Aurora Cannabis Prepares For Global Legalization Wave, Analyst's Thoughts Post Q2 Earnings

Aurora Cannabis Inc. ACB reported its financial and operational results for the fiscal second quarter that ended December 31 last week, revealing that it has achieved positive adjusted EBITDA of CA$1.4 million ($1.04 million), in line with prior guidance.

The Canadian cannabis giant expects to remain EBITDA positive going forward while working on reaching positive operating cash flow.

Cantor Fitzgerald's Pablo Zuanic took a closer look at the company's earnings report and quarterly performance, highlighting that cash burn "remains a concern," while "lower interest costs (debt paydown) and better working capital management will likely help OCF trends going forward."

The Analyst

Zuanic retained an "Overweight" rating on the company's stock while lowering his 12-month price target of $2.35 from $3 due to sectoral derating.

The Thesis

The analyst pointed out that Aurora was among the first to resize its recreational cannabis business in Canada, resulting in building a stronger position within the global cannabis market.

"The resizing, combined with cost reduction efforts and asset optimization, has helped the company build a more sustainable moat in its domestic and international medical business," he said.

Moreover, the company is preparing for a recreational sales launch in Germany, which is anticipated by spring 2025, and is seeing "the possibility of a "pilot program" in the early stages," Zuanic said.

The German Health Minister's final draft is expected to be publicly known in months to come with final approvals of the cannabis program and structure in late 2024.

"Because ACB is one of only three domestic licensed producers, the company expects to play an active role in the German rec market once sales begin," Zuanic continued.

In addition to expanding internationally, the company is seeking to position itself in an adjacent business line, given its recent acquisition of a controlling interest in Bevo, a supplier of propagated vegetables and ornamental plants in North America.

ACB Price Action

Aurora's shares traded 2.09% lower at $0.9545 per share at the time of writing on Thursday mid-morning.

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