Once singled out as a potential industry leader a little over a year ago, Aurora stock has been in freefall throughout the freshman year of legal cannabis in Canada. Having dropped over 60% since a March peak of $9.96, Aurora Cannabis (TSX:ACB) (NYSE:ACB) will report its fiscal 2020 first-quarter earnings on November 14, so has this pot stock finally bottomed out?
Aurora Stock Struggling in Year One of Legalization
The inability of Health Canada to effectively and seamlessly implement legal pot has been just one of many factors that have wreaked havoc on cannabis companies. Supply issues, scandals, regulatory uncertainty, and a lack of brick and mortar locations have all played a part in stunting the growth of one of the most high-potential markets in the world. Aurora stock has been one of the worst affected by these problems and has dropped over 40% since its last earnings call in September, driven further down by massive dumping of its stock.
Aurora shares are currently hovering around a 52-week low, but have shown signs of life in recent weeks. One thing that investors love is a good bargain, and with this stock currently trading at just $3.77, is now an opportunity? Cannabis companies don't reach a market cap of nearly $4 billion USD without having something in their locker, and there's plenty of reasons why Aurora Cannabis can turn things around as we enter the 2.0 market.
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Is 2020 Aurora's Year?
Revenue numbers have been low for most cannabis companies this year for all the reasons just mentioned. In fiscal Q4 2019, Aurora’s net revenue rose 52% year-on-year to $98.9 million CAD, missing its own guidance of $100 million to $107 million CAD. Despite the stuttering revenue figure, Aurora stock could gain significantly from the company's effective growth strategy. The company has spent substantial sums on acquisitions, building out arguably the best cultivation facilities and distribution networks on the market.
The entire industry has been pinning its hopes on legalization 2.0, which opens the cannabis industry to the sale of smoking alternatives, such as vapes, edibles, and infused drinks, and should go fully in effect by mid-December. While all cannabis companies believe they are well-positioned to take advantage of the upsurge in demand, few have as robust a derivative portfolio as Aurora Cannabis. To support the successful launch of its 2.0 products, Aurora has built three state-of-the-art production facilities across Canada, with over 450,000 total square feet of production capacity.
While some analysts predict Aurora stock to more than double next year, others are more bearish and think further misery is down the line. What do you think?
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