Analyst: Aurora Cannabis May Be 'Missing The Boat' In Beverages

Aurora Cannabis Inc ACB shares bounced back Wednesday after a mixed fiscal third-quarter earnings report. One Wall Street analyst said Aurora is making progress on its long-term goals, but the company may also be dropping the ball on some valuable opportunities.

The Analyst

Bank of America analyst Christopher Carey reiterated his Buy rating and C$15 price target ($11 USD).

The Thesis

Carey said Aurora’s third-quarter results were a bit soft compared to his expectations, but investors should expect the company’s numbers to be volatile on a quarter-by-quarter basis in the near term. The most important takeaway from the quarter is Aurora reiterated its fourth-quarter guidance for 25,000 kg of cannabis ready for sale, positive EBITDA and improving margins heading into fiscal 2020.

Carey said Aurora is adding value by expanding into established products such as vapes and edibles, it might be missing out in another area.

“We see the strategy as reasonable; however, with so many companies also focused on these areas, and very few with the scale or capabilities to build advantages in untapped areas like beverages (with the exception of Canopy and Hexo), we wonder if Aurora could be ‘missing the boat’ on an area which could prove large as newer consumers wanting less pervasive, socially accepted product forms demand both psychoactive (THC-infused) and CBD beverages,” Carey wrote in a note.

Carey is bullish on Aurora, Canopy Growth Corp CGC and Hexo Corp HEXO, but recently named Hexo his top cannabis stock pick. Aurora is the only one of the three that hasn’t announced a major partnership with a large consumer company, an announcement that could serve as a bullish near-term catalyst for the stock.

Price Action

Aurora's stock traded around $8.73 per share at time of publication.

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