Cowen: Aurora Is 'Top Pick In Cannabis'

Cowen: Aurora Is 'Top Pick In Cannabis'

Several Wall Street analysts have come out bullish on cannabis stocks in recent months, but one analyst said Monday that Aurora Cannabis Inc ACB is the clear top choice in the sector. 

The Analyst

Cowen analyst Vivien Azer reiterated an Outperform rating on Aurora with a CA$15 ($11.38) price target.

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The Thesis

While a number of Canadian cannabis producers are positioned to take advantage of a global boom in demand, Azer said Aurora is the only one of the top growers that is also on track to become profitable in the near-term. (See her track record here.) 

Aurora is second to Canopy Growth Corp CGC in terms of size, but the analyst said Canopy’s record CA$98-million loss in the first quarter was telling.

“While a number of peers have communicated a longer pathway to profitability, ACB has the opportunity to be among the few Canadian LPs to reach positive EBITDA as soon as 4Q19 (ending June 30), which is a particular standout as category leader WEED posted an expanded EBITDA loss in calendar 1Q19 (at -C$98 mm)." 

Aurora's profitability and margins should get an additional boost from a mix shift toward extracts and novel form factors, Azer said. 

Cowen first came out bullish on Aurora in March, telling investors the stock deserves to trade at a premium valuation due to its unique path to profitability.

In the long-term, Azer estimates the Candian adult-use cannabis market will be worth about CA$12 billion by 2025 and the international medicinal cannabis market will be worth $31 billion by 2024.

In the near-term, Azer said investors should expect Aurora to focus on vapor, adding that a major strategic partner could be announced in the next couple of quarters.

Price Action

Aurora shares were up 2.47% at $7.48 at the time of publication Monday. 

Related Links:

Analyst: Canopy Growth Still A Top Cannabis Stock Despite Mixed Quarter

Canopy Shareholders Approve Acreage Deal, Legalization In Focus

Photo courtesy of Aurora Cannabis. 

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