Keep buying Aurora Cannabis, says Canaccord Genuity

A quarter that fell below his expectations isn’t dampening Canaccord Genuity analyst Neil Maruoka’s enthusiasm for Aurora Cannabis (TSXV:ACB).

Yesterday, Aurora Cannabis reported its Q3, 2017 results. The company earned $100,000 on revenue of $5.2-million, up substantially from the $200,000 topline the company posted in the same period last year.

“Going forward, with one of the strongest cash balances in the industry, we will be able to execute on our aggressive expansion plans, both domestically and internationally, as we have done successfully with the acquisition of Peloton and our participation in the IPO of Australia’s first licensed cannabis company, Cann Group,” said CEO said Terry Booth. “Finally, as we are maturing as an organization, we have added considerable strength to the management team with the appointments of a chief financial officer and director of Quebec Affairs. These new team members will add important additional senior executive capacity as we pursue our goals and execute our growth strategy.”

Maruoka says he had modeled revenue of $7.7-million, but notes that Aurora’s sales run rate continues to track higher into the fourth quarter and is now above $2-million a month. The analyst says that with aggressive expansion plans and a cash warchest of $186-million, he would still be a buyer of the stock. The analyst today maintained his “Speculative Buy” rating and one-year price target of $3.25 on Aurora, implying a return of 29 per cent at the time of publication. But he says impending legalization may send his target higher.

“Our un-risked analysis for Aurora suggests a valuation in excess of $5.00 per share if marijuana is legalized in Canada, supporting our SPECULATIVE BUY rating as the pathway to the rec market further unfolds,” he says. “We would remain buyers of the stock ahead of construction milestones for Aurora Sky.”

Maruoka thinks Aurora Cannabis will generate EBITDA of $7.9-million on revenue of $27-million in fiscal 2017. He expects these numbers will improve to EBITDA of $80.2-million on revenue of $192-million the following year.