Aurora Cannabis Profitability in the Next Four Qurters – Market Realist
Posted on by Jessica Harington
Aurora Stock: Why did Two Billionaires Just Invest in Aurora Cannabis?
Aurora Cannabis (ACB) is expected to report sales of ~577 million Canadian dollars—243% year-over-year growth. However, the growth isnt expected to translate into profits in the near term.
Aurora Cannabis is expected to report net losses of 146 million Canadian dollars over the next four quarters. The net losses are expected to be better than the net losses in the last four quarters of 436 million Canadian dollars.
Investors should note that there’s a difference between Aurora Cannabis’s total shareholder return (TSR) and its share price change, which we’ve covered above. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. We note that Aurora Cannabis’s TSR, at 2088% is higher than its share price return of 2008%. When you consider it hasn’t been paying a dividend, this data suggests shareholders have benefitted from a spin-off, or had the opportunity to acquire attractively priced shares in a discounted capital raising.
Most of the costs to expand facilities to capture future sales are captured early. In the last four quarters, Aurora Cannabis made significant investments, which weighed down its profitability. The situation is expected to get better in the next four quarters with sequential losses getting smaller.
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Investors are focused on the earnings. The earnings will likely remain highly volatile for the cannabis industry. As a result, there isnt a clear leader in the cannabis industry.
In the last 3 years Aurora Cannabis saw its revenue grow at 107% per year. That’s well above most pre-profit companies. In light of this attractive revenue growth, it seems somewhat appropriate that the share price has been rocketing, boasting a gain of 176% per year, over the same period. It’s always tempting to take profits after a share price gain like that, but high-growth companies like Aurora Cannabis can sometimes sustain strong growth for many years. So we’d recommend you take a closer look at this one, or even put it on your watchlist.
Canopy Growth (WEED) is expected to report losses of 159 million Canadian dollars, while Tilray (TLRY) is expected to report losses of $37 million in the next four quarters. HEXO (HEXO) is expected to report a net income of 34 million Canadian dollars.
For us, stock picking is in large part the hunt for the truly magnificent stocks. You won’t get it right every time, but when you do, the returns can be truly splendid. One such superstar is Aurora Cannabis Inc. (TSE:ACB), which saw its share price soar 2008% in three years. On top of that, the share price is up 13% in about a quarter. The company reported its financial results recently; you can catch up on the latest numbers by reading our company report.
There are plenty of reasons to like Aurora Cannabis (TSX:ACB) (NYSE:ACB). Aurora stock has climbed over 45% since the beginning of the year. The fact that two billionaires have decided to invest in ACB stock is another reason investor interest has piqued.
According to Yahoo Finance, Citadel Advisors and Renaissance Investors have just jumped on board the Aurora train.
Those are impressive numbers for a company that’s been focused on hemp. And with its products being sold in more than 6,000 retail locations in the U.S., it already has strong market share in the country. Even if Aurora were to follow into the footsteps of its rival Canopy Growth and try to set up operations in the U.S., it would be at a significant disadvantage to Charlotte’s Web, which already has a dominant presence in the market there.
Recent SEC filings show that Citadel Advisors and Renaissance Technologies, investment firms run by billionaires Ken Griffin and James Simon respectively, bought shares of Aurora Cannabis in the first quarter of 2019.
The significance of the hemp market is evident by looking at the impressive results Charlotte’s Web has been able to achieve thus far. The passing of the Farm Bill has opened many opportunities for cannabis companies and has enabled Charlotte’s Web to list on the TSX, which has been very clear that companies listed on its exchange need to be in compliance with U.S. laws a well as Canadian ones.
Currently, Aurora stock is selling for $10.47 USD, down 3% on the day. It’s plausible the market has yet to react to this news because if two of the world’s wealthiest people are investing in Aurora, it says a lot about the company’s potential.
And while there is still hope for Aurora to rise in value and recover from to its previous highs, with lots of dilution, rising costs, and problems staying out of the red, it’s not a stock that’s a really attractive purchase today. Aurora is in danger of falling behind its peers, and while it may be one of the top stocks on the TSX today, that might not be the case a year from now.