Stifel Cautious On Aurora Cannabis Given 'Lack Of A Definitive Strategy' In US
Today 10:19 AM ET (Benzinga)Print
Cannabis stocks are getting more and more attention from Wall Street these days, and Aurora Cannabis Inc (NYSE: ACB) received its first coverage from Stifel on Thursday.
The Analyst
Stifel analyst W. Andrew Carter initiated coverage of Aurora with a Hold rating and a C$10 ($7.47) price target.
The Thesis
Despite impressive growth numbers projected in the next several years, Carter said Aurora’s international medical-use growth opportunities are limited outside of Canada and Germany.
“We are cautious on Aurora in the near-term given the company's reliance on the capital markets to execute upon its near-term business plans, the lack of a definitive strategy for entering the U.S. market, and we believe the slower development of the global medical opportunity will yield downside versus consensus estimates,” he wrote in a note.
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For now, Carter said Aurora has an enviable position as the No. 2 Canadian cannabis producer behind top Stifel pick Canopy Growth Corp (NYSE: CGC). He isn't convinced Aurora management fully appreciates the level of investment that will be required to defend that position as the market grows.
Aurora has also yet to secure partnerships with a global consumer or pharmaceutical company. However, the addition of investor Nelson Peltz as a strategic advisor should help remedy the situation, according to Carter.
Carter said Aurora’s valuation has upside only if it can maintain its Canadian market leadership position and its industry-leading margins over time. The company will also need to demonstrate it can be profitable.
Price Action
Aurora shares traded lower by 3 percent to $7.48 at time of publication Thursday.
