Although Aurora Cannabis Inc. (TSX: ACB) (Nasdaq: ACB) traded higher after releasing fourth quarter and full year financial results, broker-dealers have become more bearish on the Canadian Licensed Producer (LP).

After Aurora Cannabis announced quarterly financial results, several broker-dealers responded by changing its price target on the business. Today, we want to highlight the post-earnings rating and price target changes and will provide more insight on the state of the company. The changes from leading broker-dealers include:

CIBC lowered its price target to C$6.50 from C$7.00
ATB Capital lowered its price target to C$6.00 from C$7.50
Canaccord lowered its price target to C$6.50 from C$7.00 and reiterated its Sell rating
MKM raised its price target to C$7 from C$6 and took the rating to Hold from Sell

During the quarter, Aurora Cannabis recorded a sharp decline in recreational cannabis revenue. The Canadian LP attributed the decline to less orders from provinces and reported to be negatively impacted by COVID lockdown restrictions.

One of the positive trends for Aurora Cannabis is related to the international cannabis opportunity. For several years, the Canadian LP has been focused on capturing market share in burgeoning cannabis markets and the business benefited from this focus in the fourth quarter.

The international medical cannabis opportunity has been a bright spot for Aurora Cannabis. When compared to the same period in 2020, the company recorded an 88% increase in international medical cannabis sales and we find this to be significant.

When compared to the recreational cannabis market, the medical cannabis market has a higher average net selling prices and higher gross margins. By being highly focused on the medical cannabis market, Aurora Cannabis reported an improvement in adjusted gross margins and we will monitor how this trend continues in future quarters.

Aurora Cannabis’ management team is highly focused on executing on a cost savings initiative and recorded an improvement in its adjusted EBITDA loss in the fourth quarter. The company reiterated its plan to implement C$60 million to C$80 million of cost savings over the next 18 months and expects to report positive adjusted EBITDA in the next two quarters.

Going forward, we believe the name of the game for Aurora Cannabis is execution. With C$421 million of unrestricted cash, the company has the resources that are needed to turn the business around and we will monitor how the management is able to advance the story.

If you are interested in learning more about Aurora Cannabis, please send an email to support@technical420.com with the subject “Aurora Cannabis” to be added to our distribution list.

Authored By

Michael Berger

Michael Berger is Managing Partner of StoneBridge Partners LLC. SBP continues to drive market awareness for leading firms in the cannabis industry throughout the U.S. and abroad.