Why Cantor Fitzgerald Is No Longer An Aurora Cannabis Bull

Contrary to expectations, Aurora Cannabis Inc ACB has used what was remaining of its $183-million equity facility over the last 30 days, according to Cantor Fitzgerald.

The Aurora Cannabis Analyst: Pablo Zuanic downgraded Aurora Cannabis from Overweight to Neutral and reduced the price target from CA$18 ($13.68) to CA$7 ($5.32).

The Aurora Cannabis Thesis: For Aurora, “a slew of bad news over the past few months” has exerted downward pressure on the stock, Zuanic said in a Tuesday downgrade note. 

Even after the stock derating, there are no medium-term catalysts to lend upside, the analyst said. 

"We had decided to stay OW on overall market tailwinds (Canada rec market accelerating) and on the expected portfolio adjustments (a “pivot”) under new CEO Martin."

Yet the equity facility being used and Aurora's plans for more security filings indicate further dilution, he said. 

Write-offs; dependence on the competitive "value end" of cannabis flower; the time needed for a portfolio pivot; Nelson Peltz's exit; the "somewhat unexpected" full usage of an equity facility; and a $500-million base shelf prospectus filing Tuesday are all drivers behind Cantor's downgrade, Zuanic said. 

The analyst recommends Aphria Inc APHA to those seeking Canada exposure.

ACB Price Action: Aurora shares were down 7.16% at $4.08 at last check Tuesday. 

Photo courtesy of Aurora Cannabis.