The troubles in the cannabis sector have seen large companies like Aurora Cannabis (TSX:ACB) (NYSE:ACB) suffer a lot on the stock market, and it seems that the company’s difficulties are not over yet as Aurora stock has resumed the downtrend after an intermediate recovery in late November.
Shocking Report
This week, the Canadian cannabis producer got another jolt after an analyst at GLJ Research classified Aurora stock as a "sell" and set the target price at "zero". It is quite the move, considering the fact that Aurora Cannabis is among the top five marijuana companies in the world.
The analyst, Gordon Johnson, indicated that Aurora stock is actually worthless, and the company is soon going to go out of business.
Johnson stated that the company is currently facing a liquidity crisis, and so, really, the stock holds no value. Johnson stated, “Our view that ACB’s equity holds no value is driven by our work, which implies the company is facing a liquidity crunch that will, ultimately, risk its status as a going concern.”
It is a bold assessment, and the report certainly had a negative effect on Aurora stock this week, causing it to nosedive by as much as 16% since Monday. It remains to be seen whether ACB stock can recover in the coming sessions.
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The company is going to have to contend with intense competition from new companies as the cannabis sector further expands, and that will bring new pressure on its already troubled finances. The recreational market remains the best bet for Aurora Cannabis; however, in this regard, it should be noted that the oversupply problems are still a major issue.
Due to the oversupply issues, the price of cannabis has remained depressed, and that is going to make life even more difficult for Aurora in the near term. Additionally, vaping-related deaths have also made things difficult for many companies, and there are doubts about whether ‘legalization 2.0’ in Canada is going to show an immediate impact. Hence, it is fair to say that the company is currently going through a bit of a struggle.
Aurora stock is down 5.95% at $2.21 USD in the early session on Wednesday.
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