“Volatile” Aurora Cannabis could break out to new highs, this investor says

No stranger to big deals in the pot space, Aurora Cannabis (Quote, Chart TSX:ACB) is reportedly in talks with Coca-Cola Co. to develop a cannabis-infused beverage. The Edmonton-based licensed producer could now be breaking out to new highs, something that analyst Hap Sneddon says might follow from a major investment deal.

Aurora’s share price was up 14 per cent in early trading on Monday as investors react to the news that ACB may be on the verge of a deal with beverage giant Coca-Cola. The story comes a month after sector leader Canopy Growth Corp (Quote, Chart TSX:WEED) announced a new deal with beer and alcohol company Constellation Brands that prompted cannabis stocks across the board to heat up.

As reported by journalist David George-Cosh to BNN Bloomberg, the Coca-Cola deal is said to be aimed not at the upcoming market for recreational drinks infused with THC, the cannabis compound that gets you high, but more so at potentially restorative drinks infused with cannabis other main compound, CBD.

“Several sources have told me that Coca-Cola is in serious talks with Aurora Cannabis and the talks revolve around CBD drinks,” says George-Cosh. “It’s more of the recovery drink angle that Coca-Cola is interested in pursuing. This is the world’s biggest beverage maker and the fact that they’re even interested in the cannabis space really demonstrates the maturity of how cannabis has performed over the last several months.”

Aurora has made a number of major investments over the past year, including the acquisitions of cannabis companies CanniMed and MedReleaf and, just last week, the purchase of South America’s largest cannabis producer ICC Labs, which reportedly claims about 70 per cent of the pot market in Uruguay, where recreational marijuana has been legalized.

The cannabis sector has yet to fully get off the ground both here in Canada and in large-market states in the US such as California, making for high volatility in the space, says Hap Sneddon, chief portfolio manager at CastleMoore Inc.

Aurora Cannabis Stock Forecast

“This area scares the bejeebus out of me,” says Sneddon to BNN Bloomberg. “I go back to the typewriter analogy. Typewriters exploded when they first came out. Ten, fifteen years later and there’s only four or five [companies] and then you get to the 1970s there’s Smith Corona and maybe Brother. When you look at the shortness of the trends and the volatility, for us, we just wouldn’t touch it.”

Sneddon says that from a technical perspective, Aurora is a prime example of volatility in the space.

“It’s got a pretty big range if you look at the chart — $5 to $12,” he says. “That’s a pretty big range. Certainly, if we got below the $8 level, there’s nothing to stop it [from falling lower]. Really volatile.”

“Certainly, it could break out to new highs if we get an investment like we saw with Canopy Growth by a big partner in the US,” Sneddon says. “That could happen but you can’t really look at a long-term investment and expect your plan to be based on that.”