Over the last six months, Aurora Cannabis Inc. ACB shares have fallen 73.28%.
The Aurora Cannabis Analyst
Needham analyst Matt McGinley initiated a Hold rating on Aurora with a price target of $1.50.
The Aurora Cannabis Thesis
The Canadian cannabis market has seen too many investments so far, outpacing market development, which has further caused the need for infrastructure rationalization. To make it in these circumstances, McGinley says Aurora has set up itself as a "low cost producer with toeholds in many markets."
Nevertheless, the company is still unprofitable, and just like the competition, it's now forced to desperately minimize its operating structure while working on boosting its revenue at the same time.
McGinley still sees a possibility for the company to reach a positive EBITDA by 2021, pointing out that "any shortfalls in cost reduction or market development places the company at liquidity risk in 2H20."
"Over two quarters, ACB must cut SG&A by 50%+ to $45mn, sustain a 50%+ GM, and grow revenue 33% to $90mn to meet positive EBITDA loan covenants," he wrote in the note.
The analyst thinks that things in Aurora's hands, like restructuring. will have more power than industry revenue growth in the near future, but he also projects harsh stock volatility.
"While industry valuation mean reversion is likely, ACB’s near-term cuts likely matter more than revenue, and we view carrying a 50%+ borrow as difficult and likely to create high levels of volatility for ACB equity."
ACB Price Action
Aurora's stock was trading lower by 1.9% to $1.52 per share at time of publication.
Related Links:
Tim Seymour Compares Aurora Cannabis And Canopy Growth, Sees Path To Profitability
Here's How Much Investing $100 In The 2018 Debut Of Aurora Cannabis Would Be Worth Today
date | ticker | name | Price Target | Upside/Downside | Recommendation | Firm |
---|
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.
The Benzinga Cannabis Capital Conference is coming to Florida
The Benzinga Cannabis Capital Conference is returning to Florida, in a new venue in Hollywood, on April 16 and 17, 2024. The two-day event at The Diplomat Beach Resort will be a chance for entrepreneurs, both large and small, to network, learn and grow. Renowned for its trendsetting abilities and influence on the future of cannabis, mark your calendars – this conference is the go-to event of the year for the cannabis world.
Get your tickets now on bzcannabis.com – Prices will increase very soon!