Aurora stock has been under pressure over the past quarter as the broader cannabis sector is in the correction phase.
Since the formalization of the cannabis industry following the legalization of the product in Canada and parts of the United States, cannabis stocks have enjoyed impressive gains. However, that has no longer been the case over the past months and the situation with the stock of one of the biggest cannabis companies, Aurora Cannabis (TSX:ACB) (NYSE:ACB), is a case in point.
Aurora Stock Analysis
After enjoying a strong run for months, Aurora stock declined, and since February, ACB stock has only gained 6%. Additionally, if one considers Aurora's stock performance since April, then it has lost as much as 15%. So what are investors thinking right now?
Considering the fact that Aurora Cannabis is one of the largest cannabis operators in the industry, it is perhaps easy to argue that the fall in stock price is an indication that investors should be taking this as a grand opportunity. However, that theory is a bit simplistic.
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The cannabis industry is still new, and a lot is going to take place over the next few years, as new industries continue to enter the sector in order to unseat the current leaders. Hence, experts believe that Aurora Cannabis might not be as big a year from now as it is currently due to rising competition, and it might be difficult for the company to maintain its dominant market share.
Aurora stock is trading higher by 0.40% at $10.04 on the TSX.
Additionally, it is important to note that the higher production levels generated by most companies will slowly erode the market dominance that Aurora has enjoyed over the past few years. The higher levels of production will also have a profound impact on margins, and it is likely that margins will be thinner.
At the same time, it's necessary to point out that while the company’s sales will possibly grow, increased competition will be a prominent challenge for Aurora. This could explain why, despite the on-the-surface "opportunity" price of ACB stock currently, experts are actually not recommending Aurora stock at this time.
What do you think?
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