Most cannabis companies have been struggling to turn a profit over the past year. As investors get tired of raw revenue growth, markets have been reacting poorly to these companies, showing a preference to stocks that are showing some signs of profitability.
As it turns out, one of the largest cannabis companies in the world could be on the verge of a profitable quarter according to Wall Street’s top marijuana analyst.
Aurora Cannabis (NYSE: ACB) received some extra support on Monday as Wall Street’s top cannabis analyst reiterated her “buy” rating on the stock as well as her view that Aurora is the best pick in the industry for investors.
Vivien Azer, an analyst at Cowen & Co, wrote in a note to clients on Monday that while other companies have been struggling with losses, Aurora could reach positive earnings as soon as this quarter.
“While a number of peers have communicated a longer pathway to profitability, ACB has the opportunity to be among the few Canadian LPs to reach positive EBITDA as soon as 4Q19 (ending June 30), which is a particular standout as category leader WEED posted an expanded EBITDA loss in calendar 1Q19 (at -C$98 mm),” said Vivien Azer. She added that “At a time when EBITDA losses across the industry are elevated, we have a strong appreciation for ACB’s operational rigor…given its near term path to profitability in conjunction with strong early stage execution within the nascent Canadian cannabis adult use market.”
In comparison to Aurora’s next largest competitor, Canopy Growth Corp (NYSE: CGC), Aurora is doing better than it’s rival, with Canopy reporting a C$98 million quarterly loss.
While many institutions, such as Bank of America Merrill Lynch alongside Cowen & Co, vouch for Aurora as the top pick in the sector, other analysts such as Andrew Carter from Stifel prefer Canopy.
As the recreational market evolves alongside the second-wave of Canadian legalization in Canada which will open up CBD-products (vapes, edibles, beverages, etc.), Azer argues that Aurora will continue to solidify and grow it’s revenues while being the largest marijuana company in the world to be profitable.
Shares of Aurora Cannabis ended the day up 3 percent in response to the news. While shares of the marijuana giant jumped over the course of the first quarter, shares have since stalled in the second quarter, falling from a mid-March high of C$13 to just under $10 as of today. This follows what has been an ongoing trend in the sector, with cannabis stocks in May falling significantly across the board.
Aurora Cannabis Company Profile
Aurora Cannabis Inc is a Canada-based company engaged in the production and distribution of medical cannabis. The Company is vertically integrated and horizontally diversified across every key segment of the value chain from facility engineering and design to cannabis breeding and retail distribution.
The Company’s purpose-built facilities which integrate technologies across all processes are defined by automation and customization. The Company has a funded capacity of more than 625,000 kilograms per year as well as sales and operations in 24 countries worldwide. – Warrior Trading News