Cannabis companies have had a good day today with multiple news announcements coming out. The biggest winner, however, was Canada’s largest cannabis producer which received good news from Wall Street. Aurora Cannabis Inc (TSE: ACB)(NYSE: ACB) jumped 12 percent today after investment bank Cowen & Co. picked the company as it’s top pick in the industry, dethroning its rival and another major Canadian competitor, Canopy Growth Corp (TSE: CGC)(NYSE: WEED).
Cowen made news recently as the first Wall Street company to initiate stock research coverage on the marijuana industry. Analyzing a variety of companies, the investment bank concluded that the Edmonton-based producer will be one of the top performers in the Canadian industry. While it’s not a surprising choice, other analysts have seen Aurora’s tendency of making all-stock acquisitions as exerting a downward price on stock prices, making it a less favored investment choice for some.
“The company’s large cultivation footprint, capable of producing over 575,000 kilograms, provides ACB with the necessary infrastructure to weather early storms in adult use while continuing to grow higher-value revenues in the medical market,” analysts led by Vivien Azer wrote according to Yahoo Finance. “We believe that ACB will generate positive EBITDA by 4Q19 (June), which would be among the first LPs to reach that milestone, and ahead of large cultivation peers WEED and APHA.”
Other’s regard Aurora cannabis as a company that, while likely to remain a big figure in the short-term, will end up being relegated to something of a glorified agricultural farmer, producing large quantities of cannabis while retail-centric companies with strong brands dominate the value chain. Regardless of this prediction that some experts espouse, strong cultivators like Aurora will remain big figures in the cannabis sector for many years yet.
Cowen & Co released a report recently which predicted the U.S. CBD market would be around $16 billion within the next six years. This estimate assumes that 10 percent of the U.S. populace will be using CBD products in some form, spending on average $640 per person. While at first such a figure might seem generous, CBD can be incorporated into a variety of industries, including beauty and healthcare products, which area already gigantic in an of themselves.
A survey also conducted by the investment bank revealed that out of a 2,500-population size, around 7 percent of respondents already us CBD products of some kind.“This initial response piqued our interest considerably, as it was much higher than we would have suspected,” said Cowen analyst Vivien Azer at the time. He also compared this to the 4.2 percent of people who reported to use e-cigarette devices and 19.6 percent who are current tobacco users.
Jumping over 12 percent in one day is a significant move for a company of Aurora’s size, but still quite possible considering the youth of the cannabis sector in general.
Aurora Cannabis Company Profile
Headquartered in Edmonton, Alberta, Canada with funded capacity in excess of 500,000 kg per annum and sales and operations in 20 countries across five continents, Aurora is one of the world’s largest and leading cannabis companies. Aurora is vertically integrated and horizontally diversified across every key segment of the value chain, from facility engineering and design to cannabis breeding and genetics research, cannabis and hemp production, derivatives, high value-add product development, home cultivation, wholesale and retail distribution. – Aurora