Aurora Cannabis Analyst Drops Bearish Stance, But Is Far From Convinced

Aurora Cannabis Inc. ACB ACB still isn't a Buy, according to MKM Partners, but the sell-side firm dropped its bear stance on the stock Friday —  still saying "issues abound" with the Canadian marijuana company's outlook.

The Aurora Cannabis Analyst

Bill Kirk upgraded Aurora's Toronto-listed stock from Sell to Neutral and lowered the fair value estimate from CA$2 ($1.51) to CA$1.75 ($1.32).

The Aurora Cannabis Thesis

Kirk said in a Friday upgrade note that he doesn't believe Aurora will be profitable by the first quarter of 2021; thinks there will be more writedowns; and has other questions about the company's finances. (See Kirk's track record here.)

Those problems may not be fully revealed for months, though, and in the meantime, the immediate quarter has been "largely de-risked," the analyst said. 

"By no means do we recommend owning the stock, but without a near(er)-term catalyst, we can't recommend pressing a short thesis." 

Aurora has now revised its timeline for positive EBITDA twice, and posted its worst EBITDA loss in its history in the second quarter of 2020. 

"To believe their guidance, you have to assume Aurora didn't take prior efforts seriously, but are now appropriately committed AND the task is achievable," Kirk said. "We aren't convinced."

ACB Price Action

Aurora shares were up 5.1% at $1.54 at the time of publication Friday. 

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Photo courtesy of Aurora Cannabis.