Aurora Cannabis Stock Slips After Earnings; What Should You Know?
Earlier this week, we talked about former penny stocks. One of them was Aurora Cannabis (ACB Stock Report) and it has not disappointed (us). Shares of ACB stock plummeted on Wednesday after the company reported its fiscal fourth-quarter 2020 results after the market closed on Tuesday.
One of the things we were looking to see is if Aurora would surprise the market like it did in May. Heading into earnings, ACB stock was explosive. In fact, on sheer speculation, the former penny stock shot up 17% with its highest single-day share volume since May. Unfortunately, all that did was fluff up the market to soften this latest blow.
The marijuana stock has fallen from highs of $7.75 after the close, yesterday to early lows of $5.59 on Wednesday. So why is ACB stock down today? As I said above, it’s got everything to do with earnings. Fourth-quarter EPS came in at a loss per share of $0.10 while sales were down, year-over-year to C$72.1 million. During the same period last year, Aurora reported C$75.2 million. Analysts expected sales of $73.2 million according to FactSet.
However, there was something else that was much more glaring. Aurora reported significant losses for the year. How big? The Canadian cannabis company lost more than C$3.3 billion. What’s more, is that the company is anticipating sales to soften in its next quarter as well. During the 4th quarter alone, the company recorded losses of C$1.86 billion.
What a way to welcome in its new CEO Miguel Martin. However, Martin tried to remain upbeat on Aurora. He explained, “I accepted the CEO role because I see an opportunity to utilize my skill set in regulated CPG brand development.”
Is Aurora Cannabis (ACB) About To Become A Penny Stock Again?
Tuesday’s activity was “interesting” in my opinion and I’ll let you come to your own conclusion. There was no momentum lead-up to earnings that would suggest a “buy the rumor” type move. In fact, we’re talking about a stock that only had 3 green days all month before Tuesday. Yet the day of earnings, shares jump more than $1 per share? Had ACB stock not experienced that divine intervention on Tuesday, do you think it would be well below $5 today?
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In our previous article about ACB stock, we were able to hear what some of the industry had to say about Aurora. Jason Spatafora, the Wolf Of Weed Street, explained that “While Aurora was once a cannabis industry darling, those glistening smiles from management were hiding a glaring issue in the background. I think we’ve seen that come to fruition especially after this bloated pot penny stock did its reverse.”
“My concern isn’t that Aurora jumps if it surprises on earnings, it’s the false sense of security it gives new pot stock traders. We saw it happen in May. My focus is on MSOs right now. Aurora’s CBD play in the US is a far cry from what a true MSO would be.”
Spatafora reached fame for calling several rallies in pot stocks and currently teaches traders how to spot opportunities in the market, daily.
Where Does ACB Stock Go From Here?
This is the big question of the day. Will we soon see ACB on a list of penny stocks to watch in 2020? It’s current 2020 low sits at $5.30 right now. But also keep in mind that the company affected a reverse stock split prior. Adjusting for that May reverse, ACB stock is well below $0.50. If you’re not up on the specifics, this year, Aurora conducted a 1 for 12 reverse split.
What some are looking at is what Aurora is actually selling right now. If you look at consumer cannabis sales figures. Net revenue for this segment dropped 9% year over year. However, total cannabis sold by volume was up 36% and was further offset by a 30% decrease in net selling price per gram. The company’s “value brand”, Daily Special, accounted for 62% of flower revenue.
In its prior quarter, that figure was “only” 35%. On top of this, extract revenue also declined. The blame was placed on lower vape market share. However, extracts were supposed to have been one of the high points of Canada’s cannabis legalization 2.0; not for Aurora.
“Our Q4 demonstrated progress in rationalization of SG&A and cash burn along with continued leadership in both Canadian and international medical. However, Aurora has slipped from its top position in Canadian consumer, a market that continues to support material growth and opportunity,” stated Miguel Martin.
A Reset For Aurora Or The Beginning Of Something Bad?
Martin explained that the company is focused on moving forward. Aurora wants to “re-position” its Canadian consumer business. Meanwhile, we’re seeing a much broader focus from investors on U.S. MSOs. The recent launch of Advisor Shares Pure US Cannabis ETF (MSOS Report) is clear evidence of this.
“We look to expand beyond the value flower segment, leverage our capabilities in science and product innovation and put our effort on a finite number of emerging growth formats. This entails prioritizing our San Rafael, Aurora and Whistler premium brands in flower, pre-rolls and vapor, which will be shortly followed by strategic marketing and innovation efforts in concentrates and edibles.”
Miguel Martin
When you have companies like Truelieve (TCNNF Stock Report), Green Thumb Industries (GTBIF Stock Report), CuraLeaf Holdings (CURLF Stock Report) and others all trading at better valuations, it continues raising questions as to which companies will become part of the “FAANG” in cannabis.
Nevertheless, here we are again. Aurora Cannabis continues testing new lows on Wednesday without much reprieve. Analysts at Piper Sandler lowered their price target on the pot stock to $8. meanwhile, MKM Partners cut their “fair value estimate” on ACB to C$9 from C$18 Aside from a large industry development, is there anything that can save ACB from becoming a penny stock in the near term? Leave us a comment with your thoughts on these latest earnings below.
