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Aurora Cannabis stock has no upside, GMP Securities says

Aurora Cannabis

He has raised his one-year price target on the stock, but GMP analyst Martin Landry doesn’t think there is any money to be made on Aurora Cannabis (Aurora Cannabis Stock Quote, Chart TSX:ACB).

On Monday, Aurora Cannabis reported its Q4 and fiscal 2018 results. The company earned $79,268 on revenue of $19.2-million, a topline that was up 223 per cent over the same period last year.

“Aurora made substantial progress toward our strategic goal of becoming the global scale and margin leader in the cannabis industry, establishing a vertically integrated company with a broadly diversified product offering with a large global footprint,” CEO Terry Booth said. “Our high-pace, consistent execution has enabled us to complete a number of transformative acquisitions, bringing together industry-leading companies in terms of scale, quality, efficiencies, plant and medical science, product development and innovation, brands, and international distribution. “With coast-to-coast supply arrangements and our strategic investment in Alcanna, we are very well positioned to capitalize on the significant adult consumer use opportunity in Canada. With reported fourth quarter revenues of $19.1-million, pro forma fourth quarter revenues of over $33.1-million and production capacity scaling up rapidly, we anticipate accelerated revenue growth during fiscal 2019. We have invested heavily in our organizational capabilities, including sales, marketing, and corporate talent and capacity, to ensure we will continue to drive strong and sustainable long-term growth.”

Good news already priced into Aurora Cannabis stock

Landry says the quarter fell below his expectations on both the top and bottom line. He says there is plenty to like about ACB, but nothing that isn’t already priced into its stock.

“Aurora’s shares have had significant momentum in recent weeks supported by rumors of a partnership with a global CPG company and also by the company’s intention to list on a US stock exchange,” the analyst explains. “These have overshadowed delays on the production ramp-up of the company’s largest facility and a significantly larger cost structure than expected. Limited information was communicated to explain the delays vs communicated timelines at the July investor day. Hence, with the material changes made to our FY19 profitability expectations, the company’s valuation has increased significantly. In our view, significant positive news are priced into Aurora’s shares and we would wait for a better entry point.

In a research update to clients today, Landry maintained his “Hold” rating on Aurora Cannabis, but raised his one-year price target on the stock from $9.00 to $11.00, implying a return of negative 13.9 per cent at the time of publication.

Landry thinks ACB will post EBITDA of $37.7-million on revenue of $398.4-million in fiscal 2019. He expects those numbers will improve to EBITDA of $225.9-million on a topline of $830.2-million the following year.

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About The Author /

Nick Waddell
Cantech Letter founder and editor Nick Waddell has lived in five Canadian provinces and is proud of his country's often overlooked contributions to the world of science and technology. Waddell takes a regular shift on the Canadian media circuit, making appearances on CTV, CBC and BNN, and contributing to publications such as Canadian Business and Business Insider.

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