>Three minute read on Aurora Cannabis Stock Price Prediction
Following the announcement of a major acquisition, PI Financial analyst Jason Zandberg has raised his price target on Aurora Cannabis (Quote, Chart TSX:ACB).
This morning, ACB announced it would acquire ICC Labs for $1.95 a share, or a total value of about $290-million.
“ICC is an ideal partner for Aurora to establish leadership in the South American cannabis market, delivering clear first mover advantage on a continent with over 420 million people,” Aurora CEO Terry Booth said. “ICC and its management team have shown exceptional vision and execution across production, expansion, distribution and product development. The company has a very strong management team with deep connections throughout the continent, which we believe will facilitate successful expansion into all South American markets.”
Aurora Cannabis Stock gets new target
Zandberg gives the thumbs-up to the arrangement.
“This acquisition provides ACB with a strong presence in South America which has global opportunities,” he says. “Many Canadian LPs have made investments internationally but ICC Labs management not only have an operating history but have high level connections to many Latin American countries which have already translated into supply agreements (Mexico, Brazil for example).”
In a research update to clients today, Zandberg maintained his “Buy” rating on Aurora Cannabis, but raised his one-year price target on the stock from $13.00 to $15.00, implying a return of 84.7 per cent at the time of publication.
The analyst thinks ACB will generate EBITDA of negative $34.9-million on revenue of $64.5-million in fiscal 2018. He expects those numbers will improve to EBITDA of positive $80.8-million on a topline of $463.5-million the following year.
Zandberg warns that there is one cavaet to his more bullish target.
“We caution investors that a broad correction in equity valuations in the sector will negatively impact our target and recommendation,” he says. “Our ACB target represents an EV/EBITDA multiple of 44.2x based on our FY20 EBITDA (previously 41.2x).”