Why Should Investors Keep An Eye On Aurora Cannabis Stock Despite A Weak Quarter?

Aurora Cannabis Inc. ACB reported financial and operational results late Thursday for the third quarter of fiscal 2022 ended March 31, 2022.

For the quarter, the marijuana giant disclosed total cannabis net revenue of $50.4 million, down 17% sequentially. 

Adjusted gross margin before fair value adjustments on cannabis net revenue was 54% in Q3 2022 versus 53% in the prior quarter and 44% in Q3 2021. The increase in adjusted gross margin compared to the prior-year period is due to increased sales in the company’s international medical markets which command significantly higher average net selling prices and margins.

Adjusted EBITDA loss declined to $12.3 million in Q3 2022 versus $9.0 million in Q2 2022 but narrowed from $20.9 million in the prior-year period.

The Analyst

Cantor Fitzgerald’s Pablo Zuanic kept a ‘Neutral’ rating on Aurora’s stock, lowering the price target to CA$3.90 ($3.003) from CA$7.60. 

The Thesis

Zuanic lowered the price target to address reduced estimates and overall sectoral derating. 

According to the analyst, Aurora’s increased cash cost-saving targets provide it with more reliability in becoming EBITDA positive by December on a run-rate basis. 

“We think the company’s top 2 global cannabis exporter status is a reason to keep an eye on the stock, although question marks remain about lack of profitability and cash flows (it raised CA$139 million in new equity in the March quarter, but free cash flow was -$45 million).”

What about Q3 results? 

If counted from the first quarter of fiscal 2021, the third quarter is the second-lowest of the last seven quarters, the analyst noted. 

“In that context, we do not think this was such a great quarter.” 

Furthermore, domestic medical sales were the lowest of the seven last quarters. However, nearly $15 million in exports for the quarter is solid, and second only to Tilray’ TLRY $20 million in exports in their last reported quarter. 

The Price Action 

Aurora shares traded 7.42% higher at $2.6 per share at the time of writing Friday. 

Photo: Courtesy of Esteban Lopez on Unsplash