Aurora Cannabis Is Selling Tons of Marijuana, but Could Still Have a Rough Path to Profitability -- Barrons.com
Today 11:53 AM ET (Dow Jones)Print
By Connor Smith
Aurora Cannabis thinks it is on the path to profitability, but an analyst at BMO Capital Markets isn't so sure.
The back story. Government data have shown that recreation sales in Canada haven't been ramping up as fast as investors had hoped.
Aurora Cannabis (ticker: ACB) reported fiscal third-quarter earnings Tuesday night, showing net revenue up 20% from the previous quarter. The company said it sold 9 metric tons of marijuana. but its revenue and adjusted loss were short of Wall Street's consensus estimates.
In an earnings call Wednesday morning, Aurora management had reiterated a fiscal fourth-quarter forecast that called for positive earnings before interest, taxes, depreciation, and amortization, or Ebitda.
What's new. BMO Capital Markets analyst Tamy Chen is still cautious about the company's path to profitability. She wrote in a note to clients Thursday that the latest quarter's results were in line with her expectations, but noted that the Canadian market "remains undersupplied" because of industry-wide challenges.
"The potential for material growth in industry recreational sales beyond existing distribution channels remains unclear over the near term given the limited roll-out of retail stores," she wrote.
Looking Ahead. Chen noted that Aurora expects to produce 25 metric tons of marijuana in the fourth quarter, but a sizable portion of that will be stockpiled for "value-added products." She expects total volume sold of 17 metric tons, which would be an 80% increase from the third quarter.
Chen has a Market Weight rating on the stock.
Aurora shares were up 0.9% to $8.76 late Thursday morning. The S&P 500 index was up 1.3%.
Barron's has taken a cautious approach to marijuana stocks and doesn't think there are bargains among pot stocks.
(END) Dow Jones Newswires
May 16, 2019 11:53 ET (15:53 GMT)
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