Aurora Cannabis ACB Stock Forecast & Analysis

Aurora Cannabis ACB stock was once the absolute darling of cannabis investments.  ACB Stock forecast at the time was a moonshot of cannabis stocks.  But, reality has set in with Aurora Cannabis and ACB stock investors.  I wanted to outline what is going on with Aurora Cannabis and get the ACB stock forecast out into the sphere.

While there were big dreams starting out with cannabis federal legalization in Canada, the reality was far different.  Realistically, too many big companies thought they could all build enormous facilities and sell low-cost cannabis all through Canada.  The wholesale cannabis market completely collapsed in Canada. This is when many of the biggest companies realized that consumers were only interested in premium branded products, that the market could only bear so much inventory, and the business models were unsustainable.

Aurora Cannabis proceeded to board up facilities and downsized as best they could.  Operating costs have been cut as best possible; still a far cry from where they need to be.  Gross margins still are long away from being competitive.  If there is one thing I have picked up after evaluating over 100 cannabis stocks, it is that it is very difficult to grow excellent cannabis, consistently, and inexpensively.

That was over two years ago, and still, Aurora Cannabis has yet to get to the level necessary to sustain itself. Margins are still not even close to be able to compete against some of the biggest companies.  This is not to say that eventually, Aurora Cannabis will go bankrupt as much as it is to say they simply have far more work to do.

Latest video on Aurora dated April 2021:

I have not updated a video on Aurora in some time.  When the company progresses forward, I will update a video on them.

Here is the last video analysis:

YouTube player

Aurora Cannabis – First to Report

Aurora Cannabis ACB stock is one of the more important cannabis stocks for two big reasons:

  • Nasdaq-Listed
  • First To Report
  • Widely followed

As of right now, I have 108 stocks that I cover on this site.  They are all pure-play cannabis growers, producers, & sellers.  We are just finishing up with end-of-year 2021 for cannabis stocks.  I still have about 20 – 25 stocks that have yet to report.  But, a lot of these stocks are delayed simply because it is end of year.  Nonetheless, Already, however, Aurora Cannabis (And Tilray TLRY stock) has reported for Q1 2022.  Effectively, earnings season for 2021 is over and we are already moving into 2022.

Being a Nasdaq-listed stock, Aurora Cannabis is an important stock because of deep access to a wider pool of investors (OTC stocks are not tradable at certain brokerages).  Because of this bigger pool, ACB Stock is important as it will get a lot more traffic with searches and trades.

And, because so much was pined about ACB stock in the past, Aurora Cannabis is one of those cannabis stocks that could be a barometer for the overall cannabis investments sector.

Should ACB Stock turn upward

As I mentioned, ACB stock becomes important because of what it potentially could do for the overall broader cannabis stocks investments.  Should Aurora Cannabis do well, and ACB stock turn upward, this could draw in a lot of outside investors wanting to capitalize on cannabis stocks turning upward.

Cannabis Federal Legalization & Aurora Cannabis ACB stock

Aurora Cannabis is predominantly a Canadian cannabis company where cannabis federal legalization has already occurred.  But, here in the United States, we are just on the cusp of cannabis federal legalization.  Expectations are for the Senate bill to drop sometime this summer and a vote to occur thereafter.  But, the market is also holding out for the vote on this to happen prior to the general election in November of this year.

The Democrats have promised cannabis federal legalization and, this is the time to do it.  Should this follow through, all cannabis stocks will head upward.  Aurora Cannabis ACB stock is one of those stocks.

However, there really is not a big amount of correlation between Aurora Cannabis and cannabis federal legalization in the United States.  Because of that, I would recommend taking the money and running if you are in this stock and there is an  excited surge in cannabis stocks from federal cannabis legalization.

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Aurora Cannabis ACB Stock Forum & Discussion Is ACB Stock a good investment
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Aurora Cannabis Latest Financial Release

Here is a look at the latest financial release for Aurora Cannabis.

Aurora Cannabis Gross Profits

  • Aurora Cannabis Revenue

Flat does not begin to describe what is going on with revenue growth and Aurora Cannabis.  Disappointingly, revenue has not gained in a significant period of time.  And, yet, despite there being a lack of increase in revenue, Aurora Cannabis has simultaneously printed higher cost of goods.  This drove down gross profits and, by extension, gross margins.  Wrong direction.

Addressing revenue growth would be the very first issue.  Aurora Cannabis needs to increase revenue growth.  I am a big believer in “dollar votes” that economic concept that if consumers are truly interested in a product, they will naturally buy and consume said product.  I have not heard anyone really speak too fondly of Aurora Cannabis products.

That being said, my birthday is 4/20.  But, I do not consume cannabis… just the financial data of cannabis companies.  Nonetheless, I look for a plan.  Aurora Cannabis has a plan.  But, we are now on iteration “G” and, maybe it is time for a move into preparation “H” with what comes next with Aurora Cannabis.

Within any plan, if consumers are consistently consuming a product, and word of mouth consistently induces others to consume the product, revenues would continually increase.  Aurora Cannabis does not have increasing revenues.  Maybe it is a quality issue?

Aurora Cannabis Operating Profits

  • Aurora Cannabis Operating Costs

From an operating cost & profit basis, Aurora has not been able to adequately achieve sufficient cost-cutting levels nor, increased revenues to justify operating costs.  Total operating costs mostly comprise SG&A; Sales, General, & Administrative.  Administrative costs would be CEO salaries and other salaries that a company incurs to run a company.  Then, to find efficiencies, you take the total operating costs and divide them over total revenue.  The number is a ratio and because it is costs relative to revenue a company is trying to achieve the lowest possible number.  The best companies tend to come in around 30% – 35%.  But, there are plenty of examples of companies printing below this, and some are printing in single digits; Aurora is printing triple digits.

Now, if Aurora were to be printing a larger portion of SG&A in sales, and there was progress in revenue gains, I could fully support these levels.  Aurora is not.  At this level of cost, Aurora would need to increase revenues from the mere $47M up to approximately $150M.  But, operating costs are not static, they are linear.  This means that as revenues increase, so will operating costs.  My best guess is that Aurora would need to hit approximately $250M in revenue, quarterly, in order to potentially achieve 33% in operating efficiencies and that is only if management remains ultra-vigilant.

Aurora Cannabis EBTIDA & Net Profits

  • Aurora Cannabis EBITDA

In a fledgling endeavor, a company needs to quickly achieve EBTIDA profitability in order to show that the business model could potentially be profitable.  Once EBITDA profits are achieved, then a company needs only scale up revenues to achieve net earnings profitability.  And, the marginal profits on the increasing products working through the system will be outsized.  That is the magic of EBITDA profits.

Unfortunately, achieving this for Aurora seems far too away at this point.

Despite having a plan, once a cannabis company sells its first product, the next major milestone is to achieve EBITDA profitability via scaling up sales & revenues, and achieving an economies of scale that will show that the business can become profitable.  Competitive gross margins would be a solid start.  Those would come in ~55%; higher if you were a far better-performing cannabis stock.

Aurora Cannabis has made significant strides in its cost-cutting within operating costs, and I am thinking that further scaling up of revenue would get them to a much better position.

Combining gross profit margins & operating profit margins to getting toward 22.5%, collective, less Depreciation & Amortization, would get Aurora Cannabis to EBITDA profitability; albeit, modest levels.

There is some work to be done to getting Aurora Cannabis to EBITDA profitability.

Aurora Cannabis Cash On Hand

  • Aurora Cannabis Cash on Hand

Relative to debt, Aurora Cannabis has plenty of cash on hand.  Further, many institutions are involved in Aurora so, very likely if Aurora ever needed more cash, this would not be a difficult task.  But, relative to debt, Aurora is sitting very competitively at 62%.

Nonetheless, Aurora Cannabis also has a burn rate that is not doing them well.  Eventually, Aurora Cannabis would run out of cash on hand.  Certainly, Aurora Cannabis would not have any difficulties in raising more debt.

But, capital raises via debt financing dilute the current picture.  Taking on more debt to prolong an endeavor that is like spinning tires in mud makes this a difficult sell to me.  I would want to invest in a cannabis company that is increasing revenue continuously, improving margins and profitability, and expanding its foundation.  In a word, I am looking for the best cannabis stocks.

Not so sure Aurora Cannabis is at that level.

Aurora Cannabis Total Equity

  • Aurora Cannabis Total Assets

Just as Aurora Cannabis has plenty of cash on hand, they also have minimal debt relative to assets; they have a strong balance sheet.  This, also, is the reason Aurora Cannabis will be able to continually raise cash.  At the same time, however, assets and upward-climbing equity is the engine of producing increasing revenues.  Assets are things like dispensaries and grow facilities that will continually give a company the capacity to produce and then sell products.

And, while assets are what drive the potential for future revenue and potentially profitability, in the case of Aurora Cannabis, I do not see a picture forward for either: Aurora Cannabis needs to increase revenue.  Period.

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Aurora Cannabis ACB Stock Forecast

Normally, I put together Discounted Cash Flow Calculation and work out where any one particular stock should be based upon its intrinsic value.  The line in the sand to get me to do a DCF calculation is EBTIDA profitability.  Aurora is no where close to that.

Is Aurora Cannabis ACB Stock A Good Investment?

Aurora Cannabis ACB Stock Forecast & Analysis: Image Showing ACB Stock getting a bid tone
ACB Stock getting a bid tone after financial release.

I have been hopeful for some time that Aurora could be a turn-around story.  As I have said, Aurora Cannabis was one of the darlings of cannabis investments in Canada but, only to fall flat.  Many people own this stock that rushed into green gold.  Should these investments start producing profits, this could draw in more and more investors into cannabis investments.  So, it is an altruistic dream that these behemoths succeed.

Aurora is not succeeding despite any hope I may have had. Eventually, if the industry turns around and there is a surge in stocks, and you were in this stock, it is very possible that you could see some gains.  But, all cannabis investments are weighted down right now and so all stocks are likely to surge equally.

I would recommend getting out of this one and waiting for another lull in investment activity and then acquiring other stocks.  Aurora Cannabis has a long way to go before I can see potential profits.

There is a high likelihood that when cannabis federal legalization hits in the United States, many will surge into cannabis stocks and push valuations higher.  This will be artificial.  If this happens to ACB Stock, my recommendation is to take the money and run.  Then, when stocks settle down, find other cannabis stocks that have more improved metrics… and upside potential.

Aurora Cannabis ACB Stock Financial Data

Aurora Cannabis ACB Stock Financial Statements

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