Aurora Cannabis Inc.$1.925(1.85%)

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dmoney Well-calibrated. Correct 80 % of the time. 4199.02
$0.2 $0.8 forecast for 2021-12-31

Aurora cannabis operates in 25 countries and produce cannabis in 15 countries and own companies in the whole value chain. They have aggressively acquired companies for the last few years, financed by issuing new stocks which has diluted current investors. It has been a rough year for Aurora investors with a 80% crash from the top.

Financials: Market cap 2.1 Billions. P/B of about 0.5, but only $190 million in cash. P/S of 7.1. There is always a question how much are those assets really are worth if they were to try and liquidate some assets to improve runway? Currently their aggressive growth and expansion plan results in the company loosing money like crazy. 14% of shares shorted. Aurora expects their revenue to triple from around $200million in 2019 to $600million in 2020. Aurora has lately started to cut costs and slow expansion plans, but they will still probably have to raise more capital within a year regardless of their austerity measures.

Crowded space with many players trying to grow. The market is expected to grow substantially globally with a doubling within 2023 from todays total sales. Currently there are industry wide problems with sales licences and slow rollout of dispensaries, which makes it difficult to get products to market. This should however be a passing problem. Even though there is a movement of countries legalising cannabis products, this might stop at one point and even be rolled back if proves of negative effects starts to pile up.

The most important question in all of this is probably if Aurora will be able to operate with high margins and thus create a good business over time if they manage to tackle current problems and get out on the other side. Owning more of the value chain could help them, but my opinion is that cannabis is more like producing rice than it is a brand name like apple. I therefore believe that there are little chance of maintaining high operating margins over time.

2
insighter 0
$1 $1.5 forecast for 2020-01-31

I think they will have to start thinking about raising money rather quickly, which will scare investors away

0
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