2020 has already proven to be a challenging year for Canadian cannabis producers and this is a trend that our readers need to be aware of.
Last night, Piper Sandler (previously operated under the name Piper Jaffray) downgraded Aurora Cannabis (ACB.TO) (ACB) to Sell and issued the Canadian cannabis producer a $1 price target. The leading cannabis broker-dealer seriously doubts Aurora Cannabis’ ability to become cash flow positive until Q3 2021 and is concerned with the strength of its balance sheet. Concurrent with this problem, Piper Sandler expects the Canadian cannabis producer to have to re-finance C360M of its debt by August 2021 and this is a trend that we will be following on a going forward basis.
Prior to the downgrade, Piper Sandler had issued Aurora Cannabis a $3 price target and this is a substantial downgrade. The market has not responded favorably to this announcement and the shares are trading more than 5% lower this morning. The last twelve months have been tough for the Canadian cannabis producer and this comes not too long after it had a $10+ billion market cap at its 2019 high.
Going forward, we want to see how Aurora Cannabis will be able to execute and expect the market landscape to be more challenging following the departure of Cam Battley as Chief Corporate Officer. Cam played a key role in the success of the operation and we are cautious with the opportunity in the near-term.
When we analyze Aurora Cannabis, we see a company that had to significantly dilute in order to make acquisitions. These transactions have not advanced the business as much as expected and this has put additional pressure on the opportunity. At current levels, we remain cautious in the near-term as momentum is trending to the downside. Last night’s downgrade was substantial and this is an opportunity we will continue to follow.