Aurora Cannabis (TSX:ACB) is reaching lows not seen since last November, which might just make it a buying opportunity, says Cole Kachur, portfolio manager at Scotia Wealth Management.
With just a couple of months and change left before recreational cannabis becomes a reality, much is still to be decided about Canada’s legal marijuana industry. Nevertheless, it’s clear that Edmonton-based Aurora is going to be a big player come October 17, says Kachur, who points to Canopy Growth Corp (TSX:WEED, NYSE:CGC) and Aurora as the likely heavyweights.
“[Aurora] has these structural partnerships lined up, so as to the release of everything that’s coming up over the next few months, I think they’re very well positioned,” Kachur told BNN Bloomberg this week.
“In terms of the risk of the company, this sector is very speculative. Basically, nobody really knows how to value these companies,” he says. “I would look at them as a hierarchy: I would probably put Canopy Growth first just because it does seem to be the most-capitalized of the bunch. But Aurora would probably fall into that group right after.”
Aurora continues to make headlines with its deals and acquisitions, this week announcing a license agreement with liquor retailer Alcanna (formerly Liquor Stores N.A.) which will see the latter gain exclusive rights to open retail cannabis shops under the Aurora brand name.
In February, Aurora purchased a 20 per cent stake in Alcanna, which currently operates 229 retail outlets in Western Canada and Alaska. Of the new agreement, Aurora CEO Terry Booth says that it “creates a significant competitive advantage that will allow for the rapid development of a robust retail network in Alberta, and any other jurisdiction that permits private retail of cannabis for adult consumer use.”
Kachur says that all of Aurora’s wheeling and dealing — including the purchase this year of cannabis companies CanniMed Therapeutics and MedReleaf — may have led to investor skepticism that the company can solve its integration puzzle in time for the launch of rec cannabis.
“You see some companies where they’re just champing at the bit to just grow, grow, grow and then they have to figure out, how do we put this altogether afterwards, and I think the market is tying that in to some of the price [of Aurora] in that some of these synergies that you’re expecting, some of these partnerships that you’re expecting, they might not come to fruition,” he says.
“It might be a little bit of a wait-and-see approach as we head later into the year,” Kachur says, “but certainly they’ve come down from their highs, so if you wanted to look at them now, I think the price is relatively fair.”
ACB hit a high of $15.20 in late January but has shed much of that value in the months since and is currently trading in the low six-dollar range.