He likes a lot of things about the company, but GMP Securities analyst Martin Landry thinks Aurora Cannabis (TSX:ACB) is fully valued at current levels.
In a research update to clients today, Landry maintained his “Hold” rating, but raised his one-year price target on Aurora from $5.00 to $6.00, implying a return of negative 17.1 per cent at the time of publication.
Landry notes the difference between a great company and a great investment.
“Aurora’s momentum has accelerated this fall which has not gone unnoticed by investors as Aurora’s trading volume has been the highest of the TSX for several trading sessions in October and November,” the analyst says. “While we like ACB’s growth prospects, balance sheet and its strong competitive positioning, we feel these are already reflected in the company’s share price given it trades at a 29x CY19 EBITDA, a 74% premium to peers.”
Landry thinks Aurora Cannabis will generate EBITDA of $17.2-million on revenue of $78.3-million in fiscal 2018. He expects those numbers will improve to EBITDA of $101.0-million on a topline of $278.2-million the following year.
Noting the company’s recent M&A activity, the analyst says its ambitious and currently unfulfilled run at CanniMed Therapeutics would leave Aurora second only to Canopy Growth Corp.
“Aurora has been quite active on the M&A front recently, announcing two new acquisitions (H2 Biopharma Inc., and Larssen Ltd.) in addition to launching its formal takeover bid for CanniMed Therapeutics Inc. (CMED:TSX), all last week,” the analyst notes. “This highlights ACB’s aggressive growth strategy, and under a scenario where Aurora succeeds in acquiring CMED, this would solidify ACB as the industry’s 2nd largest LP.”