Aurora Cannabis Analyst Says Company Needs 'Much Work On Costs'

Over the past 12 months, Aurora Cannabis Inc. ACB shares fell 79.3%.

On Thursday morning, the company posted second-quarter financial results, with net revenue of CA$66.6 million ($50.21 million), 26% lower than in the first quarter.

The Aurora Cannabis Analyst

BofA Securities analyst Christopher Carey maintained an Underperform rating on Aurora with a 94-cent price objective. 

The Aurora Cannabis Thesis

Aurora pre-announced its financial results last week, and they were in ine with the final results, Carey said in a Thursday note. (See his track record here.)

The cannabis company burned through CA$263 million in the second quarter versus CA$204 million in the first, the analyst said.

See Also: Aurora Cannabis Analyst Questions Whether Company Has Enough Cash To Last Through 2020

Aurora had around CA$200 million left on its equity facility at the end of the December quarter, and according to its newest report, it's holding only CA$48 million, he said.

The he company had around CA$404 million in liquidity at the end of last year versus negative free cash flow of CA$263 million Carey said.

“Clearly, the announced cost cuts are critical. We think more will be needed. Note: the C$162mn senior secured term loan is fully drawn, with a US$345mn convertible debenture due 2024,” the analyst said.

Aurora's gross margin figures showed "a big drop," and cannabis prices are generally falling, he said.

“We note that ACB’s new covenant is to be EBITDA positive by FQ121. Much work on costs is required before then, especially with pressure on gross margin.”

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ACB Price Action

Aurora shares were trading 2.41% higher at $1.48 at the time of publication Thursday.