Aurora vs. Canopy & Tilray: Which NASDAQ-Listed Cannabis Stock Offers The Best Growth Potential?

Aurora Cannabis Inc. ACB recently reported strong quarterly earnings that outpaced market expectations, despite a downturn across the cannabis sector. 

Aurora's share price fell 18% following the earnings report, reflecting broader sector pressures, with the MSOS ETF down 29%. As of this morning, November 7, 2024, Aurora's stock is trading at $5.25 in pre-market, showing a 2.54% increase from its previous close.

"Despite having no U.S. exposure, Aurora surpassed consensus estimates on sales and EBITDA, encouraging guidance for the December quarter," observed analyst Pablo Zuanic of Zuanic & Associates. 

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International Medical Cannabis Growth Drives Revenue

Aurora's international medical cannabis (MMJ) business significantly bolstered its revenue, with European sales doubling quarter-over-quarter to $20 million, led by strong demand in Germany and Poland. 

Australian MMJ sales also rose from $9.3 million to $15.1 million, benefiting from an August inventory drawdown following the MedReleaf Australia acquisition.

Profit Margins Reflect International Expansion

The company's profitability has improved as higher-margin international markets now make up 57% of Aurora's global MMJ sales from 42% a year ago. This boosted adjusted cash gross margins to 68% for MMJ products, a 5% increase year-over-year, with total company margins rising 450 basis points to over 55%. 

Operating expenses remained steady at $35 million per quarter, resulting in an EBITDA margin increase from 5% to 12% year-over-year.

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December Quarter Guidance And Challenges

Aurora anticipates stable sales and EBITDA for the December quarter, exceeding consensus by 9% and 90%, respectively. The outlook includes a seasonal decline in its propagation business but projects positive EBITDA and free cash flow, supported by Aurora's net cash position of $27 million (cash of $85 million against $58 million in Bevo-related debt). 

Zuanic noted that international growth remains promising, although "shipments can be inconsistent, making end-market growth predictions difficult."

Valuation Compared To Peers

According to Zuanic, with a valuation of 1.4x its annualized sales, Aurora appears undervalued compared to competitors Tilray TLRY and Canopy Growth CGC, which trade at multiples of 3-4x sales. 

"Though business models differ, operational trends and lower valuation offer potential upside for ACB shares," Zuanic commented. Aurora's combination of higher-margin international revenue and more conservative valuation may present an opportunity amid sector volatility. 

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