks have been though, they realize thatâÂÂs not the case.
Source: Shutterstock
In fact, itâÂÂs far from reality â and not just for Canopy either. The entire cannabis industry has been under extreme pressure in 2019. ThatâÂÂs too bad too, because the group started off the year so strong.
Many of the stocks doubled from their December and January lows. But they used up too much energy in the first quarter, topping out and steadily declining for several months. In the summer, the bottom really started to fall out, as Canopy Growth began to severely break down.
Bulls are hoping the bottom is in. If thatâÂÂs the case, that low came in November. After a rebound in December, we need to see key support hold in order to trust this name on the long side.
Trading Canopy Growth
Source: Chart courtesy of
A look at a chart of Canopy Growth reveals just what we are talking about: intensely, painful selling.
However, in November, shares were flushed lower, bottoming at $13.81 and quickly spiking higher. It prompted us to ask earlier this month whether shares . Even doing so from current levels wouldnâÂÂt take out CanopyâÂÂs high from 2019.
Still, itâÂÂs certainly possible that Canopy Growth and the rest of the cannabis space could enjoy a big 2020. That is, if certainly catalysts come into play and if the technicals continue to improve. In order for the latter to happen, Canopy must hold a very critical level of support.
That mark comes into play near $17.50.
After hitting rock bottom, Canopy surged to $21.56 in just three trading days. Shares were rejected from the 50-day moving average and downtrend resistance. However, on the pullback, $17.50 held as support. In early December, the stock ended up pushing through downtrend resistance, as well as the 20-day and 50-day moving averages.
The stock has been slowly churning lower since that action. Fund managers likely donâÂÂt want it on their year-end books, while investors with large losses have likely been tax-harvesting those losses.
As we near 2020 though, Canopy may be able to turn a new page. While breaking out over downtrend resistance doesnâÂÂt guarantee gains will come, itâÂÂs certainly a shift in the bullsâ favor.
LetâÂÂs see if the stock can maintain above $17.50. If it canâÂÂt, the $13.81 low is back on the table. If it can maintain above it, then it can reclaim its 50-day moving average. Above it and $22.50 is possible. Over that mark and the $27.50 and 200-day moving average is on the table.
However, it all starts with support holding first.
Investing in Canopy Growth
Is Canopy Growth a good investment for 2020?
ItâÂÂs a reasonable speculative holding for 2020, provided investors do not allocate too large of position to the name and are disciplined enough to lock-in losses while they are manageable vs. holding and praying if support blows out.
Canopy is a reasonably speculative play because it has one of the better balance sheets in the industry. ThatâÂÂs also why I like Aphria (NYSE:) going into 2020 as well.
Others such a solid balance sheet, like Tilray (NASDAQ:) for example. Others, like Aurora Cannabis (NYSE:) have very unattractive technicals.
Canopy and AphriaâÂÂs charts look better and the financials are stronger. That said, Canopy has had some mishaps.
A lack of clarity around a stock-warrant situation with Constellation Brands (NYSE:), continually disappointing quarterly results and a big c-suite shake-up has deflated investor confidence. With a new CEO in place, investors are hopeful that the company can get back on track and find some consistency.
With legalization continuing to take place in the U.S. â Illinois, the sixth most populous state, â and deregulation occurring, the secular trend is in place for cannabis stocks.
Canopy Growth still has $2.73 billion in cash and short-term investments on hand, while current assets total $3.56 billion. While thatâÂÂs down significantly from $4.9 billion and $5.27 billion, respectively, at year-end 2018, it still greatly outweighs liabilities. For instance, current liabilities total just $425 million.
Admittedly, Canopy has to get its quarter-to-quarter act together. But if it can do so and its technicals remain stable, shares can have an enjoyable 2020.
Bret Kenwell is the manager and author of and is on Twitter @BretKenwell. As of this writing, Bret Kenwell is long APHA.
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. | In the summer, the bottom really started to fall out, as Canopy Growth began to severely break down. After a rebound in December, we need to see key support hold in order to trust this name on the long side. A lack of clarity around a stock-warrant situation with Constellation Brands (NYSE:), continually disappointing quarterly results and a big c-suite shake-up has deflated investor confidence. | Trading Canopy Growth Source: Chart courtesy of A look at a chart of Canopy Growth reveals just what we are talking about: intensely, painful selling. Shares were rejected from the 50-day moving average and downtrend resistance. Investing in Canopy Growth Is Canopy Growth a good investment for 2020? | Canopy Growth (NYSE:) is up 35% from its November lows. Trading Canopy Growth Source: Chart courtesy of A look at a chart of Canopy Growth reveals just what we are talking about: intensely, painful selling. Investing in Canopy Growth Is Canopy Growth a good investment for 2020? | Canopy Growth (NYSE:) is up 35% from its November lows. Because most investors know how bad cannabis stocks have been though, they realize thatâÂÂs not the case. Trading Canopy Growth Source: Chart courtesy of A look at a chart of Canopy Growth reveals just what we are talking about: intensely, painful selling. |
37779.0 | 2019-12-31 00:00:00 UTC | 1 Reason Cannabis Stocks Are Still Very Risky Buys | ACB | https://www.nasdaq.com/articles/1-reason-cannabis-stocks-are-still-very-risky-buys-2019-12-31 | nan | nan | For all the challenges that marijuana stocks have faced in the past year, including a lack of profitability and analysts being bearish on the industry, there's been no shortage of investors who have been willing to buy shares of cannabis companies despite the risks involved. The biggest risk for any cannabis investor today centers around how sensitive the stocks are and how volatile they can be in response to new developments in the industry, or just analyst opinions. This volatility shouldn't be ignored, as investors could see their portfolios lose significant value in a short amount of time.
Significant price changes are par for the course
It's not uncommon to see big swings in price from one day to the next in pot stocks, even among some of the bigger names in the industry. Canopy Growth (NYSE: CGC) and Aurora Cannabis (NYSE: ACB) have taken their shareholders on a roller-coaster ride this past year, and that's been true for the industry as a whole. Unfortunately, for many investors, the ride has been headed in one direction: down. Aurora lost more than 60% of its value this year, while Canopy Growth declined a more modest 34% in 2019. The Horizons Marijuana Life Sciences ETF, which holds a broad collection of pot stocks, has fallen by 40%.
But it's not just that pot stocks have fallen that makes them risky; it's the large swings in value that means investing in them is especially dangerous. As of Dec. 26, Canopy Growth saw its share price move by more than 10% a total of 10 times during the past year. Only half of those occurrences have been positive. Aurora, despite its worse showing this year, has had the same number of 10% moves during the year, but seven of those times were positive, with just three being negative.
Image Source: Getty Images.
When looking at movements of more than 5%, the ratio of positive to negative movements for both stocks remains at or near 50%. The most telling metric is that when looking at all the days analyzed, nearly one-quarter of Canopy Growth's trading days (24%) saw its closing price move by more than 5% from the prior day's close. Aurora has been a bit more modest, with 19% of its trading days seeing the same level of movement.
To put this into perspective, the S&P 500 increased by more than 3% just once during the same period. While a broad holding of stocks will see less volatility, the Marijuana Life Sciences ETF saw its value move by more than 5% a total of 14 times. That's 5.6% of its total trading days during the period analyzed.
Why is there so much volatility?
The largest single-day move for Canopy Growth happened on Nov. 21, when the stock jumped 18%. For Aurora Cannabis, it was Nov. 20, when its value went up by 15%. The big news around that time was that the House of Representatives approved a bill that would legalize marijuana federally and would no longer make it a Schedule 1 substance. Canopy Growth got an additional boost on news that it was upgraded by analysts at Bank of America.
Although the bill to legalize pot federally is in its early stages, and it's a long shot to pass given that Senate Majority Leader Mitch McConnell remains opposed to the legalization of marijuana, news of the bill was enough to send pot stocks into a frenzy. Marijuana stocks are very sensitive to new developments, which can move very suddenly. While investors can earn quick returns, they can also suffer significant losses as well. When one analyst at GLJ Research said in December that Aurora's "equity holds no value," the stock proceeded to fall more than 4% the following day. A few weeks ago, U.S. cannabis company Trulieve fell 12.6% in one day when a short-seller report accused the company of being a fraud. At one point the stock was down 23% amid the panic as trading volumes soared to more than 3.5 million, more than 10 times the volume the stock saw over the past two trading days.
Why should investors care?
Market volatility is something all investors have to become accustomed to when buying shares. However, the level of movement pot stocks have experienced over the past year is well above what's normal for the markets as a whole, and it makes investing in cannabis very risky. Not only are valuations dropping, but the swings can be very significant.
Given the challenges the industry is facing today and the volatility involved, it's a very high-risk sector to be investing in right now. That's something investors should take into consideration when putting their money into marijuana stocks, as there's a very real danger their investments could lose significant value.
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. | Canopy Growth (NYSE: CGC) and Aurora Cannabis (NYSE: ACB) have taken their shareholders on a roller-coaster ride this past year, and that's been true for the industry as a whole. For all the challenges that marijuana stocks have faced in the past year, including a lack of profitability and analysts being bearish on the industry, there's been no shortage of investors who have been willing to buy shares of cannabis companies despite the risks involved. The biggest risk for any cannabis investor today centers around how sensitive the stocks are and how volatile they can be in response to new developments in the industry, or just analyst opinions. | Canopy Growth (NYSE: CGC) and Aurora Cannabis (NYSE: ACB) have taken their shareholders on a roller-coaster ride this past year, and that's been true for the industry as a whole. The Horizons Marijuana Life Sciences ETF, which holds a broad collection of pot stocks, has fallen by 40%. The most telling metric is that when looking at all the days analyzed, nearly one-quarter of Canopy Growth's trading days (24%) saw its closing price move by more than 5% from the prior day's close. | Canopy Growth (NYSE: CGC) and Aurora Cannabis (NYSE: ACB) have taken their shareholders on a roller-coaster ride this past year, and that's been true for the industry as a whole. For all the challenges that marijuana stocks have faced in the past year, including a lack of profitability and analysts being bearish on the industry, there's been no shortage of investors who have been willing to buy shares of cannabis companies despite the risks involved. The biggest risk for any cannabis investor today centers around how sensitive the stocks are and how volatile they can be in response to new developments in the industry, or just analyst opinions. | Canopy Growth (NYSE: CGC) and Aurora Cannabis (NYSE: ACB) have taken their shareholders on a roller-coaster ride this past year, and that's been true for the industry as a whole. But it's not just that pot stocks have fallen that makes them risky; it's the large swings in value that means investing in them is especially dangerous. As of Dec. 26, Canopy Growth saw its share price move by more than 10% a total of 10 times during the past year. |
37780.0 | 2019-12-31 00:00:00 UTC | 3 Reasons Cannabis Stocks Face-Planted in 2019 | ACB | https://www.nasdaq.com/articles/3-reasons-cannabis-stocks-face-planted-in-2019-2019-12-31 | nan | nan | This was supposed to have been the year that marijuana stocks became the complete package. We knew that the industry offered high growth potential, as evidenced by the tens of billions of dollars in weed sales annually on the black market, and we were expecting cannabis stocks to take the turn toward profitability in 2019. But that turn never happened.
Following an impressive first quarter that saw more than a dozen pot stocks rise by at least 70%, the final nine months of the year have been a veritable house of horrors for cannabis investors. Since the end of March, the Horizons Marijuana Life Sciences Index ETF, which holds around five dozen pot stocks of various weightings, has lost 58%. And, mind you, this includes the benefit of dividend distributions.
How did things go so wrong, so fast for the hottest investment on the planet? Blame the following three factors:
Image source: Getty Images.
1. The regulatory learning curve was much steeper than anyone had thought
To begin with, it's easy to overlook the fact that there's no precedent in the modern era to marijuana being a legal drug. This has led to a trial-and-error process that's been heavy on the errors.
For instance, Canada has dealt with persistent supply issues since the green flag waved on marijuana sales in October 2018. Part of the blame lies with regulatory agency Health Canada, which has been unable to approve licensing applications in a timely manner, thereby keeping cultivators waiting a long time to get approval to plant their crops.
Likewise, Ontario's lottery licensing process has been a mess. At the one-year mark of adult-use legalization (Oct. 17, 2019), Canada's most populous province only had 24 open dispensaries. That's one store for every 604,000 people in the province. That's not nearly a large enough physical presence for consumers, and it's led to a supply bottleneck in the province.
Meanwhile, U.S. states are learning that overtaxing legal cannabis can drive consumers back to the black market. California, the largest weed market in the world, is notorious for taxing the daylights out of consumers. End users are essentially paying a state and local sales tax, a 15% excise tax, a wholesale tax, and other added costs, such as laboratory testing. There's no way that legal growers can compete on price with black market producers. This is why California's annual weed sales are nearly flat between 2017 and 2019 (the Golden State opened its doors to recreational pot sales on Jan. 1, 2018).
The good news is that all of these regulatory issues are resolvable. The problem is that fixing these issues isn't going to happen overnight. This means the supply challenges in Canada and tax problems in the U.S. are liable to persist for the foreseeable future.
Image source: Getty Images.
2. Financing continues to be a major concern
The second thing we learned about the marijuana industry in 2019 is that financing concerns have not been put in the rearview mirror.
With North American cannabis sales ramping up slower than expected, we've witnessed consensus sales estimates come way down on Wall Street, while pot stocks have often reported larger-than-expected losses. Given that fixing supply and tax issues will take time, a number of cannabis stocks have turned to cost-saving measures to conserve their capital and better align demand with production.
For example, Aurora Cannabis (NYSE: ACB), HEXO (NYSE: HEXO), and The Green Organic Dutchman (OTC: TGODF) all announced production cuts during the fourth quarter. Aurora is halting construction at two of its largest facilities, taking more than 300,000 kilos of peak annual output off the table. HEXO and Green Organic Dutchman expect peak production of around 100,000 kilos and 20,000 kilos to 22,000 kilos, respectively, in 2020, down from peak estimates (if all facilities are operational) of 150,000 kilos and 219,000 kilos.
Aurora, HEXO, and Green Organic Dutchman have taken these measures because access to capital remains dicey. Even with access to a $360 million Canadian credit facility, Aurora Cannabis continues to sell its own stock to fund acquisitions and debt conversions, and has had its outstanding share count balloon by well over 1 billion in five years.
Similar financing concerns are impacting U.S. pot stocks, with a number of multistate operators (MSO) recently turning to sale-leaseback agreements to raise cash. Under a sale-leaseback agreement, an MSO sells a cultivation or processing facility to a real estate focused company in exchange for cash, then leases the property for an extended period of time from that same real estate company.
Expect financing to continue to be a problem for cannabis stocks throughout 2020.
Image source: Getty Images.
3. Investors lost trust in cannabis stocks
Lastly, there was a clear lack of investor trust when it came to pot stocks in 2019. Aside from the fact that cannabis stocks failed to deliver, there were a number of instances of wrongdoing that have been tough to gloss over.
In July, Ontario-based grower CannTrust (NYSE: CTST) came clean that it had been growing marijuana in five unlicensed rooms at its Niagara cultivation farm for a period of six months (October 2018 to March 2019). Subsequent to this finding, CannTrust's CEO was terminated, the company destroyed $58 million worth of illegally grown inventory, and its sales and cultivation licenses were suspended by Health Canada. By mid-2020 or sooner, CannTrust may also face delisting by the New York Stock Exchange.
While this was, by far, the most egregious breach of investor trust, Aphria (NYSE: APHA) and Namaste Technologies (OTC: NXTTF) also did little to inspire confidence in their leadership teams.
Aphria was accused of fraud in a short-seller report in December 2018, which led an independent committee to investigate the allegations. In early 2019, we learned that while most of the accusations were without merit, conflicts of interest were discovered involving Aphria's purchase of Latin American assets. This led to the departure of longtime CEO Vic Neufeld, and was followed by a writedown of 50 million in Canadian dollars ($38.2 million) on this acquisition.
Similarly, Namaste faced fraud allegations from noted short-seller Citron in October 2018. An independent committee found that now-former CEO Sean Dollinger had sold company assets to a related party without disclosing the sale. Dollnger was fired from his post with cause, but Namaste's share price hasn't recovered.
Building trust will be key for cannabis stocks if they're to have a better 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 owns shares of CannTrust Holdings Inc. The Motley Fool recommends CannTrust Holdings Inc, HEXO., and Namaste Technologies. 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), HEXO (NYSE: HEXO), and The Green Organic Dutchman (OTC: TGODF) all announced production cuts during the fourth quarter. We knew that the industry offered high growth potential, as evidenced by the tens of billions of dollars in weed sales annually on the black market, and we were expecting cannabis stocks to take the turn toward profitability in 2019. Even with access to a $360 million Canadian credit facility, Aurora Cannabis continues to sell its own stock to fund acquisitions and debt conversions, and has had its outstanding share count balloon by well over 1 billion in five years. | For example, Aurora Cannabis (NYSE: ACB), HEXO (NYSE: HEXO), and The Green Organic Dutchman (OTC: TGODF) all announced production cuts during the fourth quarter. HEXO and Green Organic Dutchman expect peak production of around 100,000 kilos and 20,000 kilos to 22,000 kilos, respectively, in 2020, down from peak estimates (if all facilities are operational) of 150,000 kilos and 219,000 kilos. Under a sale-leaseback agreement, an MSO sells a cultivation or processing facility to a real estate focused company in exchange for cash, then leases the property for an extended period of time from that same real estate company. | For example, Aurora Cannabis (NYSE: ACB), HEXO (NYSE: HEXO), and The Green Organic Dutchman (OTC: TGODF) all announced production cuts during the fourth quarter. We knew that the industry offered high growth potential, as evidenced by the tens of billions of dollars in weed sales annually on the black market, and we were expecting cannabis stocks to take the turn toward profitability in 2019. Investors lost trust in cannabis stocks Lastly, there was a clear lack of investor trust when it came to pot stocks in 2019. | For example, Aurora Cannabis (NYSE: ACB), HEXO (NYSE: HEXO), and The Green Organic Dutchman (OTC: TGODF) all announced production cuts during the fourth quarter. Given that fixing supply and tax issues will take time, a number of cannabis stocks have turned to cost-saving measures to conserve their capital and better align demand with production. Expect financing to continue to be a problem for cannabis stocks throughout 2020. |
37781.0 | 2019-12-31 00:00:00 UTC | 1 Reason Marijuana Stocks Could Bounce Back in 2020 | ACB | https://www.nasdaq.com/articles/1-reason-marijuana-stocks-could-bounce-back-in-2020-2019-12-31 | nan | nan | 2019 was rough for cannabis stocks -- and the investors who held them -- due to a number of factors.
The bubble that grew ahead of Canada's legalization of marijuana in October 2018 burst this year. Investors grew less willing to overlook the wide losses that many companies in the industry are experiencing, and an oversupply of marijuana led to falling prices. Meanwhile, there has been little progress toward legalization at the federal level in the U.S., and the industry remains highly fragmented, meaning there will likely be more losers than winners.
Image source: Getty Images.
Many of the best-known pot stocks, including Canopy Growth (NYSE: CGC), Aurora Cannabis, Tilray, and Cronos Group, as well as the ETFMG Alternative Harvest ETF, fell sharply this year.
CGC data by YCharts
However, the momentum could shift in 2020 as the U.S. presidential election could generate pressure in Washington for legalization.
The impact of an election
It's no secret that conditions in the marijuana industry are politically driven. After all, without legal medical marijuana or recreational pot in Canada, cannabis stocks wouldn't exist, and the Canadian marijuana industry would be much smaller if recreational weed was still illegal north of the border. In the U.S., cannabis-derivative stocks like New Age Beverages popped when the 2018 farm bill was passed, legalizing hemp.
According to the Pew Research Center, two-thirds of Americans support legalizing marijuana for medical use, as do a majority of voters in both political parties -- 55% of Republicans and 78% of Democrats. And 59% of those polled said they favor legalizing recreational marijuana.
In other words, the public support is there to legalize recreational pot nationwide. Today, recreational weed is legal in 10 states, with Illinois set to legalize it in 2020, plus the District of Columbia. Only one state in recent years, Arizona, has voted against allowing marijuana for personal consumption, by a slim margin of 2.6 percentage points. When the issue has come up on the ballot, voters have almost always chosen to legalize.
With a Republican in the White House for the last three years, the issue has stalled at the federal level, but nearly all the 2020 Democratic candidates have expressed support for legal marijuana. Former Vice President Joe Biden, something of an outlier, said he only wants to decriminalize it.
Though it's likely to take more than just a pot-friendly president to achieve federal legalization, any visible progress toward that end should energize pot stocks, as the U.S. market is nearly 10 times the size of Canada's. Investors should also remember that political shifts can happen fairly quickly. Gay marriage went from being illegal everywhere in the U.S. to fully legal in a little more than 10 years. After a number of states allowed it, the Supreme Court made it legal in a 5-4 decision in 2015. A similar process could play out in this case.
Which pot stocks would win if the U.S. legalized marijuana?
While Canadian pot stocks have captured the bulk of investors' attention so far, a different set of stocks could benefit if weed becomes legal at the federal level in the U.S.
Dispensary operators including Green Thumb Industries (OTC: GTBIF) and Curaleaf Holdings (OTC: CURLF) -- which own dozens of locations in both recreational and medical states -- could have an edge. These chains are already building their brands with consumers nationally thanks to marijuana tourism -- many people from states where pot isn't legal have encountered them during visits to states where it is.
Elsewhere, Acreage Holdings (OTC: ACRGF) also presents an appealing opportunity for investors. It's one of the biggest U.S. growers, thanks to a slew of acquisitions, and the company already has a sale agreement in place, pending U.S. legalization: Canopy Growth agreed to acquire it for $3.4 billion when and if that day comes. Given Acreage's current market value of just $517 million, that acquisition price represents a premium of more than 500% That, in turn, also makes Canopy and its own partner Constellation Brands, the distributor of Corona, potential winners on legalization. Canopy is already Canada's biggest pot company and can capitalize on Constellation's own marketing, distribution, and beverage expertise as derivatives continue to be a valuable slice of the marijuana market.
U.S. pot companies generally trade at much cheaper valuations than their Canadian peers, giving them greater upside potential.
What's next?
Marijuana legalization has received little attention thus far in the presidential campaign, but that doesn't mean the issue has been forgotten. Considering that the younger generations in the U.S. overwhelmingly support it, the question around legalization appears to be more a matter of when it will occur rather than if.
When the general election campaign heats up, keep your eye on the poll numbers. If a pot-friendly candidate is leading, marijuana stocks, especially those with U.S. exposure, should get a strong boost.
10 stocks we like better than Constellation Brands
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Jeremy Bowman owns shares of Constellation Brands and ETFMG Alternative Harvest ETF. 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. | Many of the best-known pot stocks, including Canopy Growth (NYSE: CGC), Aurora Cannabis, Tilray, and Cronos Group, as well as the ETFMG Alternative Harvest ETF, fell sharply this year. It's one of the biggest U.S. growers, thanks to a slew of acquisitions, and the company already has a sale agreement in place, pending U.S. legalization: Canopy Growth agreed to acquire it for $3.4 billion when and if that day comes. Given Acreage's current market value of just $517 million, that acquisition price represents a premium of more than 500% That, in turn, also makes Canopy and its own partner Constellation Brands, the distributor of Corona, potential winners on legalization. | Many of the best-known pot stocks, including Canopy Growth (NYSE: CGC), Aurora Cannabis, Tilray, and Cronos Group, as well as the ETFMG Alternative Harvest ETF, fell sharply this year. After all, without legal medical marijuana or recreational pot in Canada, cannabis stocks wouldn't exist, and the Canadian marijuana industry would be much smaller if recreational weed was still illegal north of the border. See the 10 stocks *Stock Advisor returns as of December 1, 2019 Jeremy Bowman owns shares of Constellation Brands and ETFMG Alternative Harvest ETF. | After all, without legal medical marijuana or recreational pot in Canada, cannabis stocks wouldn't exist, and the Canadian marijuana industry would be much smaller if recreational weed was still illegal north of the border. Which pot stocks would win if the U.S. legalized marijuana? While Canadian pot stocks have captured the bulk of investors' attention so far, a different set of stocks could benefit if weed becomes legal at the federal level in the U.S. Dispensary operators including Green Thumb Industries (OTC: GTBIF) and Curaleaf Holdings (OTC: CURLF) -- which own dozens of locations in both recreational and medical states -- could have an edge. | After all, without legal medical marijuana or recreational pot in Canada, cannabis stocks wouldn't exist, and the Canadian marijuana industry would be much smaller if recreational weed was still illegal north of the border. When the general election campaign heats up, keep your eye on the poll numbers. The Motley Fool recommends Constellation Brands. |
37782.0 | 2019-12-31 00:00:00 UTC | The Worst Mistake Aurora Cannabis Investors Can Make Right Now | ACB | https://www.nasdaq.com/articles/the-worst-mistake-aurora-cannabis-investors-can-make-right-now-2019-12-31 | nan | nan | Aurora Cannabis' (NYSE: ACB) stock is down more than 75% in just the past six months. While all pot stocks have been performing poorly, Aurora has still been one of the worst stocks to own during this stretch. Rival Canopy Growth (NYSE: CGC) declined 52% over the same period, which is close to how the Horizons Marijuana Life Sciences ETF performed. It's a troubling time for investors as things continue to go from bad to worse for the cannabis industry.
However, Aurora investors can make one mistake today that could put their portfolios in even more harm's way.
Don't assume the stock has reached bottom
Currently at a $2.1 billion market cap, Aurora still has a relatively high valuation. The reason it still looks expensive is that Aurora remains dependent on the Canadian market, which, according to research company BDS Analytics, might only be worth $5.2 billion in 2024. While Aurora has operations in other parts of the world, those markets will be even smaller pieces of the pie, and they are still in their very early stages. Only two countries have legalized recreational pot thus far: Canada and Uruguay. While there may be greater long-term potential outside of Canada, for now, it remains one of the best legal markets for cannabis today.
There's also no shortage of competition in the Canadian cannabis market, with Canopy Growth, HEXO, and Aphria among the bigger names in the industry right now. More companies could exist by 2024, making it even more difficult for Aurora to dominate the market. And that's what it would have to do in order to justify being worth about 40% of the market four years from now.
Image Source: Getty Images.
That's why the possibility that Aurora will continue falling in value is a very real one. Although the stock lost more than half of its value in 2019, that doesn't mean that it's become a good buy or that it's only a matter of time before things turn around. That kind of thinking could lead to investors incurring even greater losses as the stock continues to sink in value.
Why further decline could be around the corner
Investors should not forget Aurora missed its own sales estimates in Q4 2019. A big earnings miss can always send a stock down even lower, and there's little reason to believe that Aurora will turn things around anytime soon. The company burned through 218 million Canadian dollars from its operations over the past 12 months, so it could have a pressing need to issue more shares to keep the lights on. As of Sept. 30, Aurora had just CA$153 million in cash and cash equivalents.
If Aurora issues more shares, its stock price will plummet even further. The danger is that the more it stock falls, the more shares will need to be issued to raise the same level of cash it would have needed prior to the decline. That can put the stock into a dangerous spiral.
What should investors do?
Investors should consider selling their shares to salvage what they have today. It's not an easy decision since it locks in your losses, but if conditions improve and Aurora starts producing better, more consistent results, you can always buy back in at a later point. There's no guarantee that the stock will turn around from where it is today, and that's why it's important to consider the risks of holding on to shares of Aurora.
While the temptation might be to buy more shares of the company to average down your costs, it's a dangerous move that could leave you even more exposed to a crashing stock price. In a situation like this, investors are better off taking the advice of billionaire investor Warren Buffett: "The most important thing to do if you find yourself in a hole is to stop digging."
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) stock is down more than 75% in just the past six months. Rival Canopy Growth (NYSE: CGC) declined 52% over the same period, which is close to how the Horizons Marijuana Life Sciences ETF performed. It's not an easy decision since it locks in your losses, but if conditions improve and Aurora starts producing better, more consistent results, you can always buy back in at a later point. | Aurora Cannabis' (NYSE: ACB) stock is down more than 75% in just the past six months. However, Aurora investors can make one mistake today that could put their portfolios in even more harm's way. There's also no shortage of competition in the Canadian cannabis market, with Canopy Growth, HEXO, and Aphria among the bigger names in the industry right now. | Aurora Cannabis' (NYSE: ACB) stock is down more than 75% in just the past six months. While all pot stocks have been performing poorly, Aurora has still been one of the worst stocks to own during this stretch. If Aurora issues more shares, its stock price will plummet even further. | Aurora Cannabis' (NYSE: ACB) stock is down more than 75% in just the past six months. It's a troubling time for investors as things continue to go from bad to worse for the cannabis industry. The reason it still looks expensive is that Aurora remains dependent on the Canadian market, which, according to research company BDS Analytics, might only be worth $5.2 billion in 2024. |
37783.0 | 2019-12-30 00:00:00 UTC | Short Sellers Made $791 Million in 2019 by Betting Against These 4 Pot Stocks | ACB | https://www.nasdaq.com/articles/short-sellers-made-%24791-million-in-2019-by-betting-against-these-4-pot-stocks-2019-12-30 | nan | nan | After years of big gains, 2019 was supposed to be the year that marijuana stocks put everything together and proved to Wall Street that they deserved premium valuations. Canada has commenced recreational weed sales in Oct. 2018, derivative pot products would soon follow, and state-level legalization momentum in the U.S. looked strong.
Unfortunately, it wasn't meant to be for pot stocks. Following an impressive first-quarter run that saw more than a dozen pot stocks gallop higher by at least 70%, the declines since the end of March have been unrelenting. In fact, the only folks that seemed to do well in the marijuana industry in 2019 were those who bet against pot stocks (i.e., short sellers).
According to predictive financial analytics firm S3 Partners, short exposure to cannabis stocks rose by $843 million in 2019, a 35% year-on-year increase, with short sellers logging $993 million in year-to-date gains, through mid-December. Mind you, these gains actually topped $1.1 billion as of the end of November, but we've seen a modest bounce back in a small handful of pot stocks this month.
Maybe what's most noteworthy about this short-selling is that the bulk of the gains -- $791 million to be exact -- have come from betting against only four pot stocks.
Image source: Getty Images.
1. Aurora Cannabis: $265 million in year-to-date short-selling profit
Aurora Cannabis (NYSE: ACB) is potentially a surprising name to see at the top of the list considering that it's probably the most popular pot stock on the planet. However, it has shed 80% of its share price since mid-March, so there's been plenty of opportunity for pessimists to thrive.
Very little has ultimately gone right for Aurora in 2019. Despite being the projected leading producer of cannabis, and having a broader international presence than any other cannabis stock, none of this has really mattered due to persistent supply issues in Canada. Ontario's inability to license dispensaries has been a particularly hard-to-swallow miscue, which led Aurora to announce construction halts at its Aurora Sun facility in Alberta and Aurora Nordic 2 campus in Denmark in November. While these halts are also designed to reduce Aurora's expenditures, they'll wind up halving the company's peak run-rate output in 2020.
Aurora Cannabis has also done short-sellers plenty of favors by utilizing its common stock as capital. Having completed more than a dozen acquisitions since Aug. 2016, the company has financed practically all of them by using its common stock as collateral. As a result, Aurora's share count has skyrocketed from 16 million to around 1.1 billion in just over five years. This consistent dilution is a big reason Aurora's share price continues to decline.
It also can't be overlooked that these acquisitions have led to the recognition of $3.17 billion Canadian in goodwill on its balance sheet. This works out to 57% of the company's total assets, or 69% if you want to also factor in intangible assets. This perilously high figure implies a good likelihood of a future writedown. Suffice it to say that short sellers have read the tea leaves to a winning trade.
Image source: Getty Images.
2. Cronos Group: $217 million
Despite sporting one of the most robust cash piles in the entire industry, it wasn't enough to keep short sellers away from Cronos Group (NASDAQ: CRON) in 2019. Pessimists have banked $217 million in year-to-date profit from Cronos, and there's still a little trading left to go this year.
As noted, Cronos Group does have a perceived-to-be lucrative partnership with tobacco giant Altria Group. In March, Altria paid $1.8 billion for a 45% stake in Cronos, giving it a means to potentially expand beyond tobacco sales in the United States. Meanwhile, the $1.8 billion Cronos received was viewed as downside buffer for the stock, as well as much needed capital to expand internationally.
Unfortunately for Cronos, it's been contending with a multitude of problems. For one, supply issues in Canada have constrained the company's ability to get its product in front of consumers. Secondly, Health Canada delayed the launch of cannabis derivatives until mid-December. The expectation going into 2019 was that high-margin alternatives would be on dispensary shelves by no later than October. Third and finally, a vape-health scare in the U.S. could threaten near-term vape sales in Canada.
What's more, it's not as if Cronos Group has exactly impressed in the production department. The company's net sales and production have significantly lagged its peers, and if a number of one-time benefits are removed from the equation, Cronos continues to lose money on an operating basis. Pessimists appear to have a firm hold of Cronos for the time being.
Image source: Getty Images.
3. Tilray: $174 million
Talk about coming full circle. After listing its stock at $17 for its July 2018 initial public offering, Tilray (NASDAQ: TLRY) would see its stock ascend to $300 on an intraday basis just two months later, in Sept. 2018. Now, in Dec. 2019, Tilray finds itself back at $17.
One the biggest issues with Tilray has been the perception that management doesn't have a concrete plan. In March, CEO Brendan Kennedy announced plans to de-emphasize investments in Canada in favor of putting that money to work in the U.S. and Europe. Even with Canada's supply issues, it was an odd decision to make considering the political uncertainty tied to the U.S. pot industry, and the equally slow uptake of weed sales in Europe, at least in the early going.
Furthermore, Tilray's decision to build up the necessary infrastructure to be successful in overseas markets has pushed any chance of profitability out until 2021 or 2022. The company's ongoing losses, coupled with its aggressive expansion, have shrunk its cash pile from $517.6 million (this includes cash, cash equivalents, and short-term investments) to begin the year to just $122.4 million by the end of September.
As the icing on the cake, Tilray's downstream merger with private equity firm Privateer Holdings hasn't reduced concerns about insiders exiting their positions. Even though this merger will lead to Privateer's 75 million shares being disposed of in an orderly manner, this is still expected to weigh on Tilray's already depressed stock.
Image source: Getty Images.
4. Canopy Growth: $135 million
Last, but not least, Canopy Growth (NYSE: CGC), the largest marijuana stock in the world by market cap, wound up generating $135 million in year-to-date gains for short sellers. Since hitting its yearly high in late April, shares of Canopy have fallen by 62%.
Pretty much everything that could go wrong has gone wrong for Canopy Growth. It's facing the same supply issues that have adversely impacted the entire industry, and hasn't been generating much revenue from its international operations. But the most damning factor of all has been Canopy's monstrous losses, which have been fueled by exorbitant share-based compensation.
Prior to being fired in early July, now-former co-CEO Bruce Linton believed that giving employees long-term-vesting stock was the smart way to improve loyalty and motivate workers. In doing so, Linton ballooned the company's share-based compensation, which is recorded as an expense on the company's income statement. In the most recent quarter, Canopy's net sales actually came in lower than its share-based compensation.
Additionally, there are more questions than can be counted on two hands when it comes to the company's future. It has CA$1.91 billion in goodwill, which looks like a writedown waiting to happen, and a new CEO it set to take over come January. Who knows what direction the company will head following the departure of its longtime leaders, Bruce Linton and Mark Zekulin. Short sellers appear to be successfully riding this uncertainty to big gains.
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: $265 million in year-to-date short-selling profit Aurora Cannabis (NYSE: ACB) is potentially a surprising name to see at the top of the list considering that it's probably the most popular pot stock on the planet. The company's net sales and production have significantly lagged its peers, and if a number of one-time benefits are removed from the equation, Cronos continues to lose money on an operating basis. Even with Canada's supply issues, it was an odd decision to make considering the political uncertainty tied to the U.S. pot industry, and the equally slow uptake of weed sales in Europe, at least in the early going. | Aurora Cannabis: $265 million in year-to-date short-selling profit Aurora Cannabis (NYSE: ACB) is potentially a surprising name to see at the top of the list considering that it's probably the most popular pot stock on the planet. Cronos Group: $217 million Despite sporting one of the most robust cash piles in the entire industry, it wasn't enough to keep short sellers away from Cronos Group (NASDAQ: CRON) in 2019. As the icing on the cake, Tilray's downstream merger with private equity firm Privateer Holdings hasn't reduced concerns about insiders exiting their positions. | Aurora Cannabis: $265 million in year-to-date short-selling profit Aurora Cannabis (NYSE: ACB) is potentially a surprising name to see at the top of the list considering that it's probably the most popular pot stock on the planet. According to predictive financial analytics firm S3 Partners, short exposure to cannabis stocks rose by $843 million in 2019, a 35% year-on-year increase, with short sellers logging $993 million in year-to-date gains, through mid-December. Canopy Growth: $135 million Last, but not least, Canopy Growth (NYSE: CGC), the largest marijuana stock in the world by market cap, wound up generating $135 million in year-to-date gains for short sellers. | Aurora Cannabis: $265 million in year-to-date short-selling profit Aurora Cannabis (NYSE: ACB) is potentially a surprising name to see at the top of the list considering that it's probably the most popular pot stock on the planet. As a result, Aurora's share count has skyrocketed from 16 million to around 1.1 billion in just over five years. Cronos Group: $217 million Despite sporting one of the most robust cash piles in the entire industry, it wasn't enough to keep short sellers away from Cronos Group (NASDAQ: CRON) in 2019. |
37784.0 | 2019-12-30 00:00:00 UTC | Here’s Why You Should Pay More, Not Less for Aphria Stock | ACB | https://www.nasdaq.com/articles/heres-why-you-should-pay-more-not-less-for-aphria-stock-2019-12-30 | nan | nan | With 2019âÂÂs smoking nearly in the rear-view mirror, could 2020 be a year for investors to grow the color of money in Aphria (NYSE:) stock? LetâÂÂs see where APHA is off and on the price chart. Then I will offer a stronger, risk-adjusted determination on how to position in shares.
Source: Shutterstock
Any investor with even a passing interest in the stock market knows itâÂÂs been a tough year for cannabis stocks. Canadian-based producers from Tilray (NASDAQ:) to Aurora Cannabis (NYSE:) or Cronos (NASDAQ:) and even the industryâÂÂs largest, Canopy Growth (NYSE:), all saw punishing stock declines in 2019. And Aphria stock wasnâÂÂt an exception either.
By and large the pressure in cannabis stocks this year hasnâÂÂt been without merit. Investor optimism so rampant in 2017 and 2018 ultimately caved to a reality with ever-growing risks. From larger-than-forecast losses, squeezed margins, supply gluts, slow-to-open distribution channels and regulatory challenges around every corner, there were ample reasons for Wall Street to turn more uniformly skittish.
Cannabis 2.0
Many of these publicly listed cannabis producers are now banking on the recent legalization of edibles, vaporizers and infused beverage products in Canada to usher in a happier 2020. ItâÂÂs been coined . It just might work, too. But Aphria is betting smartly on another industry angle thatâÂÂs already bearing some fruit for its shareholders.
APHAâÂÂs focus on the sale of medical-grade THC resulted in the company turning a profit in its most recent quarter. ItâÂÂs a far cry from its peers who uniformly announced wider-than-forecast losses and reduced outlooks. WhatâÂÂs more, the quarter for APHA stock wasnâÂÂt a one-off event.
Aphria has produced profits in four of its last five quarters. Additionally, Aphria stock has been careful to not move too fast during 2019âÂÂs downturn. This should mean if the legal environment improves in 2020, an already profitable APHA stock which also boasts virtually no debt and money in the bank will be in to further grow a successful business.
Aphria Stock Monthly Chart
Source: Chart by TradingView
For contrarian-minded investors, 2019âÂÂs bear market in Aphria stock appears to have completed this month. On the provided monthly view we can observe APHA shares confirmed a double-bottom pattern after this monthâÂÂs price action traded above the high price of NovemberâÂÂs hammer candlestick. By itself, the potential low is only somewhat interesting. What makes the bottom more compelling are three additional supports.
First, the pattern has completed around the lifetime 76% retracement level with both bottoming candles piercing the Fibonacci support. Second, this bottom lines up with a two-step or mirror move pattern. This formation completes once leg CD matches the size of leg AB. Lastly, APHA stockâÂÂs stochastics are on the cusp of a bullish crossover at oversold levels.
Bottom Line on APHA
So, what now? My recommendation is to put Aphria stock on the buy list as a second attempt purchase. IâÂÂd look to buy APHA if shares can demonstrate a second round of strength and trade back above the November high of $5.41 without breaking the hammer low.
A second attempt entry often yields good results as many investors throw in the towel if the initial signal fails to deliver immediate gratification. In this instance, the purchase would also have the likely benefit of a stochastics crossover backing the buy decision.
If Aphria stock does result in a position, IâÂÂd suggest a stop-loss below $4.74. In my estimation thatâÂÂs sufficient leeway to avoid potential larger losses. And if thereâÂÂs another whiff of Cannabis 2.0 on the APHA price chart, taking initial profits between $7.00-$7.50 has smart money written all over it.
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. | From larger-than-forecast losses, squeezed margins, supply gluts, slow-to-open distribution channels and regulatory challenges around every corner, there were ample reasons for Wall Street to turn more uniformly skittish. This should mean if the legal environment improves in 2020, an already profitable APHA stock which also boasts virtually no debt and money in the bank will be in to further grow a successful business. A second attempt entry often yields good results as many investors throw in the towel if the initial signal fails to deliver immediate gratification. | Aphria Stock Monthly Chart Source: Chart by TradingView For contrarian-minded investors, 2019âÂÂs bear market in Aphria stock appears to have completed this month. On the provided monthly view we can observe APHA shares confirmed a double-bottom pattern after this monthâÂÂs price action traded above the high price of NovemberâÂÂs hammer candlestick. And if thereâÂÂs another whiff of Cannabis 2.0 on the APHA price chart, taking initial profits between $7.00-$7.50 has smart money written all over it. | With 2019âÂÂs smoking nearly in the rear-view mirror, could 2020 be a year for investors to grow the color of money in Aphria (NYSE:) stock? Source: Shutterstock Any investor with even a passing interest in the stock market knows itâÂÂs been a tough year for cannabis stocks. Aphria Stock Monthly Chart Source: Chart by TradingView For contrarian-minded investors, 2019âÂÂs bear market in Aphria stock appears to have completed this month. | Aphria has produced profits in four of its last five quarters. Aphria Stock Monthly Chart Source: Chart by TradingView For contrarian-minded investors, 2019âÂÂs bear market in Aphria stock appears to have completed this month. If Aphria stock does result in a position, IâÂÂd suggest a stop-loss below $4.74. |
37785.0 | 2019-12-30 00:00:00 UTC | Better Buy: Cronos vs. Tilray | ACB | https://www.nasdaq.com/articles/better-buy%3A-cronos-vs.-tilray-2019-12-30 | nan | nan | A new year is around the corner for the cannabis industry, and that can mean a new start for two troubled stocks: Tilray (NASDAQ: TLRY) and Cronos Group (NASDAQ: CRON). Like much of the industry, both have struggled this past year and both are now at lower valuations. And with the launch of the "Cannabis 2.0" market in Canada sure to give both companies a boost in 2020, it's a good time for investors to take a close look at these two stocks to see which is the better buy going forward.
Does having a big partner give Cronos a big advantage?
Having tobacco giant Altria (NYSE: MO) in Cronos' back pocket ensures that running short on cash and resources shouldn't be an issue for the pot stock. Altria made a large $1.8 billion investment into Cronos a year ago, which gives it lots of incentive to ensure things go well for the cannabis producer. Rising net losses and a lack of cash flow have been problems in the cannabis industry this year, and that's why the partnership with Altria gives the company an immediate advantage.
With 1.5 billion Canadian dollars in cash on its books as of September 30, Cronos isn't in any imminent danger of that being a problem just yet. Cronos' cash burn over the past nine months has totaled CA$102 million, but it's been the company's investing activities of more than CA$906 million that have been draining the well. Having access to cash can allow Cronos to take advantage of acquisitions or growth opportunities as they come up.
Yet the cannabis company may need to find something to invest in or acquire to inject a lot more growth into its sales. Over the past three quarters, Cronos has generated net revenue of just CA$29 million, and it's going to be difficult to convince investors that Cronos is a formidable cannabis stock to invest in if those numbers don't get a lot higher. The company is lagging key rivals very badly. In just their most recent quarters alone, Aurora Cannabis and Canopy Growth have reported net revenue of CA$75 million and CA$77 million , respectively. Vaping was one area where Cronos was expecting to see a lot of growth, but given the rising health concerns tied to vape products this year, there are questions about how strong sales will be in Canada in light of those issues.
Image Source: Getty Images.
Diversification could make Tilray a safer stock heading into 2020
Tilray did not impress investors with its most recent quarter with its loss in Q3 of $36 million, which was nearly double last year's loss. However, investors shouldn't lose hope on the stock just yet. One reason that the stock could be a great buy: its diversification. Vaping-related health risks underscore the danger of a stock having too much exposure to just one segment of the market.
In Tilray's case, the company has many different segments of its business that it can rely on for growth. Of the $120 million in revenue that the company has generated during the first three quarters of 2019, just under one-third of that (32%) came from the adult-use market, with sales in that segment totaling $39 million. Tilray's hemp sales of $41 million have made up more of its total revenue, and medical pot sales in both domestic and international markets have combined for $40 million as well.
Tilray's sales numbers could get a lot stronger next year. Back in February, the company announced it was acquiring Manitoba Harvest, which owns the Hemp Hearts brand, for CA$419 million. The acquisition gives Tilray a terrific opportunity to accelerate its expansion into the hemp-based cannabidiol (CBD) market in the U.S. Meanwhile, its research partnership with Anheuser-Busch InBev will help drive opportunities in the cannabis-infused beverages market in Canada, which is now open for business. With so many ways to grow, Tilray could be due for a big year in 2020.
Why Tilray is the better buy today
Cronos having a big partner to lean on is advantageous, but it's not enough to make up for the challenges the company is facing today. Not only is the vaping market a big question mark for the company, but its sales are just not strong enough. Currently, Cronos trades at around 90 times its sales. In contrast, Tilray trades at much more modest 13 times sales. And with more diversification and some attractive growth opportunities ahead of it, Tilray is the better marijuana stock to invest in 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.
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 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. | Having tobacco giant Altria (NYSE: MO) in Cronos' back pocket ensures that running short on cash and resources shouldn't be an issue for the pot stock. Altria made a large $1.8 billion investment into Cronos a year ago, which gives it lots of incentive to ensure things go well for the cannabis producer. Rising net losses and a lack of cash flow have been problems in the cannabis industry this year, and that's why the partnership with Altria gives the company an immediate advantage. | Does having a big partner give Cronos a big advantage? Over the past three quarters, Cronos has generated net revenue of just CA$29 million, and it's going to be difficult to convince investors that Cronos is a formidable cannabis stock to invest in if those numbers don't get a lot higher. In just their most recent quarters alone, Aurora Cannabis and Canopy Growth have reported net revenue of CA$75 million and CA$77 million , respectively. | Cronos' cash burn over the past nine months has totaled CA$102 million, but it's been the company's investing activities of more than CA$906 million that have been draining the well. Over the past three quarters, Cronos has generated net revenue of just CA$29 million, and it's going to be difficult to convince investors that Cronos is a formidable cannabis stock to invest in if those numbers don't get a lot higher. Diversification could make Tilray a safer stock heading into 2020 Tilray did not impress investors with its most recent quarter with its loss in Q3 of $36 million, which was nearly double last year's loss. | Tilray's hemp sales of $41 million have made up more of its total revenue, and medical pot sales in both domestic and international markets have combined for $40 million as well. Tilray's sales numbers could get a lot stronger next year. And with more diversification and some attractive growth opportunities ahead of it, Tilray is the better marijuana stock to invest in today. |
37786.0 | 2019-12-29 00:00:00 UTC | Weekly Cannabis Stock News: Why HEXO's New Share Issue Got the Investor Stink Eye | ACB | https://www.nasdaq.com/articles/weekly-cannabis-stock-news%3A-why-hexos-new-share-issue-got-the-investor-stink-eye-2019-12 | nan | nan | Congratulations in advance, marijuana stock investors, for surviving 2019. It was an indisputably awful year for publicly traded pot companies. All were squeezed on many fronts in a business that continues to endure acute growing pains.
There wasn't much disastrous news in the final full week of the year, thankfully. Still, there were a few happenings of note to report, so let's jump right into it.
Image source: Getty Images.
HEXO's latest move -- investor gift, or lump of coal?
HEXO (NYSE: HEXO) ticked one item off its holiday wish list this year -- millions of dollars in fresh capital. This didn't necessarily fill its shareholders with cheer, though.
This present came a day after Christmas, with the company announcing it reached agreement with institutional investors for $25 million in new proceeds, to be sold in a direct offering. For their money, the investors are receiving just under 15 million shares of HEXO common stock, plus warrants for almost 7.5 million more.
The company said it'll use the dosh for that "general corporate purposes" category every equity-issuing company seems to prioritize, plus research and development activities.
This is an interesting contrast to the weed industry financing deal that came a few days before HEXO's announcement -- Curaleaf's (OTC: CURLF) four-year, $275 million loan from a syndicate of lenders. Curaleaf took pains to point out that, unlike equity financing deals, said loan will not be dilutive to existing shareholders.
This is a major concern in the cannabis sector, which is generally loss-making yet still hungry for expansion and scale -- the key reason marijuana companies always seem to be scratching around for new funding.
But no one likes when the pool of a stock investment widens; HEXO's new deal would dilute its outstanding stock by around 9% if all those warrants were exercised. Oof. No wonder its stock took a 20%-plus hit on the day the deal was announced.
Neither HEXO's nor Curaleaf's latest round of financing is particularly advantageous. The former's will not only be dilutive, but it also suggests the company had little choice but to add an inducement like warrants to secure investors for this turn at the wheel. As for Curaleaf, its new facility bears a hefty nine-figure debt burden that will carry a high interest rate of 13%.
Still, in the current environment, any infusion of new capital is welcome. Both companies will certainly find plenty of uses for the money; here's to hoping they spend wisely and carefully.
Aurora does the derivative dance
Cannabis 2.0 is upon us -- well, if you live in Canada, anyway. This new phase of legal recreational use in our northern neighbor sanctions the sale and consumption of derivatives such as extracts, weed-laced drinks (as long as they don't also contain intoxicants like caffeine or nicotine), vapes, and candies.
Cannabis 2.0 officially kicked off in October, but since derivatives makers were required to give the authorities 60 days' notice before marketing their tasty new goods, products are only now being shipped.
Aurora Cannabis (NYSE: ACB) fired off one of the first salvos in what promises to be a colorful and eventful scrap over this market segment. The company said it made deliveries to 10 provincial authorities throughout the country, in a first step at getting its derivatives to market.
No one's going to see Aurora's weed gummies or pot chocolate in 2019, though. Its Cannabis 2.0 offerings won't make it on to dispensary shelves until early in the new year, the company said.
Regardless, this gives marijuana stock investors in general something to look forward to. Any company active on the Canadian market is charging to grab a piece of the derivatives segment, and even the laggards should draw some revenue from the new category. Aurora is devoting plenty of capital and resources to this effort, manufacturing such products at three of its facilities throughout the country.
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. | Aurora Cannabis (NYSE: ACB) fired off one of the first salvos in what promises to be a colorful and eventful scrap over this market segment. This is an interesting contrast to the weed industry financing deal that came a few days before HEXO's announcement -- Curaleaf's (OTC: CURLF) four-year, $275 million loan from a syndicate of lenders. This new phase of legal recreational use in our northern neighbor sanctions the sale and consumption of derivatives such as extracts, weed-laced drinks (as long as they don't also contain intoxicants like caffeine or nicotine), vapes, and candies. | Aurora Cannabis (NYSE: ACB) fired off one of the first salvos in what promises to be a colorful and eventful scrap over this market segment. This is an interesting contrast to the weed industry financing deal that came a few days before HEXO's announcement -- Curaleaf's (OTC: CURLF) four-year, $275 million loan from a syndicate of lenders. But no one likes when the pool of a stock investment widens; HEXO's new deal would dilute its outstanding stock by around 9% if all those warrants were exercised. | Aurora Cannabis (NYSE: ACB) fired off one of the first salvos in what promises to be a colorful and eventful scrap over this market segment. This is an interesting contrast to the weed industry financing deal that came a few days before HEXO's announcement -- Curaleaf's (OTC: CURLF) four-year, $275 million loan from a syndicate of lenders. But no one likes when the pool of a stock investment widens; HEXO's new deal would dilute its outstanding stock by around 9% if all those warrants were exercised. | Aurora Cannabis (NYSE: ACB) fired off one of the first salvos in what promises to be a colorful and eventful scrap over this market segment. For their money, the investors are receiving just under 15 million shares of HEXO common stock, plus warrants for almost 7.5 million more. This is an interesting contrast to the weed industry financing deal that came a few days before HEXO's announcement -- Curaleaf's (OTC: CURLF) four-year, $275 million loan from a syndicate of lenders. |
37787.0 | 2019-12-29 00:00:00 UTC | 5 Trends That Will Dominate the Cannabis Landscape in 2020 | ACB | https://www.nasdaq.com/articles/5-trends-that-will-dominate-the-cannabis-landscape-in-2020-2019-12-29 | nan | nan | When the curtain finally closes on 2019, it'll go down as one of the strongest years in a long time for the broader market, and likely the worst year for marijuana stocks.
What had been an incredible buzz for investors throughout the first quarter turned into a major buzzkill for the remaining nine months. Since the end of the first quarter, most cannabis stocks have lost a significant amount of their market cap as questions fly concerning the growth trajectory of the global pot industry moving forward.
But the big question: What does 2020 hold for marijuana stocks?
As we look toward the New Year, I'd suggest that the following five trends are poised to dominate the cannabis landscape.
Image source: Getty Images.
1. The Canadian derivatives launch
It's arguably the event that cannabis stock investors have waited the entire year for -- the launch of marijuana derivatives, such as edibles, infused beverages, vapes, topicals, and concentrates. Originally expected to launch no later than October, Health Canada pushed back the official date for these products to reach dispensary shelves until mid-December. As of right now, derivatives have been on Canadian dispensary shelves for less than two weeks.
However, derivatives are a significantly higher margin product than traditional dried cannabis, making this launch incredibly important for the financial well-being of marijuana stocks. What's more, derivatives are particularly popular with younger adults, thereby providing a bridge for the pot industry to a new generation of cannabis consumers.
Investors will want to play close attention to how well this launch goes in Canada. Supply issues that've impacted dried flower are liable to negatively affect derivatives in the early going, but this shouldn't stop pot stocks from emphasizing these alternative consumption options. This is an especially important time for the likes of Cronos Group (NASDAQ: CRON), which has de-emphasized dried flower production and seemingly bet the farm on derivatives, more specifically vapes. Remember, Cronos Group has Altria Group in its corner as a 45% equity partner, and Altria knows a thing or two about consumer smoking habits. Cronos' future very much depends on a successful derivatives ramp-up in Canada.
Image source: Getty Images.
2. Uncertainty surrounding U.S. CBD
Meanwhile, in the U.S., all eyes are going to be on the cannabidiol (CBD) industry. CBD being the nonpsychoactive cannabinoid found in cannabis and hemp that's best-known for its perceived medical benefits.
On one hand, CBD growth is expected to skyrocket, according to the Brightfield Group. After generating around $600 million in U.S. sales in 2018, CBD revenue should soar to $23.7 billion by 2023. That's a compound annual growth rate of more than 100% for those of you keeping score at home. With the Farm Bill being signed into law one year ago, it allows for the industrial production of hemp, which is rich in CBD, as well as for general retailers to distribute products containing CBD.
On the other hand, the U.S. Food and Drug Administration (FDA) has put its foot down the CBD craze. Recently, the FDA provided a consumer update on CBD that noted it can be harmful, and that a lot is still unknown about the popular cannabinoid. In effect, the FDA, which has been reviewing CBD as a possible additive to food and beverages, cast doubt over whether or not it'll be able to give the substance a green light anytime soon. This pretty much removed the idea of CBD-infused food and beverages hitting shelves in the U.S.
Nevertheless, a company like Charlotte's Web (OTC: CWBHF) can still thrive, albeit with tamer growth projections. Charlotte's Web predominantly sells oils and topicals that aren't on the FDA's radar, and it's more than doubled its retail door presence since the beginning of the year to over 9,000 stores. Nevertheless, as the CBD market share leader, all eyes will be on Charlotte's Web and the FDA for further guidance on CBD in the U.S. in 2020.
Image source: Getty Images.
3. The push toward profitability
With supply issues to our north and high tax rates constraining sales in the U.S., marijuana stock investors have watched the black market thrive in 2019. In turn, this has pushed sales estimates way down for marijuana stocks and moved loss projections way up.
As we enter 2020, profitability will come into focus more than ever. It was already on the radar of investors in 2019, but with financing being somewhat of a concern (a point I'll touch on in a moment), minimizing losses and/or pushing toward positive operating cash flow is going to be the primary objective of most marijuana stocks.
For example, Canopy Growth (NYSE: CGC) has been losing money at an incredible pace over the past year as it attempts to expand domestically and internationally, all while incorporating a host of acquisitions. What's more, Canopy Growth handed out long-term-vesting stock in droves to its employees to keep them loyal, and is now facing the consequence of this decision in the form of high share-based compensation expensing. In fact, share-based compensation outpaced net sales in Canopy's fiscal second-quarter operating results. With David Klein set to take over the company's new CEO, some serious belt-tightening can be expected.
Look for more capital expenditure cuts throughout the industry in 2020.
Image source: Getty Images.
4. Financing concerns
Another trend likely to crop up in 2020 is financing concerns for the cannabis industry.
In the U.S., financing is particularly troublesome given that marijuana is still a Schedule I substance at the federal level. This discourages banks and credit unions from providing basic financial services to pot companies for fear of facing criminal and/or financial repercussions. Aside from selling stock, a number of well-known multistate operators (MSO) have recently turned to sale-leaseback agreements with Innovative Industrial Properties (NYSE: IIPR). Under a sale-leaseback agreement, Innovative Industrial will acquire a cannabis growing and/or processing facility for cash, then lease back the property to the same company for a 10-to-20-year period. This provides MSOs with much needed cash, all while bolstering Innovative Industrial Properties' leading cannabis-focused property portfolio.
However, understand that financing isn't just a U.S. issue. Alberta-based Aurora Cannabis (NYSE: ACB), the most popular pot stock on the planet, has a reasonably small amount of cash on hand relative to the number of domestic and international projects on its plate. Persistent supply issues in Canada have put a major monkey wrench into Aurora's plan, and issuing stock seems to be its only means of financing various parts of its expansion. Unfortunately, Aurora's share count has ballooned from 16 million to close to 1.1 billion since June 2014, and the company's balance sheet isn't looking all that great.
Image source: Getty Images.
5. Shareholder trust
Lastly, expect to a see a lot of focus placed on cannabis stocks building trust with investors in the upcoming year.
For those who may recall, CannTrust (NYSE: CTST) dropped a bombshell on the industry in early July when it was discovered that it had been illegally growing weed in five unlicensed rooms for a period of six months (Oct. 2018 – March 2019). Further investigation found blatant attempts to cover up this illicit grow from regulators, as well as knowledge (via emails) that now-former CEO Peter Aceto knew of this illegal operation. As punishment, CannTrust had its cultivation and sales licenses suspended by Health Canada, and the company wound up destroying $58 million worth of inventory grown from these rooms. CannTrust hopes to regain its licenses in 2020, but serious damage has been done to its reputation.
A number of other marijuana stocks have also caused investors to be leery, including Aphria and Namaste Technologies, both of which saw their CEOs leave after conflicts of interest were disclosed following deals for their respective companies.
Look for the upcoming year to feature a lot more transparency from the marijuana industry in an effort to attract long-term 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 owns shares of CannTrust Holdings Inc. The Motley Fool owns shares of and recommends Charlotte's Web. The Motley Fool recommends CannTrust Holdings Inc, Innovative Industrial Properties, and Namaste Technologies. 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. | Alberta-based Aurora Cannabis (NYSE: ACB), the most popular pot stock on the planet, has a reasonably small amount of cash on hand relative to the number of domestic and international projects on its plate. Since the end of the first quarter, most cannabis stocks have lost a significant amount of their market cap as questions fly concerning the growth trajectory of the global pot industry moving forward. It was already on the radar of investors in 2019, but with financing being somewhat of a concern (a point I'll touch on in a moment), minimizing losses and/or pushing toward positive operating cash flow is going to be the primary objective of most marijuana stocks. | Alberta-based Aurora Cannabis (NYSE: ACB), the most popular pot stock on the planet, has a reasonably small amount of cash on hand relative to the number of domestic and international projects on its plate. However, derivatives are a significantly higher margin product than traditional dried cannabis, making this launch incredibly important for the financial well-being of marijuana stocks. Aside from selling stock, a number of well-known multistate operators (MSO) have recently turned to sale-leaseback agreements with Innovative Industrial Properties (NYSE: IIPR). | Alberta-based Aurora Cannabis (NYSE: ACB), the most popular pot stock on the planet, has a reasonably small amount of cash on hand relative to the number of domestic and international projects on its plate. The Canadian derivatives launch It's arguably the event that cannabis stock investors have waited the entire year for -- the launch of marijuana derivatives, such as edibles, infused beverages, vapes, topicals, and concentrates. However, derivatives are a significantly higher margin product than traditional dried cannabis, making this launch incredibly important for the financial well-being of marijuana stocks. | Alberta-based Aurora Cannabis (NYSE: ACB), the most popular pot stock on the planet, has a reasonably small amount of cash on hand relative to the number of domestic and international projects on its plate. This is an especially important time for the likes of Cronos Group (NASDAQ: CRON), which has de-emphasized dried flower production and seemingly bet the farm on derivatives, more specifically vapes. Nevertheless, as the CBD market share leader, all eyes will be on Charlotte's Web and the FDA for further guidance on CBD in the U.S. in 2020. |
37788.0 | 2019-12-28 00:00:00 UTC | Canada's Year 1 Pot Sales Hit a Surprising Figure, but Still Disappoint | ACB | https://www.nasdaq.com/articles/canadas-year-1-pot-sales-hit-a-surprising-figure-but-still-disappoint-2019-12-28 | nan | nan | There's no denying that marijuana has the potential to be a big-money business. Every year, tens of billions of dollars in sales are being conducted in the black market, which provides plenty of hope that these consumers will steadily be transitioned to legal channels over time.
However, this hope didn't translate into positive results for cannabis stocks in 2019. Despite being the first industrialized country to legalize recreational marijuana in the modern era, Canada is viewed as having dropped the ball, with sales and income statements from pot stocks largely underwhelming.
And yet, the Canadian pot industry still managed to eke out a milestone that seemed almost impossible just a few months prior.
Image source: Getty Images.
Canada's marijuana sales hit an unlikely milestone
Every month, Statistics Canada, the national statistics office for our northerly neighbor, releases retail sales data from two months prior. Since marijuana sales officially commenced on Oct. 17, 2018, licensed cannabis-store sales have been included in each of these reports. And given the tight regulatory nature of marijuana in Canada, the data is believed to be highly accurate.
Last week, Statistics Canada released sales data for the month of October, showing that marijuana sales in licensed dispensaries hit an all-time high of $128.94 million Canadian (about $97.93 million U.S.). But more importantly, it was the last piece of the puzzle needed to roughly determine how much cannabis Canada sold over its trailing first year since adult-use weed sales began on Oct. 17, 2018.
Here's a look at every bit of retail sales data we've received from Health Canada since recreational marijuana sales commenced (all figures in Canadian dollars, with U.S. dollar equivalency in parenthesis):
October (2018): CA$53.68 million ($40.77 million)
November (2018): CA$53.73 million ($40.81 million)
December (2018): CA$57.34 million ($43.55 million)
January: CA$54.88 million ($41.68 million)
February: CA$51.66 million ($39.24 million)
March: CA$60.94 million ($46.28 million)
April: CA$74.58 million ($56.64 million)
May: CA$85.81 million ($65.17 million)
June: CA$91.46 million ($69.46 million)
July: CA$107.36 million ($81.54 million)
August: CA$125.95 million ($95.66 million)
September: CA$122.93 million ($93.97 million)
October: CA$128.94 million ($97.93 million)
Since the very first sale on Oct. 17, 2018 through Oct. 31, 2019, Canada has racked up $1.069 billion ($812.1 million) in aggregate cannabis retail revenue.
Image source: Getty Images.
But you'll note that this estimate factors in all of October 2019's sales, rather than those sales that would have occurred through the 16th (i.e., the end of the first trailing year of adult-use weed sales). If we use an imperfect measure and divide 16 into 31 to account for the percentage of the month we're interested in, and then multiply this percentage into Oct. 2019's total sales, we get CA$66.55 million. Again, this isn't a perfect way of doing things, but it's the easiest method available since Statistics Canada isn't providing a true trailing-12-month breakout.
The point is that once we break out trailing sales data this way, Canadian weed sales ever-so-slightly surpass the CA$1 billion mark over the first 365 days. That's a pretty impressive milestone, all problems considered.
Here's why Canadian pot stocks aren't reaching their potential
Then again, there's no overlooking the fact that Wall Street and investors were expecting so much more than CA$1 billion in first-year sales.
One of the biggest problems for Canadian pot stocks is that the country's most populous province, Ontario, has slow-stepped the rollout of physical dispensaries. Ontario has been using a lottery system to award retail licenses in the province which, as of the one-year anniversary of recreational weed sales, led to a meager 24 stores being open. Do the math, and you'll see that this works out to one open dispensary for every 604,000 people in Ontario. Without a reasonable number of avenues with which to reach consumers, legal product has been bottlenecked in Ontario, while black-market marijuana has blossomed.
For instance, Aurora Cannabis (NYSE: ACB), the projected leader in peak production, somewhat recently announced that it would be halting construction on its flagship Aurora Sun facility in Alberta and its Aurora Nordic 2 grow farm in Denmark. Although this is partly a cost-cutting move designed to reduce cash outlays for Aurora, it's also being made because Ontario doesn't have its act together. Utilizing only 238,000 square feet of growing space at Aurora Sun (a projected 1.62-million-square-foot grow farm), Aurora Cannabis has effectively cut its annual run-rate output by mid-2020 in half. Aurora isn't alone, either, with around 1 million kilos of peak output currently on standby.
Image source: Getty Images.
Another problem for the Canadian pot industry is regulatory agency Health Canada. For example, when the year began, derivatives, such as edibles, vapes, and infused beverages, were expected to hit dispensary shelves by no later than October. However, only the regulations concerning derivatives went into effect by the one-year anniversary of recreational weed sales. Actual derivatives didn't start hitting shelves until about a week-and-a-half ago. This delay has proved costly, considering that derivatives are a much higher-margin product than traditional dried flower.
Furthermore, derivatives aren't simply going to flood the marketplace, given that they're subject to the same supply constraints that have plagued dried flower since Oct. 2018.
To a lesser extent, Health Canada has also been to blame for long wait times to grow, process, and sell marijuana. It entered the year with a licensing backlog north of 800. As a result, some growers have had to wait longer than a year to get the green light to plant or sell cannabis.
Suffice it to say, while sales are moving in the right direction in Canada, the maturation of the industry isn't going to occur overnight. This is a work in progress that's going to take numerous quarters, if not a few years, to get right.
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. | For instance, Aurora Cannabis (NYSE: ACB), the projected leader in peak production, somewhat recently announced that it would be halting construction on its flagship Aurora Sun facility in Alberta and its Aurora Nordic 2 grow farm in Denmark. Every year, tens of billions of dollars in sales are being conducted in the black market, which provides plenty of hope that these consumers will steadily be transitioned to legal channels over time. Despite being the first industrialized country to legalize recreational marijuana in the modern era, Canada is viewed as having dropped the ball, with sales and income statements from pot stocks largely underwhelming. | For instance, Aurora Cannabis (NYSE: ACB), the projected leader in peak production, somewhat recently announced that it would be halting construction on its flagship Aurora Sun facility in Alberta and its Aurora Nordic 2 grow farm in Denmark. Last week, Statistics Canada released sales data for the month of October, showing that marijuana sales in licensed dispensaries hit an all-time high of $128.94 million Canadian (about $97.93 million U.S.). Here's a look at every bit of retail sales data we've received from Health Canada since recreational marijuana sales commenced (all figures in Canadian dollars, with U.S. dollar equivalency in parenthesis): October (2018): CA$53.68 million ($40.77 million) November (2018): CA$53.73 million ($40.81 million) December (2018): CA$57.34 million ($43.55 million) January: CA$54.88 million ($41.68 million) February: CA$51.66 million ($39.24 million) March: CA$60.94 million ($46.28 million) April: CA$74.58 million ($56.64 million) May: CA$85.81 million ($65.17 million) June: CA$91.46 million ($69.46 million) July: CA$107.36 million ($81.54 million) August: CA$125.95 million ($95.66 million) September: CA$122.93 million ($93.97 million) October: CA$128.94 million ($97.93 million) Since the very first sale on Oct. 17, 2018 through Oct. 31, 2019, Canada has racked up $1.069 billion ($812.1 million) in aggregate cannabis retail revenue. | For instance, Aurora Cannabis (NYSE: ACB), the projected leader in peak production, somewhat recently announced that it would be halting construction on its flagship Aurora Sun facility in Alberta and its Aurora Nordic 2 grow farm in Denmark. Canada's marijuana sales hit an unlikely milestone Every month, Statistics Canada, the national statistics office for our northerly neighbor, releases retail sales data from two months prior. Last week, Statistics Canada released sales data for the month of October, showing that marijuana sales in licensed dispensaries hit an all-time high of $128.94 million Canadian (about $97.93 million U.S.). | For instance, Aurora Cannabis (NYSE: ACB), the projected leader in peak production, somewhat recently announced that it would be halting construction on its flagship Aurora Sun facility in Alberta and its Aurora Nordic 2 grow farm in Denmark. Last week, Statistics Canada released sales data for the month of October, showing that marijuana sales in licensed dispensaries hit an all-time high of $128.94 million Canadian (about $97.93 million U.S.). Another problem for the Canadian pot industry is regulatory agency Health Canada. |
37789.0 | 2019-12-27 00:00:00 UTC | Aurora Stock Delivering Profits for Traders | ACB | https://www.nasdaq.com/articles/aurora-stock-delivering-profits-for-traders-2019-12-27 | nan | nan | In early December there was an opportunity brewing in Aurora Cannabis (NYSE:) stock between $2.40 and $2.60 per share. I know this sounds very granular and short-term, but therein lie dozens of such setups per year. Today we make the argument as to why ACB investors should care about the short-term.
It is easy to restate the woeful story of cannabis stocks this year. The Wall Street statistics are horrendous. Aurora stock, for example, is down 83% off its highs. And itâÂÂs not alone. Canopy Growth (NYSE:) is also almost 70% off its highs. Year-to-date Aurora stock is down more than 60%.
Early fundamental investors that are in ACB stock for the long-term have definitely seen their investments get obliterated. ItâÂÂs hard to say if itâÂÂs going to be better in the future as these stocks canâÂÂt yet find a bottom. And even when that happens, the 2018 hay-days may not ever come back.
But since the overall thesis for pot stocks is still viable, I can understand ACB fans wanting to stick it out or bust. Since the level of success from here is not likely to equal the peaks of 2018, by definition, investors who are stuck long from much higher levels need to manage their risk by trading around their positions. There are ways of doing this, but they all involve short-term trading ACB.
Aurora Stock Delivers Short-Term Opportunities
Source: Charts by TradingView
Aurora stock has been a very active trading vehicle. It has a low price ticker so it attracts all account sizes for trading. The intraday moves have been impressive in relative terms, so there are daily areas of opportunities for those who can trade fast.
However, Aurora investors are emotional about their stock so they tend to only want to trade it from one side. This is OK as long as they know where to place the stops if the price action goes against their short-term assumptions.
In this case the closest upside potential for ACB stock is if the bulls can get to $2.10 per share. Then they could invite buyers to fill the small gap above. More importantly, they would breakout of a descending lower-high trend line that has persisted for weeks. The fans of Aurora are itching to chase any good news in the charts. Conversely, if ACB cannot hold its recent lows, then it could retests the lows of June 2017.
There might be some good news soon. This terrible 2019 correction brought Aurora cannabis stock back to its levels from 2016. These in theory should provide some support because it has fallen back into a solid old base of consolidation. Those who traded it back then will want to trade it again.
A More Cautious Approach to Trading ACB Stock
It is important to note that trading a low-dollar stock like ACB gives the impression that the dollar risk is small. On the contrary, this is a fast-moving stock and in percentage terms it can cause just as much damage as higher-priced tickers. So just because itâÂÂs a $2 stock doesnâÂÂt mean traders canâÂÂt lose a lot of money.
There is a definite need to use specific stop losses. Ideally these are set at the start of a trade along with specific exit targets.
Options can also help minimize the risk from here. The alternative to buying the actual Aurora cannabis stock is to buy call options. This way investors can limit the potential damage by betting a set smaller amount and letting time be the factor. For example, instead of buying shares for $2, a trader could buy January 2021 $3 call for 45 cents per contract.
Each call option contract represents 100 shares of Aurora stock. However, time becomes the enemy when owning options because they lose value with time, especially if price stalls or goes the wrong way.
Nicolas Chahine is the managing director ofÃÂ . As of this writing, he did not hold a position in any of the aforementioned securities. Join his live chat room for freeÃÂ here.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | But since the overall thesis for pot stocks is still viable, I can understand ACB fans wanting to stick it out or bust. Today we make the argument as to why ACB investors should care about the short-term. Early fundamental investors that are in ACB stock for the long-term have definitely seen their investments get obliterated. | Today we make the argument as to why ACB investors should care about the short-term. Early fundamental investors that are in ACB stock for the long-term have definitely seen their investments get obliterated. But since the overall thesis for pot stocks is still viable, I can understand ACB fans wanting to stick it out or bust. | A More Cautious Approach to Trading ACB Stock It is important to note that trading a low-dollar stock like ACB gives the impression that the dollar risk is small. Today we make the argument as to why ACB investors should care about the short-term. Early fundamental investors that are in ACB stock for the long-term have definitely seen their investments get obliterated. | A More Cautious Approach to Trading ACB Stock It is important to note that trading a low-dollar stock like ACB gives the impression that the dollar risk is small. Today we make the argument as to why ACB investors should care about the short-term. Early fundamental investors that are in ACB stock for the long-term have definitely seen their investments get obliterated. |
37790.0 | 2019-12-27 00:00:00 UTC | U.S. Cannabis Stocks Will Make Cheap, Smart Buys in 2020 | ACB | https://www.nasdaq.com/articles/u.s.-cannabis-stocks-will-make-cheap-smart-buys-in-2020-2019-12-27 | nan | nan | Do you have big questions about what to expect in the new year? Or are you a loyalàTwitterà(NYSE:) follower of Matt McCall? Either way, heâÂÂs got you covered in this episode of âÂÂMoneyline.â HeâÂÂs here to wish you âÂÂhappy holidaysâ and answer the top questions about 2020âÂÂs major themes.
Source: InvestorPlace
Cannabis stocks have been a hot topic in 2019. After soaring to reach new highs in the beginning of the year, the big names have all tanked.àAurora Cannabis (NYSE:),àCanopy Growthà(NYSE:) and Cronos (NASDAQ:) are all sporting year-to-date losses of more than 30%. Many investors fear that 2020 will bring trouble for companies in âÂÂcash crunches.â But McCall isnâÂÂt too worried about what he sees as the solid names in the business.
For investors looking to get in at good valuations, heâÂÂs recommending U.S. pot stocks that trade at much lower price-to-sales ratios than their Canadian peers. This next year might just bring U.S. legalization at the federal level and send cannabis stocks blazing.
Want to learn more about other high-risk, high-reward investments? McCall next dives into bitcoin and other cryptocurrency plays. After looking at historical trends, he concludes that 2020 will be a big year for bitcoin. It could hit $50,000 or even $100,000 in the next few years. But perhaps more exciting are alternative coins. These alt-coins are ready for huge growth, but be careful. DonâÂÂt put all your retirement money in these cryptocurrencies.
McCallâÂÂs Podcast
McCallâÂÂs listeners have him hopping across the world for 2020âÂÂs next major themes. After cannabis and crypto, itâÂÂs time for Chinese stocks. Boy, thatâÂÂs an alliterative mouthful. You might remember that he recently traveled to China to do research, and heâÂÂs still confident about the upside potential there. HeâÂÂs bullish on a peer-to-peer lending company and some biotech names.
It wasnâÂÂt until 2018 that Hong KongâÂÂs stock exchange allowed pre-revenue biotech companies to list. But now, it seems likely that a few of these names will parallel the likes ofàAmgenà(NASDAQ:). ItâÂÂs likely McCall will be making a return trip to China in 2020, so keep your eyes peeled for more updates. With a trade deal resolution hopefully right around the corner, thereâÂÂs a lot to like in terms of Chinese stocks.
For more on McCallâÂÂs 2020 predictions, solar stocks and wind stocks, tune into âÂÂMoneyline.â YouâÂÂll get an update about his holiday travel plans and more on an upcoming IPO product, too.
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. . Matt does not directly own the aforementioned securities.ÃÂ
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | Many investors fear that 2020 will bring trouble for companies in âÂÂcash crunches.â But McCall isnâÂÂt too worried about what he sees as the solid names in the business. For investors looking to get in at good valuations, heâÂÂs recommending U.S. pot stocks that trade at much lower price-to-sales ratios than their Canadian peers. ItâÂÂs likely McCall will be making a return trip to China in 2020, so keep your eyes peeled for more updates. | Either way, heâÂÂs got you covered in this episode of âÂÂMoneyline.â HeâÂÂs here to wish you âÂÂhappy holidaysâ and answer the top questions about 2020âÂÂs major themes. Source: InvestorPlace Cannabis stocks have been a hot topic in 2019. After soaring to reach new highs in the beginning of the year, the big names have all tanked.àAurora Cannabis (NYSE:),àCanopy Growthà(NYSE:) and Cronos (NASDAQ:) are all sporting year-to-date losses of more than 30%. | After soaring to reach new highs in the beginning of the year, the big names have all tanked.àAurora Cannabis (NYSE:),àCanopy Growthà(NYSE:) and Cronos (NASDAQ:) are all sporting year-to-date losses of more than 30%. This next year might just bring U.S. legalization at the federal level and send cannabis stocks blazing. For more on McCallâÂÂs 2020 predictions, solar stocks and wind stocks, tune into âÂÂMoneyline.â YouâÂÂll get an update about his holiday travel plans and more on an upcoming IPO product, too. | McCall next dives into bitcoin and other cryptocurrency plays. After looking at historical trends, he concludes that 2020 will be a big year for bitcoin. HeâÂÂs bullish on a peer-to-peer lending company and some biotech names. |
37791.0 | 2019-12-27 00:00:00 UTC | Is Aphria the Best Cannabis Stock to Buy? | ACB | https://www.nasdaq.com/articles/is-aphria-the-best-cannabis-stock-to-buy-2019-12-27 | nan | nan | Marijuana stocks keep trying to carve out a bottom, but their efforts have been sketchy.
Source: Shutterstock
After plunging in November, Aphria (NYSE:), Canopy Growth (NYSE:) and others have recovered meaningfully. However, that recovery is starting to wane, leaving many bulls wondering whether more new lows could be on the way.
TheyâÂÂre trying to determine if the sector experienced a dead-cat bounce which will eventually lead to new lows or if marijuana stocks have bottomed but are having trouble rising further amidàinvestorsâ lack of trust and tax-loss selling.
The Overvaluation of Marijuana Stocks
The biggest issue for the cannabis space is overvaluation. However, itâÂÂs not as clear-cut as some bears make it seem. While they may compare cannabis stocks to the dot-com bust, thatâÂÂs not a perfect analogy.
Granted, when Tilray (NASDAQ:) exploded from the $20s to almost $300, there were certainly bubble-like signs in play.
There are other examples of unwarranted gains by cannabis stocks. However, marijuana stocksâ valuations appear huge simply because many of these companies generate very little revenue.
But because the U.S. and countries around the world are deregulating and decriminalizing cannabis for medical and recreational purposes, bulls are betting that cannabisâÂÂàtangible, addressable market will increase considerably in coming years.
That phenomenon has already started, with many companies sporting triple-digit revenue growth rates.
Why Aphria Is a Name to Consider
Many marijuana stocks stumbled into 2019, but quickly found their footing and raced higher. Aphria was one of those names. A year ago, the stock was trading for $4.55. By early February the shares had more than doubled, climbing above $10.
But just like Aurora Cannabis (NYSE:), Canopy Growth, Cronos Group (NASDAQ:) and so many others, Aphria has been under intense pressure since that first-quarter spike. Unlike many of its peers, though, AphriaâÂÂs financials are at least somewhat attractive.
In fiscal 2018, Aphria had sales of 36.9 million CAD. In FY19, the company generated revenue of 237 million CAD. The companyâÂÂs FY20 ended in May, and itâÂÂs been stepping on the gas even more since then. Last quarter, Aphria had revenue of 126.1 million CAD, up 849% year-over-year. Keep in mind, that last quarterâÂÂs sales were more than 50% of FY19âÂÂs total.
Also, unlike many of its peers, Aphria is reporting positive earnings. ItâÂÂs put together two consecutive profitable quarters, and it has had a positive bottom-line result in four of its last five quarters. Granted, its net income of just 16.4 million CAD (7 cents per share) isnâÂÂt blowing the roof off, but itâÂÂs better than what a majority of its peers are doing.
Aphria isnâÂÂt perfect. For instance, itâÂÂs not reporting positive free cash flow yet. However, itâÂÂs got momentum.
Analysts sales of $437 million this year. With a market cap of about $1.25 billion, Aphria shares trade at less than three times this yearâÂÂs average revenue estimate. Further, Aphria has 449 million CAD of cash and equivalents on its balance sheet. In fact, it has enough cash liquidity to easily cover current its liabilities of 122.9 million CAD.
In short, Aphria is slightly profitable, has intense revenue growth and a liquid balance sheet. While the entire industry is under pressure, Aphria stock looks like a reasonable, speculative pick for investors.
Trading APHA Stock
Source: Chart courtesy of StockCharts.com
AphriaâÂÂs chart is a bit sloppy, but thatâÂÂs what you get when youâÂÂre dealing with a $5 stock in a volatile industry.
Aphria is trying to stay above itsÃÂ 50-day moving average, while the 100-day has been a tough nut to crack. If APHA rises above those levels and the $5.50 mark, perhaps Aphria can get some traction.
However, itâÂÂs most important for the stock to stay over $4.50. That was the low from almost a year ago and, except for a temporary (although violent) breakdown in November, this area has been a line in the sand for the bulls. A break below this level puts the $3.76 low back on the table.
So bulls will try to keep Aphria above $4.50, then reclaim the 100-day moving average and $5.50.
Bret Kenwell is the manager and author of and is on Twitter @BretKenwell. As of this writing, he is long APHA.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. | TheyâÂÂre trying to determine if the sector experienced a dead-cat bounce which will eventually lead to new lows or if marijuana stocks have bottomed but are having trouble rising further amidàinvestorsâ lack of trust and tax-loss selling. But because the U.S. and countries around the world are deregulating and decriminalizing cannabis for medical and recreational purposes, bulls are betting that cannabisâÂÂàtangible, addressable market will increase considerably in coming years. But just like Aurora Cannabis (NYSE:), Canopy Growth, Cronos Group (NASDAQ:) and so many others, Aphria has been under intense pressure since that first-quarter spike. | Source: Shutterstock After plunging in November, Aphria (NYSE:), Canopy Growth (NYSE:) and others have recovered meaningfully. In short, Aphria is slightly profitable, has intense revenue growth and a liquid balance sheet. Trading APHA Stock Source: Chart courtesy of StockCharts.com AphriaâÂÂs chart is a bit sloppy, but thatâÂÂs what you get when youâÂÂre dealing with a $5 stock in a volatile industry. | In fiscal 2018, Aphria had sales of 36.9 million CAD. Last quarter, Aphria had revenue of 126.1 million CAD, up 849% year-over-year. Further, Aphria has 449 million CAD of cash and equivalents on its balance sheet. | Marijuana stocks keep trying to carve out a bottom, but their efforts have been sketchy. Granted, its net income of just 16.4 million CAD (7 cents per share) isnâÂÂt blowing the roof off, but itâÂÂs better than what a majority of its peers are doing. With a market cap of about $1.25 billion, Aphria shares trade at less than three times this yearâÂÂs average revenue estimate. |
37792.0 | 2019-12-27 00:00:00 UTC | With so Much Going Right, Aphria Stock Could Have a Breakout 2020 | ACB | https://www.nasdaq.com/articles/with-so-much-going-right-aphria-stock-could-have-a-breakout-2020-2019-12-27 | nan | nan | From a performance standpoint, Aphria (NYSE:) continues to be an outlier in the cannabis space, but Aphria stock is held down by the overall sector.
While peers struggle to drive profits, Aphria already has delivered on that front, posting positive Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) in each of the last two quarters. Guidance for fiscal 2020 (ending May) suggests the company should post positive net income for the full year.
That profitability is in noted contrast to peers like Canopy Growth (NYSE:), for which even EBITDA profitability likely doesnâÂÂt arrive until 2021 at the earliest. And Aphria has moved toward profitability without selling billions of dollars in shares, as both Canopy and Cronos Group (NASDAQ:) have done.
Nor has Aphria leveraged its balance sheet. While the likes of Aurora Cannabis (NYSE:) and Hexo (NYSE:) face significant debt challenges, AphriaâÂÂs cash at the end of the first quarter was nearly equivalent to its total borrowings. The combination of a solid balance sheet and profitability is one simply not found among cannabis stocks right now.
Yet Aphria stock hasnâÂÂt been much of an outlier in terms of trading. Admittedly, relative to its 52-week high, APHA stock has outperformed many other cannabis names. CGC shares, for instance, are down 63% from late April peaks. ACB stock is off 80%. In contrast, Aphria stock has declined âÂÂonlyâ 50%.
Of course, thatâÂÂs obviously still a steep haircut. And AphriaâÂÂs far stronger performance as a business suggests that APHA should have posted much better performance as a stock. With shares seemingly finding a bottom around $5 in recent weeks, itâÂÂs worth considering whether that performance is starting to arrive â and what can send Aphria stock even lower from here.
Is Aphria Stock Really Cheap?
In its first-quarter earnings release in October, Aphria for CAD$650 to CAD$700 million in revenue and Adjusted EBITDA of CAD$88 to CAD$95 million. That release was enough to send Aphria soaring over 24%. Within a month, however, continued pressure on cannabis stocks erased all of those gains, and then some.
After another rally, Aphria (based on its price on the Toronto Stock Exchange) has a market capitalization of CAD$1.655 billion. Add in net debt of roughly CAD$18 million and its enterprise value sits at about CAD$1.67 billion.
Those figures suggest that APHA stock is rather cheap. EV/revenue, even at the low end of guidance, is below 3x. EV/EBITDA, again at the low end, is 19x.
CGC stock trades at over 7x estimated fiscal 2020 revenue. ACB is valued at over 9 times sales. And, again, there isnâÂÂt a cannabis peer with even positive EBITDA in fiscal 2020, barring a huge surprise.
At least based on FY20 numbers, APHA stock far and away is the cheapest stock in the sector. And whatâÂÂs interesting at this point is that Aphria stock really isnâÂÂt that expensive relative to the market as a whole. The S&P 500 has an EV/revenue multiple of 2.5x. EV/EBITDA is near 14x.
To be sure, these metrics alone donâÂÂt guarantee that Aphria is too cheap, or even necessarily cheap. Other cannabis companies may (and likely will) post stronger growth after fiscal 2020, and the market is incorporating that growth to some extent. EV/EBITDA multiples are imperfect, and better used for comparisons than absolute valuation. On a P/E basis, Aphria looks a bit more expensive (though even a ~16x multiple to fiscal 2022 estimates looks rather attractive).
What Goes Wrong for APHA Stock
Still, the broad point holds. Aphria has a reasonable valuation on an absolute basis, and an enormously attractive valuation on a relative basis. Considering the relatively safe balance sheet, that combination would seem to suggest that current trading around $5 makes sense. APHA has stabilized because it is simply âÂÂtoo cheapâÂÂ.
What changes that thesis? The most obvious potential culprit is the companyâÂÂs guidance. Aphria is projecting a significant increase in profitability in 2020. Adjusted EBITDA for fiscal 2019, even with a profitable fourth quarter, was negative $27 million. The Q1 figure was barely $1 million. Aphria needs to turn on the proverbial jets over the next three quarters to match its outlook.
ThatâÂÂs far from guaranteed. As Brad Moon detailed this week, we still donâÂÂt know how the will perform, despite broad-based optimism in the industry. That launch aside, the sectorâÂÂs history adds another concern. Cannabis companies have established an unfortunate track record of overpromising and underdelivering. Some investors no doubt see a similar risk with Aphria.
The other concern centers on valuation multiples. ItâÂÂs possible that cannabis simply isnâÂÂt a good business, particularly on the production side. Margins for growers may well see a âÂÂrace to the bottomâÂÂ. Consumer products, whether flower or derivatives like vapes and oils, will see intense competition, and potential pricing pressure as well.
If the industry doesnâÂÂt grow as bulls hope, and/or margins are much lower than projected, cannabis stocks on the whole arenâÂÂt that attractive. In that scenario, 2019 trading could repeat going forward. Aphria stock probably outperforms the likes of ACB and HEXO â but still declines further as its multiples compress.
The Case for Aphria Stock
From this perspective, however, the broad case for Aphria still holds. As IâÂÂve written before, investors hugely bullish on cannabis probably should look elsewhere. The same balance sheet leverage that has led ACB and HEXO to underperform would have a reverse impact if and when the sector rallies. Canopy Growth likely will have a larger and broader reach.
If an investorâÂÂs thesis is that the 2019 sell-off in cannabis names is wrong â that the market is being short-sighted amid regulatory delays and disappointing early results â APHA stock isnâÂÂt the pick. But if an investor believes that a healthy correction has occurred, thatâÂÂs where Aphria stock gets interesting.
The case here is that the industry isnâÂÂt going to be quite the performer bulls believed when cannabis stocks soared in 2018. But itâÂÂs still a good business. ItâÂÂs a business that can drive enough growth to buy a stock valued only at a modest premium to the mature, low-growth names in the S&P 500.
Of course, those investors also have to trust Aphria management, given the apparent early risks to guidance. With on board after questionable decisions by past executives, thatâÂÂs easier to do.
And so I still believe, as IâÂÂve written before, that APHA stock is the . But that doesnâÂÂt mean itâÂÂs a risk-free trade. Both Aphria and the industry have to deliver for currently stable trading to hold. IâÂÂm personally not quite convinced enough on both points to put money behind Aphria stock. But other investors can, and do, see it differently.
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. | ACB stock is off 80%. ACB is valued at over 9 times sales. Aphria stock probably outperforms the likes of ACB and HEXO â but still declines further as its multiples compress. | ACB stock is off 80%. ACB is valued at over 9 times sales. Aphria stock probably outperforms the likes of ACB and HEXO â but still declines further as its multiples compress. | ACB stock is off 80%. ACB is valued at over 9 times sales. Aphria stock probably outperforms the likes of ACB and HEXO â but still declines further as its multiples compress. | ACB stock is off 80%. ACB is valued at over 9 times sales. Aphria stock probably outperforms the likes of ACB and HEXO â but still declines further as its multiples compress. |
37793.0 | 2019-12-27 00:00:00 UTC | Could Aurora Cannabis Fall Below $1 in 2020? | ACB | https://www.nasdaq.com/articles/could-aurora-cannabis-fall-below-%241-in-2020-2019-12-27 | nan | nan | In just a matter of days, we'll be closing the curtain on 2019, which turned out to be an incredibly good year for the broad-based markets, and an abysmal year for marijuana stock investors.
Everything began well, with cannabis stocks leading the charge throughout the first quarter. But the wheels, and everything else that wasn't welded on, soon fell off the wagon. Persistent supply issues throughout Canada, high tax rates in a number of recreationally legal U.S. states, and a resilient black market have made investing in pot stocks particularly painful in 2019.
For example, the most popular stock on online investing platform Robinhood, Aurora Cannabis (NYSE: ACB), has shed 80% of its value since peaking in mid-March. And note, I don't mean most popular pot stock -- I mean the most-held stock, period, on the entire platform. At just $2 a share, the company probably looks like a bargain to the nearly 10% of Robinhood members who currently own it.
But looks can be deceiving, and while it might sound far-fetched, Aurora Cannabis' stock could fall another 50% in 2020 and potentially dip below $1 a share.
Image source: Getty Images.
Everything looked perfect for Aurora Cannabis...
On paper, at least, Aurora Cannabis looks like it has its ducks in a row. No grower has more peak production capacity, with 15 cultivation facilities capable of probably close to 700,000 kilos per year. These large growing campuses are also capable of yielding more per square foot than the industry average, which, when coupled with its size, would be expected to push per-gram production costs well below the industry average.
Aurora also has a clear lead when it comes to international expansion efforts. Including Canada, it has a presence -- be it in cultivation, research, export, or a partnership -- in 25 countries. Only two of its peers are even at or above one dozen countries. The thinking had been that if and when Canadian dried cannabis flower became oversupplied, Aurora would simply lean on these foreign sales channels, where higher-margin medical marijuana is legal, to offload its excess supply.
This is also a company that brought in famed billionaire activist investor Nelson Peltz as a strategic adviser in mid-March. It was no secret that Aurora was looking for an equity investment and/or brand-name partnership with a company in the food or beverages industry to help with the forthcoming launch of derivatives (i.e., edibles, infused beverages, vapes, topicals, tinctures, and concentrates). Peltz's background as an activist investor happens to focus on the food and beverage industry, making him the perfect person to bridge an eventual partnership or equity investment.
But estimates and projections don't always lead to concrete results, as we've witnessed with Aurora Cannabis.
Image source: Getty Images.
...Then it all fell apart
As you're likely well aware, one of the main issues that's hurt all Canadian growers is the inability to get product in front of consumers. The government agency Health Canada is partly to blame for delaying the rollout of high-margin derivatives by two months, as well as contending with an enormous backlog of licensing applications, thereby leading to long wait times to plant and sell cannabis. But a lot of the finger-pointing is directed at Ontario, which had a meager 24 dispensaries open on the one-year anniversary of the legalization of recreational weed sales. A change in Ontario's dispensary licensing policy should help, but there's no immediate relief for the most-populous province's supply concerns.
The problem is that there are also company-specific issues beyond just getting its products in front of the consumer. For example, Aurora Cannabis' aggressive expansion tactics, which included more than a dozen acquisitions over the course of three years, are hurting shareholders two ways.
First, the company financed practically all of its deals, as well as its ongoing operations, by issuing common stock or, in rarer instances, convertible debentures. By using its stock as capital, Aurora has ballooned its outstanding share count from 16 million to close to 1.1 billion in a little over five years. No matter what sort of assets are added, it's virtually impossible for shareholders to contend with this level of dilution without being hammered.
Second, Aurora's aggressive acquisition strategy looks to have led to a number of gross overpayments for the companies that were purchased. Given the various U.S. deals that have been amended or canceled in recent months, perhaps it's no surprise that Aurora is carrying around $3.17 billion in Canadian dollars ($2.4 billion) in goodwill (i.e., premiums paid above and beyond tangible assets) on its balance sheet. Sure, Aurora may have CA$5.6 billion in total assets, but 57% of this is made up of goodwill, and 69% as a whole from goodwill plus intangible assets. In other words, Aurora's value proposition is built on finger-crossing and hope, which may ultimately not work in investors' favor.
Image source: Getty Images.
Yes, Aurora Cannabis could fall below $1 in 2020
While it's always possible that Canada corrects its supply issues quicker than anticipated, Aurora looks to be on a slippery slope that could have its share price fall below $1. Note that with close to 1.1 billion shares outstanding, this would still give the company a roughly $1 billion market cap.
Following the recently announced departure of chief corporate officer Cam Battley (Battley was, arguably, Aurora's primary cheerleader), Aurora can now add executive turnover and uncertainty to its growing mix of concerns. In 2020, it certainly wouldn't take much to shave another $1 off the share price of a company that Wall Street doesn't seem to trust at the moment.
But what would be the ultimate culprit that drags Aurora below $1 a share, you wonder? My best guess would be a significant writedown on the value of its goodwill. We witnessed Aphria get roasted after taking a CA$50 million charge on its Latin American asset purchase, albeit there were other concerns surrounding this transaction in the first place. Still, if Aurora was forced to write down even a third of its goodwill, the company's stock could be clobbered.
Another possible reason for a decline below $1 might be financing concerns. Aurora does have $400 million (those are U.S. dollars) in at-the-market financing available, which is a fancy way of saying it could potentially bury shareholders under a sea of new common-stock issuances to bolster its cash position as losses mount.
The point is that the negatives clearly outnumber the positives right now, and Aurora's already beaten-down stock could still head much lower.
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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. | For example, the most popular stock on online investing platform Robinhood, Aurora Cannabis (NYSE: ACB), has shed 80% of its value since peaking in mid-March. Persistent supply issues throughout Canada, high tax rates in a number of recreationally legal U.S. states, and a resilient black market have made investing in pot stocks particularly painful in 2019. The thinking had been that if and when Canadian dried cannabis flower became oversupplied, Aurora would simply lean on these foreign sales channels, where higher-margin medical marijuana is legal, to offload its excess supply. | For example, the most popular stock on online investing platform Robinhood, Aurora Cannabis (NYSE: ACB), has shed 80% of its value since peaking in mid-March. Image source: Getty Images. For example, Aurora Cannabis' aggressive expansion tactics, which included more than a dozen acquisitions over the course of three years, are hurting shareholders two ways. | For example, the most popular stock on online investing platform Robinhood, Aurora Cannabis (NYSE: ACB), has shed 80% of its value since peaking in mid-March. Everything looked perfect for Aurora Cannabis... On paper, at least, Aurora Cannabis looks like it has its ducks in a row. By using its stock as capital, Aurora has ballooned its outstanding share count from 16 million to close to 1.1 billion in a little over five years. | For example, the most popular stock on online investing platform Robinhood, Aurora Cannabis (NYSE: ACB), has shed 80% of its value since peaking in mid-March. No grower has more peak production capacity, with 15 cultivation facilities capable of probably close to 700,000 kilos per year. For example, Aurora Cannabis' aggressive expansion tactics, which included more than a dozen acquisitions over the course of three years, are hurting shareholders two ways. |
37794.0 | 2019-12-27 00:00:00 UTC | 2 Pot Stocks to Flat Out Avoid in 2020 | ACB | https://www.nasdaq.com/articles/2-pot-stocks-to-flat-out-avoid-in-2020-2019-12-27 | nan | nan | After starting the year red hot, pot stocks are set to end 2019 on a sour note. Underwhelming recreational-use sales in Canada, high tax rates in key states like California, various scandals, and an increasingly uncertain outlook about marijuana gaining legal status at the federal level in the United States have diminished the market's appetite for all things cannabis.
Despite that sharp drop in corporate valuations across the space, though, the worst could be yet to come. With the outlook dimming for Canada's legal cannabis market and the United States seemingly years away from ending prohibition at the federal level, most pot companies have been forced to continue selling shares to cover their capital expenditures.
Image Source: Getty Images.
What's more, several top Canadian companies have idled construction on key grow facilities due to a lack of cannabis retail outlets, the thriving black market, and a slower-than-expected rollout of edibles, vapes, and other high-margin derivative products.
These gale-force headwinds mean that a strong case could be made against buying any cannabis stocks right now, but in particular, Aurora Cannabis (NYSE: ACB) and HEXO (NYSE: HEXO) appear to be in serious trouble heading into 2020. Here's why.
Aurora: More downside to come
Despite being Canada's largest marijuana cultivator by production capacity, and arguably one of the industry's most diversified names from a product line-up standpoint, Aurora hasn't been able to put it all together to create value for its shareholders of late. It has consistently missed financial targets, posted staggering quarterly losses, and diluted shareholders to a jaw-dropping degree -- issues which helped drive Aurora's share price downward by nearly 60% in 2019.
Next year, though, could be even worse from a stock-performance perspective. Even though Cannabis 2.0 -- the legal arrival on the market of marijuana-derived products like edibles, drinks, and vapes -- should provide Aurora a much-needed revenue boost by the middle of next year, it might prove too little, too late. The company is barreling toward a possible liquidity crunch. Because of certain restrictions associated with its $360 million secured credit facility with Bank of Montreal and its enormous cash burn rate, Aurora could run out of working capital by the middle of next year, according to a research note by Gordon Johnson of GLJ Research.
Given the unfavorable dynamics playing out in the Canadian marijuana market at the moment, Aurora may have to further dilute shareholders simply to remain a going concern, strike a large partnering deal from a position of weakness, and/or amend this secured credit facility with Bank of Montreal. None of those options bodes particularly well for the pot giant's share price over the next six to 12 months.
HEXO: Don't try to catch this falling knife
HEXO's shares are down a painful 76% from their 52-week high, but this middle-of-the-road cannabis producer could have a long way to go before it hits rock bottom. There are four clear reasons to avoid this pot stock in 2020:
The company is setting up an at-the-market financing program equivalent to 10% of its market cap as of the close of November. That's not an enormous amount of dilution, but it isn't great news for shareholders, either.
HEXO (along with several of its closest peers) has openly admitted that Canada probably won't have enough physical retail locations to adequately meet demand until 2021. Profitability could thus take a few more years to achieve -- at least on a consistent basis.
Gross profit margins on dried flowers will only continue to deteriorate in its fiscal 2020 (which began in August) due to an array of factors. HEXO will be working against this unfavorable trend as it strives to become profitable.
Unlike its larger competitors with sizable international footprints, HEXO is mainly oriented toward the Canadian cannabis market. Given the various issues it faces, HEXO would have been wise to build out a serious international presence before now.
Bottom line, even though HEXO's management has done a lot to cut costs, explore viable ways to enter the lucrative U.S. market, and fight back against black market sales with the launch of a low-priced brand, "Original Stash," the hard truth is that the company may have trouble surviving in this harsh environment.
HEXO doesn't have a major equity partner to help it through this industry-wide trough, nor does it have the financial muscle to survive several more years of hefty net losses. That's not to say that it's destined to go belly up anytime soon, but management will definitely have their work cut out for them in 2020.
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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. | These gale-force headwinds mean that a strong case could be made against buying any cannabis stocks right now, but in particular, Aurora Cannabis (NYSE: ACB) and HEXO (NYSE: HEXO) appear to be in serious trouble heading into 2020. With the outlook dimming for Canada's legal cannabis market and the United States seemingly years away from ending prohibition at the federal level, most pot companies have been forced to continue selling shares to cover their capital expenditures. What's more, several top Canadian companies have idled construction on key grow facilities due to a lack of cannabis retail outlets, the thriving black market, and a slower-than-expected rollout of edibles, vapes, and other high-margin derivative products. | These gale-force headwinds mean that a strong case could be made against buying any cannabis stocks right now, but in particular, Aurora Cannabis (NYSE: ACB) and HEXO (NYSE: HEXO) appear to be in serious trouble heading into 2020. With the outlook dimming for Canada's legal cannabis market and the United States seemingly years away from ending prohibition at the federal level, most pot companies have been forced to continue selling shares to cover their capital expenditures. Because of certain restrictions associated with its $360 million secured credit facility with Bank of Montreal and its enormous cash burn rate, Aurora could run out of working capital by the middle of next year, according to a research note by Gordon Johnson of GLJ Research. | These gale-force headwinds mean that a strong case could be made against buying any cannabis stocks right now, but in particular, Aurora Cannabis (NYSE: ACB) and HEXO (NYSE: HEXO) appear to be in serious trouble heading into 2020. With the outlook dimming for Canada's legal cannabis market and the United States seemingly years away from ending prohibition at the federal level, most pot companies have been forced to continue selling shares to cover their capital expenditures. Bottom line, even though HEXO's management has done a lot to cut costs, explore viable ways to enter the lucrative U.S. market, and fight back against black market sales with the launch of a low-priced brand, "Original Stash," the hard truth is that the company may have trouble surviving in this harsh environment. | These gale-force headwinds mean that a strong case could be made against buying any cannabis stocks right now, but in particular, Aurora Cannabis (NYSE: ACB) and HEXO (NYSE: HEXO) appear to be in serious trouble heading into 2020. It has consistently missed financial targets, posted staggering quarterly losses, and diluted shareholders to a jaw-dropping degree -- issues which helped drive Aurora's share price downward by nearly 60% in 2019. 10 stocks we like better than Aurora Cannabis Inc. |
37795.0 | 2019-12-26 00:00:00 UTC | 3 Marijuana Stocks That Cost Investors Billions in 2019 | ACB | https://www.nasdaq.com/articles/3-marijuana-stocks-that-cost-investors-billions-in-2019-2019-12-26 | nan | nan | We now have less than a week to go before we say goodbye to 2019, and the year can't end soon enough for marijuana stock investors.
When 2019 began, the expectation was that this would be the year the cannabis industry really matured. Sales were expected to skyrocket with Canada allowing recreational weed sales and derivative pot products positioned to hit dispensary shelves during the fourth quarter. But as the year played out, these projections turned out to be nothing more than a pipe dream, with the end result being billions of dollars lost by pot stock investors.
Although a few niches within the cannabis industry outperformed, most marijuana stocks lost a considerable amount of their value. The following three pot stocks were especially good at destroying shareholder value, with market cap losses ranging from $2.2 billion to $4.9 billion for the year.
Image source: Getty Images.
Tilray: $4.85 billion in market cap lost
Talk about a stock coming full circle. After listing its shares at $17 for its initial public offering on the Nasdaq in July 2018, Tilray (NASDAQ: TLRY) wound up seeing its shares spike to as high as $300 on an intraday basis in Sept. 2018, briefly giving the company a value of $26 billion. Yet last week, investors saw Tilray's share price briefly dip below $17, the company's IPO listing price.
The bigger story here is that 2018's hottest stock wound up shedding close to 74% of its value in 2019, losing almost $4.9 billion in market cap.
The big issue for all Canadian pot stocks is the tempered rollout of cannabis products. Regulatory agency Health Canada has struggled to approve licensing applications in a timely manner, while Ontario has been a major buzzkill in that it's slow-stepped the licensing of physical dispensaries. With few avenues to reach consumers in Canada's most populous province, all growers, including Tilray, have struggled mightily.
Making matters worse for Tilray is the perception that its management team has no concrete strategy. In March, for instance, CEO Brendan Kennedy announced that his company would focus future investments on the U.S. and Europe, which seemed an odd decision to make with Canada having launched recreational weed sales just six months prior.
With Tilray in the process of building up its overseas presence and having to spend aggressively to do so, it doesn't look as it'll have a shot at recurring profitability before 2021 or 2022. In short, Tilray's drubbing looks well deserved in 2019.
Image source: Getty Images.
Aurora Cannabis: $2.59 billion in market cap lost
Another marijuana stock that cost investors billions of dollars throughout the year is Aurora Cannabis (NYSE: ACB). Aurora might be the most-held pot stock by a mile on investment app Robinhood, but popularity doesn't guarantee profits.
Like Tilray, Aurora Cannabis was walloped by the supply struggles experienced in Canada. In fact, in the company's fiscal first-quarter operating results, it announced that it would halt construction at its 1.62-million-square-foot Aurora Sun campus in Alberta and 1-million-square-foot Aurora Nordic 2 grow farm in Denmark to conserve capital and align production with demand. Aurora previously forecast at least 625,000 kilos of annual run-rate production by the end of its fiscal year (June 30, 2020), but its run-rate output has now probably been halved.
Two probably bigger issues that continue to affect the company are its ugly balance sheet and its ongoing share-based dilution. To speak of the latter, shareholders have seen Aurora's outstanding share count catapult from 16 million to around 1.1 billion over the past 21 quarters (five years and three months). With Aurora aggressively expanding its capacity organically and via acquisition, it's regularly used its common stock as capital. Unfortunately, its shareholders have paid the price for that choice.
As for the company's balance sheet, it's lugging around an unsightly $3.17 billion Canadian in goodwill from these acquisitions, which currently represents 57% of its total assets. It looks as if Aurora grossly overpaid for its acquisitions and that a writedown is forthcoming. Add the fact that some folks on Wall Street are genuinely concerned about Aurora's cash position, and you have the perfect recipe for Aurora Cannabis to crush shareholders' dreams in 2019.
Image source: Getty Images.
Canopy Growth: $2.23 billion in market cap lost
It's probably no surprise that the largest marijuana stock in the world by market cap, Canopy Growth (NYSE: CGC), also had a pretty miserable year. Investors can take solace in the fact that, at least on the basis of market cap, Tilray and Aurora were worse off.
In keeping with the theme, supply chain issues in Canada, coupled with the delayed launch of derivatives -- they were supposed to be on shelves by no later than October, but reached dispensaries only last week -- have ensured that Canopy has had a bad year. But other company-specific issues have dragged down this stock in 2019.
For one, Canopy Growth's income statements have been an utter mess. The company's free-spending ways have led to huge operating losses, even with a number of one-time expenditures removed from the equation. During the fiscal second quarter, Canopy's share-based compensation wound up being higher than its net sales, which goes to show just how bad things are right now.
Somewhat similarly to Aurora, Canopy Growth is carrying CA$1.91 billion in goodwill on its balance sheet, which now accounts for 23% of its total assets. Canopy also looks to have grossly overpaid for its deals, which increases the likelihood of a writedown.
Lastly, among Canadian pot growers, Canopy Growth looks poised to be among the last to generate a recurring profit, primarily because of its aggressive spending, share-based compensation, and international expansion efforts. With Wall Street clearly focused on companies that can generate a profit, there's no guarantee this stock will rebound anytime soon.
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Sean Williams has no position in any of the stocks mentioned. The Motley Fool recommends Nasdaq. 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: $2.59 billion in market cap lost Another marijuana stock that cost investors billions of dollars throughout the year is Aurora Cannabis (NYSE: ACB). But as the year played out, these projections turned out to be nothing more than a pipe dream, with the end result being billions of dollars lost by pot stock investors. In March, for instance, CEO Brendan Kennedy announced that his company would focus future investments on the U.S. and Europe, which seemed an odd decision to make with Canada having launched recreational weed sales just six months prior. | Aurora Cannabis: $2.59 billion in market cap lost Another marijuana stock that cost investors billions of dollars throughout the year is Aurora Cannabis (NYSE: ACB). Sales were expected to skyrocket with Canada allowing recreational weed sales and derivative pot products positioned to hit dispensary shelves during the fourth quarter. But as the year played out, these projections turned out to be nothing more than a pipe dream, with the end result being billions of dollars lost by pot stock investors. | Aurora Cannabis: $2.59 billion in market cap lost Another marijuana stock that cost investors billions of dollars throughout the year is Aurora Cannabis (NYSE: ACB). The following three pot stocks were especially good at destroying shareholder value, with market cap losses ranging from $2.2 billion to $4.9 billion for the year. Canopy Growth: $2.23 billion in market cap lost It's probably no surprise that the largest marijuana stock in the world by market cap, Canopy Growth (NYSE: CGC), also had a pretty miserable year. | Aurora Cannabis: $2.59 billion in market cap lost Another marijuana stock that cost investors billions of dollars throughout the year is Aurora Cannabis (NYSE: ACB). We now have less than a week to go before we say goodbye to 2019, and the year can't end soon enough for marijuana stock investors. Investors can take solace in the fact that, at least on the basis of market cap, Tilray and Aurora were worse off. |
37796.0 | 2019-12-26 00:00:00 UTC | Make Aurora Cannabis Front and Center in Your Pot-folio | ACB | https://www.nasdaq.com/articles/make-aurora-cannabis-front-and-center-in-your-pot-folio-2019-12-26 | nan | nan | ThereâÂÂs no point trying to pretend otherwise: 2019 was a disappointing year for Aurora Cannabis (NYSE:) and other marijuana stocks. The first three months were pretty good, but after that it was a painful, relentless downhill ride.
Source: Shutterstock
Much of the decline was due to the over-advertised Cannabis 2.0 (the legalization of derivative products like edibles, beverages and vaping concentrates), which was priced into the market too quickly. There was no way that Aurora and its ilk could possibly live up to the hype. Thank goodness that the yearâÂÂs over and done with, but what lies ahead for Aurora and its investors?
The Harshest Price Target Ever?
There are haters, and then there areàhaters. IâÂÂm talking about absolute rancor, which is what it would take for a respected analyst to put his reputation on the line and give a well-known pot stock a price target ofàzero.
ThatâÂÂs not a misprint. GLJ ResearchâÂÂs Gordon Johnson gave Aurora a âÂÂsellâ rating, though heâÂÂs certainly not the only analyst to do that. Then he proceeded to declare that âÂÂACBâÂÂs equity holds no valueâ and an unheard-of $0 two-year price target.
ThatâÂÂs an audacious move on JohnsonâÂÂs part. Is it an attention-getting ploy? Does he have a blood feud with Aurora CEO Terry Booth? We can have fun and speculate on these matters, but thereâÂÂs a serious problem here. Someone might take JohnsonâÂÂs prediction too seriously and initiate a massive short position in ACB stock.
I, for one, donâÂÂt recommend doing that. IâÂÂm not saying that Johnson told anyone to do that, but the possibility of a 2020 cannabis comeback is very real. I tend to believe that a fundamental mistake is being made here. Just because a stock has gone down 50% doesnâÂÂt mean that itâÂÂs literally going to zero.
Moving Against the Crowd
My greatest investing successes have come from doing the complete opposite of what the majority of investors are doing â and oftentimes ignoring what the analysts are predicting. Year-over-year, AuroraâÂÂs net revenues increased by a whopping 153.6% the companyâÂÂs most recent earnings release, but investors and analysts mostly chose to ignore that fact and beat up on Aurora anyway.
But why? ItâÂÂs simple. The actual quarterly net revenues of 75.2 million CAD somehow werenâÂÂt impressive enough, as the analyst consensus estimate was an eye-popping 94.2 million CAD. That estimate would have implied a year-over-year increase of 217.6% â lofty expectations, to say the least.
AuroraâÂÂs net cannabis revenues also improved considerably year-over-year with a 187.8% increase. Not only that, but AuroraâÂÂs gross margin on net cannabis revenues was predicted to come to 53.2% but actually came in at 58%. Sometimes analysts just get it wrong, and itâÂÂs easy for them to blame the company rather than accept responsibility for their predictions.
I also feel that investors donâÂÂt fully appreciate the future impact of the SAFE Act, which if passed would end AmericaâÂÂs long-standing restrictions on banks seeking to provide financial services to cannabis companies (in states where cannabis is legal). The SAFE Act has already passed the House of Representatives, and if it passes the Senate, the entire cannabis sector should celebrate with higher stock prices â including Aurora Cannabis.
My Takeaway on Aurora Cannabis
This past year didnâÂÂt exactly go as planned, but thatâÂÂs not sufficient reason to discount AuroraâÂÂs potential. If someone wants to give the stock a price target of zero, thatâÂÂs fine with me; IâÂÂll stick to my thesis that the stock will, in time, go from zero to hero.
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. | Then he proceeded to declare that âÂÂACBâÂÂs equity holds no valueâ and an unheard-of $0 two-year price target. Someone might take JohnsonâÂÂs prediction too seriously and initiate a massive short position in ACB stock. Source: Shutterstock Much of the decline was due to the over-advertised Cannabis 2.0 (the legalization of derivative products like edibles, beverages and vaping concentrates), which was priced into the market too quickly. | Then he proceeded to declare that âÂÂACBâÂÂs equity holds no valueâ and an unheard-of $0 two-year price target. Someone might take JohnsonâÂÂs prediction too seriously and initiate a massive short position in ACB stock. Year-over-year, AuroraâÂÂs net revenues increased by a whopping 153.6% the companyâÂÂs most recent earnings release, but investors and analysts mostly chose to ignore that fact and beat up on Aurora anyway. | Then he proceeded to declare that âÂÂACBâÂÂs equity holds no valueâ and an unheard-of $0 two-year price target. Someone might take JohnsonâÂÂs prediction too seriously and initiate a massive short position in ACB stock. Year-over-year, AuroraâÂÂs net revenues increased by a whopping 153.6% the companyâÂÂs most recent earnings release, but investors and analysts mostly chose to ignore that fact and beat up on Aurora anyway. | Then he proceeded to declare that âÂÂACBâÂÂs equity holds no valueâ and an unheard-of $0 two-year price target. Someone might take JohnsonâÂÂs prediction too seriously and initiate a massive short position in ACB stock. ThereâÂÂs no point trying to pretend otherwise: 2019 was a disappointing year for Aurora Cannabis (NYSE:) and other marijuana stocks. |
37797.0 | 2019-12-26 00:00:00 UTC | Canopy Growth Could Surprise in 2020, but Don’t Rush In | ACB | https://www.nasdaq.com/articles/canopy-growth-could-surprise-in-2020-but-dont-rush-in-2019-12-26 | nan | nan | As we close the books on 2019, what does the future hold for Canopy Growth (NYSE:)? The âÂÂCannabisphereâ maelstrom continues. Canopy stock is down 60% from its 52-week high. But thanks to new product launches, and a new CEO courtesy of backer Constellation Brands (NYSE:), shares could rebound in the coming year. As long as the macro factors play out.
Source: Jarretera / Shutterstock.com
Constellation may now be in the driverâÂÂs seat. However, they do not control the destiny of the Canadian pot market. Waiting for bureaucrats to remains key for the licensed producers (LPs). Therefore, upside in Canopy Growth is contingent on this factor.
But thatâÂÂs not all! The Canopy story going forward requires âÂÂCannabis 2.0â to meet expectations. The company is betting big on infused beverages, and these new products need mass consumer adoption to support the stockâÂÂs current valuation.
Is all this possible in 2020? Certainly. But, given the current valuation, taking your time with Canopy Growth may be the best call. LetâÂÂs dive in, and see whatâÂÂs in store for Canopy at the dawn of the 2020s.
Cutting The Red Tape
Oversupply and lack of retail distribution are key challenges for Canadian pot stocks. Despite a large legal market, licensed retail locations remain scarce. Meanwhile, the illicit pot market continues to dominate. If you are a marijuana user in Ontario, would you waste your time finding one of ? Especially when a black market delivery service is just a phone call away?
Overall, progress is being made cutting the red tape. The Ontario Government is on retail locations, and eliminating the cap on total stores in the province is a step in the right direction.
But, retail distribution isnâÂÂt the only issue plaguing âÂÂBig PotâÂÂ. Oversupply remains a concern, but the introduction of infused beverages, edibles and vapes could help drive demand next year. Yet, we may until 2021 at the earliest.
However, supply issues may not be such a big deal. The important thing for Canopy Growth in 2020 is to turn âÂÂCannabis 2.0â speculation into tangible results. Canopy expects its 2.0 products to , and results for fourth quarter 2020 could make or break the Canopy story.
In the meantime, we need to separate hype from fact. Pivoting to valuation, we can see that investors continue to have high expectations for Canopy stock. Shares may be down from past highs, but they are not in the bargain basement.
Valuation Remains Rich
Canopy Growth remains richly valued. Shares trade for around 25 times trailing twelve month (TTM) sales. By comparison, Aurora Cannabis (NYSE:) trades for 10 times trailing sales. Tilray (NASDAQ:) and Hexo (NYSE:) trade at similar valuations, and Cronos Group (NASDAQ:) is the only major pot stock trading at a higher valuation at around 70 times trailing sales.
On the other hand, this premium makes sense. Canopy Growth has backing from a deep-pocketed partnerÃÂ in Constellation. Likewise, Cronos has Altria Group (NYSE:). As a result, both have significant cash on hand.
Meanwhile, companies like Aurora remain . In other words, Canopy and Cronos can better weather the Cannabis maelstrom, and they could even profit from the wreckage. Companies like Aurora may have to sell prized assets at fire sale prices to stay afloat.
was a prior concern of mine for Canopy Growth, as Constellation holds a large slug of warrants to buy more Canopy shares. But, MKM Partnersâ Bill Kirk recently noted that acquiring majority ownership of Canopy Growth could jeopardize ConstellationâÂÂs U.S. federal alcohol licenses. That is to say, Constellation wonâÂÂt consider growing their Canopy stake until pot is fully legal in the United States.
Yet, Constellation could still profit at the expense of outside investors. Long term, shares could rally back above the warrantsâ strike price â and given these warrants donâÂÂt expire until 2023 and 2026, this remains a possibility. Keep this in mind when determining CanopyâÂÂs potential value a few years down the road.
Another issue to consider is that âÂÂpot stockâ prices could be skewed by . The major names are up big from their lows, and shorts are throwing in the towel. This creates even more buying pressure, as shorts who didnâÂÂt cover early scramble to close out their positions.
Take Your Time Before Buying Canopy Growth
2019 was a killer for Canopy Growth shares, but all bets are off for 2020. Canadian regulators are fixing the mess they created. Add in the âÂÂinfused beverageâ catalyst, and investors could rush back into the stock.
Yet, todayâÂÂs price may not be your best entry point. Wait for the shorts to clear out.
With strong capitalization, Canopy Growth is a âÂÂsaferâ pot stock play. But, to tilt the odds in your favor, take your time before buying.
As of this writing, Thomas Niel 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. | But thanks to new product launches, and a new CEO courtesy of backer Constellation Brands (NYSE:), shares could rebound in the coming year. The company is betting big on infused beverages, and these new products need mass consumer adoption to support the stockâÂÂs current valuation. But, MKM Partnersâ Bill Kirk recently noted that acquiring majority ownership of Canopy Growth could jeopardize ConstellationâÂÂs U.S. federal alcohol licenses. | Despite a large legal market, licensed retail locations remain scarce. Valuation Remains Rich Canopy Growth remains richly valued. Tilray (NASDAQ:) and Hexo (NYSE:) trade at similar valuations, and Cronos Group (NASDAQ:) is the only major pot stock trading at a higher valuation at around 70 times trailing sales. | Tilray (NASDAQ:) and Hexo (NYSE:) trade at similar valuations, and Cronos Group (NASDAQ:) is the only major pot stock trading at a higher valuation at around 70 times trailing sales. was a prior concern of mine for Canopy Growth, as Constellation holds a large slug of warrants to buy more Canopy shares. Take Your Time Before Buying Canopy Growth 2019 was a killer for Canopy Growth shares, but all bets are off for 2020. | Pivoting to valuation, we can see that investors continue to have high expectations for Canopy stock. Canopy Growth has backing from a deep-pocketed partneràin Constellation. Take Your Time Before Buying Canopy Growth 2019 was a killer for Canopy Growth shares, but all bets are off for 2020. |
37798.0 | 2019-12-24 00:00:00 UTC | First Week of ACB February 2020 Options Trading | ACB | https://www.nasdaq.com/articles/first-week-of-acb-february-2020-options-trading-2019-12-24 | nan | nan | Investors in Aurora Cannabis Inc (Symbol: ACB) saw new options begin trading this week, for the February 2020 expiration. At Stock Options Channel, our YieldBoost formula has looked up and down the ACB options chain for the new February 2020 contracts and identified one put and one call contract of particular interest.
The put contract at the $1.00 strike price has a current bid of 5 cents. If an investor was to sell-to-open that put contract, they are committing to purchase the stock at $1.00, but will also collect the premium, putting the cost basis of the shares at $0.95 (before broker commissions). To an investor already interested in purchasing shares of ACB, that could represent an attractive alternative to paying $1.92/share today.
Because the $1.00 strike represents an approximate 48% 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 99%. 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 5.00% return on the cash commitment, or 30.93% 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 $1.00 strike is located relative to that history:
Turning to the calls side of the option chain, the call contract at the $3.00 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 $1.92/share, and then sell-to-open that call contract as a "covered call," they are committing to sell the stock at $3.00. Considering the call seller will also collect the premium, that would drive a total return (excluding dividends, if any) of 61.46% if the stock gets called away at the February 2020 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 $3.00 strike highlighted in red:
Considering the fact that the $3.00 strike represents an approximate 56% 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 92%. 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 5.21% boost of extra return to the investor, or 32.22% annualized, which we refer to as the YieldBoost.
The implied volatility in the put contract example is 167%, while the implied volatility in the call contract example is 121%.
Meanwhile, we calculate the actual trailing twelve month volatility (considering the last 252 trading day closing values as well as today's price of $1.92) to be 71%. 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 $3.00 strike highlighted in red: Considering the fact that the $3.00 strike represents an approximate 56% 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 February 2020 expiration. | Below is a chart showing ACB's trailing twelve month trading history, with the $3.00 strike highlighted in red: Considering the fact that the $3.00 strike represents an approximate 56% 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 February 2020 expiration. At Stock Options Channel, our YieldBoost formula has looked up and down the ACB options chain for the new February 2020 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 $3.00 strike highlighted in red: Considering the fact that the $3.00 strike represents an approximate 56% 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 February 2020 expiration. At Stock Options Channel, our YieldBoost formula has looked up and down the ACB options chain for the new February 2020 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 February 2020 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 $3.00 strike highlighted in red: Considering the fact that the $3.00 strike represents an approximate 56% 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 February 2020 expiration. |
37799.0 | 2019-12-24 00:00:00 UTC | Aurora Cannabis Ships Its First Cannabis 2.0 Products | ACB | https://www.nasdaq.com/articles/aurora-cannabis-ships-its-first-cannabis-2.0-products-2019-12-24 | nan | nan | Leading marijuana stock Aurora Cannabis (NYSE: ACB) announced Monday that it made its first shipments of products falling under so-called "Cannabis 2.0" legalization. This is the initiative under which Canada's government sanctioned the sale and consumption of cannabis derivatives such as gummy candies, vapes, drinks, and the like. The company also issued an update on certain aspects of its finances and operations.
As for the Cannabis 2.0 products, Aurora said it made its inaugural shipments to 10 provincial regulators throughout the country. The company produces these goods at three facilities: Aurora Sky in the country's western city of Edmonton and two locations in the east of the country, Aurora River in Ontario, and Quebec's Aurora Vie.
San Rafael vape cartridges being produced in a Canopy Growth facility. Image source: Canopy Growth.
In a press release, Aurora said of the Cannabis 2.0 rollout: "We have prudently deployed capital and we believe that we're ready with the appropriate combination of technology, scale and consumer insights to have the right products on store shelves in a timely fashion."
Although Cannabis 2.0 took legal effect in mid-October, its regulations stipulated a 60-day notice period for manufacturers to ship product. Aurora noted that most of its initial shipment won't be available in retail outlets until early next month.
Updating its operational and financial situations, Aurora said that in spite of a recent halt in the construction of two company facilities -- Aurora Sun in the province of Alberta, and Aurora Nordic 2 in Denmark -- it has enough capacity to meet current demand.
In Denmark, the company's Aurora 1 facility has been completed, holds a production license, and is expected to receive a sales license in the near future.
In terms of finances, Aurora reiterated that it retired 227 million Canadian dollars of a CA$230 million convertible debenture issue set to mature in March 2020 by converting these securities to stock. The company added that it can still draw from a CA$360 million credit facility, and it has recourse to a $400 million (U.S) at-the-market equity program (essentially, a share issuance initiative).
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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. | Leading marijuana stock Aurora Cannabis (NYSE: ACB) announced Monday that it made its first shipments of products falling under so-called "Cannabis 2.0" legalization. This is the initiative under which Canada's government sanctioned the sale and consumption of cannabis derivatives such as gummy candies, vapes, drinks, and the like. In a press release, Aurora said of the Cannabis 2.0 rollout: "We have prudently deployed capital and we believe that we're ready with the appropriate combination of technology, scale and consumer insights to have the right products on store shelves in a timely fashion." | Leading marijuana stock Aurora Cannabis (NYSE: ACB) announced Monday that it made its first shipments of products falling under so-called "Cannabis 2.0" legalization. As for the Cannabis 2.0 products, Aurora said it made its inaugural shipments to 10 provincial regulators throughout the country. In Denmark, the company's Aurora 1 facility has been completed, holds a production license, and is expected to receive a sales license in the near future. | Leading marijuana stock Aurora Cannabis (NYSE: ACB) announced Monday that it made its first shipments of products falling under so-called "Cannabis 2.0" legalization. The company produces these goods at three facilities: Aurora Sky in the country's western city of Edmonton and two locations in the east of the country, Aurora River in Ontario, and Quebec's Aurora Vie. Updating its operational and financial situations, Aurora said that in spite of a recent halt in the construction of two company facilities -- Aurora Sun in the province of Alberta, and Aurora Nordic 2 in Denmark -- it has enough capacity to meet current demand. | Leading marijuana stock Aurora Cannabis (NYSE: ACB) announced Monday that it made its first shipments of products falling under so-called "Cannabis 2.0" legalization. Updating its operational and financial situations, Aurora said that in spite of a recent halt in the construction of two company facilities -- Aurora Sun in the province of Alberta, and Aurora Nordic 2 in Denmark -- it has enough capacity to meet current demand. 10 stocks we like better than Aurora Cannabis Inc. |
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