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Aurora stocks are lighting up, even as cannabis company struggles with cash

Fri, 05/22/2020 - 11:46

It looks like it’s a good time to go green. Aurora Cannabis stock leaped up dramatically following its earnings report last week, leading a more modest rally in the broader marijuana industry.

Shares of the Canadian cannabis company are up by 54.4% in the stock market as of the time of writing. On Friday, Aurora Cannabis (ACB) enjoyed an eye-popping 70% surge.

Other marijuana stocks also rode the wave of industry interest generated by Aurora’s performance. Canopy Growth (CGC) gained 2.9%, Cronos Group (CRON) climbed 0.9%, Tilray (TLRY) rose by 2.45% and Aphria (APHA) went up by 6.55%.

The grass gets greener

Aurora released its fiscal third-quarter sales on Thursday, amid ongoing concerns about the company’s finances. Sales numbers climbed by 35% over the last quarter, smashing shareholder’s single-digit expectations. The cannabis company’s cost-cutting measures were seen to be effective, with overhead expenses down by 20% and more than a 50% cut in stock-based compensation charges.

However, not everything is necessarily well in the north. Aurora is still burning money at an alarming rate. With a net loss of CA$137.4 million, or CA$1.37 per share, the Canadian Cannabis company still has a lot bills to deal with. Aurora aims to push all its operational costs down to a run rate of CA$40-45 million per quarter by the end of its fiscal fourth quarter.

Investor’s notes on the outlook for Aurora’s long-term future are mixed. ‘Nice revenue beat, but profitability remains elusive,’ said Cowen analyst Vivien Azer, calling out the company’s continued cash burn.

Ladenburg Thalmann analyst Glenn Mattson released a research note on the cannabis firm’s cost-cutting measures with a sunnier outlook.

‘With expenses soon to be under control, insolvency concerns have begun to recede,’ he said. ‘We think ACB can become a solid cash flow generator simply from the Canadian operations and, with a strong market position in Canada, the company can create significant value from here based on this one market.’

Mattson also added that he thought it likely that the Canadian cannabis company would open business in the US, but only once regulation became clearer.

Cannabis under Corona

The coronavirus crisis resulted in a boost in sales for North American cannabis industry, as customers lined up at outlets to stockpile their supply in anticipation of lockdown. Aurora saw success from its introduction of value brands to compete with the black market, but Tilray and Cronos Group also reported higher sales.

However, the pot industry still faces the same issues that plague retail during this period of COVID-19. Storefronts laying off staff and switching to pickup deliveries, as well as logistical difficulties and supply chain disruption, can also delay orders, undermine consumer confidence and drive down demand.

Libertex: the best trading platform for marijuana and more

The weed industry appears to be making a strong comeback. As a relatively young sector that only recently overcame decades of stigma and marginalization, it remains an exciting market for traders and investors. The tendency towards increased liberalization and legalization should create further opportunities for cannabis companies, making them an attractive option for investors to add to their portfolio.

Libertex stands out as the best trading platform for investors looking to add marijuana to their portfolio. In addition to shares in Canopy Growth, Tilray, Aurora, Aphria and Cronosin, Libertex also offers over 240 financial instruments including fuel, tech, precious metals, foreign currencies, and cryptocurrencies.  

Available on your smartphone or the web, Libertex offers trades with zero spreads and favourable leverage. Thanks to its easy-to-use design, built-in educational program, and exceptional support team, Libertex remains the most accessible trading platform for beginners, while offering a high level of functions for experts.

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