Although the Canadian legislature legalized cannabis on the 17th of October 2018, Canadian citizens are still struggling to get their hands on legal cannabis in shops across the country. The high demands for the few available products immediately created an abnormal market. Ready companies like Aurora Cannabis immediately captured a larger market share.
However, Aurora’s impressive start hit a snag in the last quarter of 2018. Aurora Cannabis (NYSE: ACB) ended its impressive run down 34.3% at the end to 2018. This placed the company as the second worst behind Aphria (NYSE: APHA) among the top 5 Canadian cannabis stocks.
Although the stock got a quick bump this morning due to news of the acquisition of a 51% stake in Portugal’s Gaia Pharma.
Irrespective of Aurora’s loss in the last quarter of 2018, the company’s shares have grown nearly 40% in less than five years from 16 million to 998 million shares. With the acquisition of Whistler Medical Marijuana (in January) and the expected rise in the global sale of cannabis by 38% in 2019 by ArcView Market Research and BDS Analytics, Aurora is projected to lead the industry as the largest grower—having a yearly peak yield of over 500,000 kilograms.
Inasmuch as Aurora has the numbers in production, it needs to speed up its move into the international market, particularly the United States—and investors will be counting on this to happen soon. Aurora’s major competitor, Canopy Growth (NYSE: CGC), quickly got a stake in the U.S. market upon the legalization of hemp in the country in December.
With the U.S. market projected to reach $22 billion by 2022, Aurora needs to stop talking and take actions. Like Cronos Group and Canopy Growth, Aurora needs to start considering a partnership in a bid to capture significant international market shares.
All told, we would suggest picking up some shares of ACB if/when the stock falls to the $4-$5 dollar per share range. Yes, this is 30-40% lower than the value at which it is currently trading but the stock is simply not a good value now. Aurora needs to write off purchases such as MedReleaf and others. Additionally, Wall Street’s 2020 EPS is only calling for $.06 in full-year profit.
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