It may very well be that time is up for Wall Street’s top cannabis stock now that one major analyst has given his warnings about this marijuana giant. Large-cap cannabis companies have been hit hard over the past couple of months as poor profitability and unexpected losses saw many major producers take significant losses in their market cap.
Aurora Cannabis (NYSE: ACB) has remained strong for the most part, weathering the storm while rivals such as Canopy Growth (NYSE: CGC) faltered amidst shocking quarterly losses.
While many have wondered whether or not the stock will continue to stand strong or whether it will lose steam, the company’s recent financial reports have disappointed many investors who were expecting some sort of a profit in 2019. In response, one analyst has gone ahead and downgraded Aurora.
Stifel Nicolaus analyst Andrew Carter told his clients on Monday that it was time to sell Aurora Cannabis. Besides downgrading the stock to a “sell” rating after first covering the company with a “hold,” he also cut his target price for Aurora down to C$5, 31% below where the company is currently trading.
“Our outlook suggests significant downside potential for the shares of Aurora over the near term, given it will be difficult for the company to continue positioning for the larger global opportunity within the confines of significant financing risk that could challenge the company’s ability to fully embrace the level of investment needed to be a leader not only in the global cannabis category but also in Canada,” Carter wrote on Monday in a note to clients, adding that the company’s inability to secure a partnership has caused uncertainty in the markets. “Aurora has given mixed commentary on pursuing partnerships, but we believe the company will be required to continue pursuing an independent path with global consumer companies likely taking a wait-and-see approach to the sector with less incentive to partner with a Canadian L.P.”
Aurora reported worse then expects fiscal Q4 losses and revenue that had missed the already lowered expectations. Most devastatingly, the company announced that they are pushing back estimates on when they will report a profit back to 2020, something which few were expecting.
In response, shares fell by almost 10% last Thursday when the news first broke. The analyst goes on to add that while Canopy Growth has taken a hit, Aurora will end up struggling to compete with its rival in the years to come without a significant partnership to its name, something that Aurora still lacks.
In response to this news, shares of Aurora fell by around 7% on Monday. This could very well be the start of a significant shift in Wall Street as formerly optimistic analysts begin downgrading the cannabis giant.
Aurora Cannabis Company Profile
Aurora Cannabis Inc., headquartered in Edmonton, Canada, cultivates and sells medicinal and recreational cannabis through a portfolio of brands that include Aurora, CanniMed, MedReleaf, and San Rafael ’71. Although the company primarily operates in Canada, Aurora has expanded internationally through medical cannabis exporting agreements or cultivation facilities in more than 25 countries. – Warrior Trading News
