Aurora Cannabis Sends a Mixed Message to Marijuana Investors




 

It hasn't taken long for Aurora Cannabis (NYSE: ACB) to become one of the budding giants of the marijuana industry. With its extensive growth capacity, its voracious appetite for acquisitions, and its name and brand awareness among consumers, Aurora consistently ranks among the top prospects for cannabis stocks.

Coming into Monday's fiscal second-quarter financial report, Aurora investors were looking forward to seeing substantial gains in revenue. Yet they weren't sure how those numbers would translate on the bottom line, and they wanted to see signs that Aurora is looking at ways to boost long-term profitability. Aurora's report was mixed on that front, and despite expected sales increases, there's still uncertainty about whether Aurora's future strategic direction will be the best for shareholders.

Image source: Aurora Cannabis.

How Aurora moved forward

Aurora Cannabis' fiscal second-quarter results showed just how complex cannabis company financials are right now. Net revenue came in at 54.2 million Canadian dollars, which was up 83% from the fiscal first quarter and more than quadruple what the cannabis company had in sales in the year-earlier period. However, Aurora reported a monumental loss of CA$237.8 million, with mark-to-market adjustments for its derivative cannabis investments contributing about CA$190 million to the company's red ink.

Aurora had good news with its production capacity. The company said it produced more than 7,800 kilos of cannabis during the quarter, up 57% from three months ago and more than six times what it produced a year ago. Similarly, kilos sold rose to nearly 7,000, with the rollout of recreational cannabis in Canada contributing considerably to Aurora's distribution. Sales to the Canadian consumer market represented about 40% of Aurora's overall revenue for the period, with medical marijuana sales making up most of the remainder of the company's cannabis-related sales.

However, Aurora saw some pressures on the cost front. Average cash cost of dried cannabis jumped by nearly a third to CA$1.92 per gram, with the company citing higher expenses related to the ramp-up of the Aurora Sky facility in Edmonton and the regulatory costs connected to the launch of recreational cannabis throughout Canada. Aurora tried to reassure investors that this increase should be temporary, and cost savings should result from the optimization of new production facilities as they come fully online.

CEO Terry Booth was happy with the way the company performed during the period. "Aurora continues to execute strongly across all of its market segments," Booth said, and "our brands continue to resonate extremely well in the consumer market." The CEO also pointed to international market opportunities as well as the recent MedReleaf acquisition as key components of Aurora's long-term growth strategy.

Can Aurora shine brighter?

Aurora has high hopes for the future. As Booth puts it:

Aurora pointed to a large number of new supply agreements to expand its international scope. Exports to Poland, Luxembourg, Mexico, the U.K., and the Czech Republic were the latest in what is now an operation that touches almost two dozen countries worldwide. At the same time, acquisitions have played a key role, and further mergers both during and after the fiscal second quarter show Aurora's commitment to growing by all available means.

Yet some investors aren't entirely certain Aurora Cannabis is taking the optimal approach toward the industry. Unlike other major players like Canopy Growth and Cronos Group, Aurora has yet to make any major partnership or collaboration agreement with a large company in the consumer goods or healthcare space, and some fear the lack of support could put Aurora at a competitive disadvantage to its rivals.

Aurora shareholders didn't seem all that excited by the news, and the stock traded down as much as 5% in pre-market trading Tuesday following the late-Monday announcement. That's a minor move in the context of the big jump that Aurora shares enjoyed in January, but it'll be interesting to see whether the stock can regain its positive momentum once investors have a chance to digest the financial and business performance that the cannabis giant has achieved and assess its potential for future growth.

Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

COMMENTS

More Related News

5 Marijuana Stocks With the Most Debt: Should Investors Be Worried?
5 Marijuana Stocks With the Most Debt: Should Investors Be Worried?

These companies have the highest debt levels in the cannabis industry. But there's more to the story.

Better Marijuana Stock: Organigram Holdings vs. Aphria
Better Marijuana Stock: Organigram Holdings vs. Aphria

Which Canadian cannabis producer has what it takes to bounce back from recent disappointments?

Got the Munchies? Food Brands Are Taking 4/20 Celebrations to the Next Level
Got the Munchies? Food Brands Are Taking 4/20 Celebrations to the Next Level

Got the Munchies? Food Brands Are Taking 4/20 Celebrations to the Next Level

How dare you do this to Cypress Hill, Hollywood Walk of Fame
How dare you do this to Cypress Hill, Hollywood Walk of Fame

West Coast hip-hop legends Cypress Hill finally made it to the Hollywood Walk of Fame on Thursday -- two days too early, in the minds of some.The plaque was formally presented on Thursday, April 18, 2019. But everyone knows that Cypress Hill is synonymous with marijuana. Couldn't whoever constructed the plaque have waited two days to present it on 4/20, the biggest marijuana holiday of the year?SEE ALSO: Where the 2020 presidential candidates stand on marijuana legalizationCypress Hill is known for their many excellent pro-weed jams, including "Hits From the Bong" and the subtly titled, "I Want to Get High."The group is also active in the legal marijuana industry....

Is 4/20 on the way to becoming marijuana
Is 4/20 on the way to becoming marijuana's Hallmark holiday?

Once an underground celebration of weed smoking, the annual event is turning into big business in the era of legalizationTyler Shumway of Aurora, Colorado, lights up a joint at 420pm in Civic Center Park on 20 April 2012 in Denver. Photograph: Marc Piscotty/Getty ImagesToday may be the day that marijuana officially loses its cool. April 20, 4/20, the once underground national holiday for dope smokers, appears to have sold out to The Man.The origins of 4/20 are as disputed as the last pack of gummy bears after a long smoking session. Some say it was once police code for "marijuana smoking in progress" - apparently untrue - and others claim it was invented by high school stoners in Marin...

Leave a Comment

Your email address will not be published. Required fields are marked with *

Cancel reply

Comments

Top News: Economy

facebook
Hit "Like"
Don't miss any important news
Thanks, you don't need to show me this anymore.