Is Aurora Cannabis a buy? (August, 2024)

Following the company’s first quarter results, Roth MKM analyst Bill Kirk says there was improvement, but ultimately remains on the fence when it comes to Aurora Cannabis (Aurora Cannabis Stock Quote, Chart, News, Analysts, Financials TSX:ACB).

On August 7, ACB reported its Q1, 2025 results. The company post Adjusted EBITDA of $4.9-million on revenue of $83.4-million, a topline that was up 12%, year-over-year.

“This was a milestone quarter for Aurora, as we delivered strong net revenue1 growth, a substantial increase in adjusted EBITDA1, and positive free cash flow1,” CEO Miguel Martin said. “Our impressive performance was driven by record net revenue1 in the rapidly growing global medical cannabis segment, and we look forward to building on our achievements in key markets such as Germany, Australia, and the UK throughout fiscal 2025 and beyond. The quarter was further supported by a record contribution from our Bevo plant propagation business, underscoring the strength of our diversified business model. The progress we made during the quarter sets a strong foundation for the rest of the fiscal year, and with our continued commitment to operational excellence and strategic growth, we are well-positioned to sustain this positive momentum. Our growth in global medical, the highest margin cannabis segment, alongside our strong balance sheet and ongoing fiscal discipline, are pivotal as we build on our achievement with respect to positive free cash flow.”

Kirk says ACB’s promise to improve after its Q4 results was delivered on.

“Aurora has competently navigated a difficult environment (solvency risks and large supply pressures in Canada), Today, Aurora’s balance sheet and fundamentals are stable and improving,” he wrote.  “The balance sheet is net cash, adj. EBITDA is positive, free cash flow turned positive in 1Q, and medical performance is admirable. We remain unsure on ACB’s ability to consistently service int’l opportunities from Canada, but German expansion, with local production, and Australia successes are promising.”

In a research update to clients August 7, Kirk maintained his “Neutral” rating but raised his price target on ACB from $8.00 to $9.00.

The analyst thinks ACB will post EBITDA of $12.6-million on revenue of $270.4-million in fiscal 2024. He expects those numbers will improve to EBITDA of $17.7-million on a topline of $308.1-million in fiscal 2025.

“Our DCF-based C$9.00 PT implies ~26x EV/2025E EBITDA. We assume: 1) ACB achieves positive full-year FCF until FY2025; 2) revenue grows from C$248mn in FY19 to C$308mn in FY25; 3) P&L leverage turns a FY19 ~C$158mn EBITDA loss to a C$17.7mn FY25 EBITDA gain; 4) terminal growth market of 2%; 5) capex normalizes at ~$50mn; and 6) a WACC of ~9.5%,” Kirk added.