Aurora Cannabis Downgraded By Piper Sandler, BofA

Over the last 12 months, Aurora Cannabis Inc. ACB shares have fallen 70%. Two sell-side analysts turned bearish on the cannabis stock Friday. 

The Aurora Analysts

Piper Sandler analyst Michael Lavery downgraded Aurora Cannabis from Neutral to Underweight and lowered the price target from $3 to $1.

BofA Securities analyst Christopher Carey downgraded Aurora from Neutral to Underperform and trimmed the price target from CA$4 ($3.07) to CA$1.50.

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Aurora's Balance Sheet Risk 

In July, Carey downgraded Aurora to Neutral on the basis of balance sheet constraints, and the company has underperformed the SPX by 85 points since, he said in a Friday downgrade note. 

Balance sheet risk is the most important investment thesis for Aurora this year, and BofA is not confident about the stock achieving sustainable support, the analyst said. 

“As such, despite a number of attractive fundamental characteristics (industry leading GM %, top 2 share in Canada, and others), we are compelled to move our rating to Underperform from Neutral, especially with shares still trading at 7/5.5x CY20/21e EV/sales, and lower our POs to C$1.50/US$1.00 on 3.5x CY21e EV/sales.”

BofA is not expecting Aurora to meet financial covenants in its CA$400 million credit facility, but rather for the covenants to be restructured.

“Once this and visibility on financial delivery improves (and valuation with it), we see an opportunity to return focus to ACB’s key positive qualities.”

Aurora Price Action

Aurora shares were trading down 7.28% at $1.72 at the time of publication Friday. 

Related Links:

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Photo courtesy of Aurora Cannabis.