On Thursday morning trade, Aurora stock slide by as much as 6% as Bank of America Merrill Lynch expressed concerns about the company’s cash burn and downgraded Aurora Cannabis (TSX:ACB) (NYSE:ACB) from buy to neutral.
Surprise Downgrade
The analyst Christopher Crey stated that although the company has emerged as one of the most efficient operators in the industry, it has continued to burn through cash far too quickly and hence, the company is in danger of becoming cash negative.
Christopher Crey stated that "[Aurora] is burning cash and by our estimates could be cash negative by CQ120 (absent financing), namely if a large convertible debenture due in CQ120 stays out of the money."
Aurora Gets Big Order from Italy
For the biggest marijuana companies in North America, international expansion remains the next big target, and many of them are making important moves in overseas markets.
In another major development, Aurora Cannabis, announced today that it has emerged as the winner in the public tender by the Italian government to supply medical cannabis to the country. As many as five companies were in contention to land this lucrative tender, but in the end, the Italian government went with Aurora.
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Aurora stock is trading lower by 5.50% at $9.15 on the TSX. On the NYSE, however, ACB stock is up 5.95% and now trading at $6.95.
Aurora also won the very first tender to supply medical cannabis to Italy back in January of 2018, and the latest development further reinforces the company’s standing as a supplier of repute in the country. Moreover, it is also important to note that Italy has an extremely stringent requirement from companies that supply them, which bodes well for Aurora if it is looking to also supply other countries in Europe. According to the terms of the deal, Aurora is going to send 400 kilos of medical cannabis to Italy over the next couple of years.
Aurora Cannabis has been making pretty impressive moves over the recent past. Recently the company announced that it has acquired outdoor cultivation license at two new sites, one in British Columbia and the other in Quebec. The award of outdoor cultivation licenses is a big win for a company of its size since it allows the company to bring down its costs rapidly. At the end of the day, Aurora would not have to spend heavily on artificial sources of light because it can use natural sunlight.
Aurora stock is up about 32% since the beginning of this year and remains among the most popular companies in the cannabis sector. Do you agree with the analysts who downgraded Aurora stock, or do you agree more with Italy's decision to order from the company?
Featured image: Canva
