Aurora stock shot off to a great start in 2019, but since late March and across April, shares have mostly traded sideways. Most recently, shares tumbled on the eve of Wednesday, May 1st—declining from $9.01 approx to $8.62 in a matter of hours.
Considering Aurora Cannabis’s (TSX:ACB) (NYSE:ACB) earnings report is nearing, why are shares stagnating?
Without a meaningful catalyst, it’s unlikely that there will be any significant gains in the near-term.
What would a meaningful catalyst be? Well, a major US partnership, for one example, or entering the US market via hemp could be another.
A Major US Partner
Aurora Cannabis has decided to remain independent of any major US partner or global drinks brand. It’s a rather contrary decision in an industry where M&A’s have become almost a daily occurrence.
Because of its size—we’re talking about the second largest cannabis company in the world—this is most likely a strategic move. I can’t imagine there hasn’t been a line of potential suitors knocking at its door.
But whatever the reason, Aurora Cannabis has not received investment akin to Constellation Brands’ (NYSE:STZ) stake in Canopy Growth (TSX:WEED) (NYSE:CGC) or Altria Brands’ (NYSE:MO) position in Cronos Group (TSX:CRON) (NASDAQ:CRON).
Investors may be suspicious about this, and that’s fair. After all, is it naive to take on global cannabis without the support and experience of a major US behemoth? Considering the US market grew to $10.4 billion in 2018, isn’t that where the second biggest company in cannabis needs to aim?
But investors that are opportunistic will see the potential ahead; if Aurora does buddy up with a conglomerate of sorts, then this would surely be a catalyst to drive Aurora stock through the roof.
Perhaps being the leading capacity producer is simply enough here. With a forecasted production level of over 700,000 kilos, Aurora Cannabis is streets ahead of its nearest rival, Canopy, with its estimated 525,000-kilo peak annual output. That counts for a lot.
But as stated, the US market can’t be ignored, and where other Canadian brands are moving into US hemp to take a piece of this lucrative market, Aurora has yet to announce any moves.
But again, this could change at any time, and if it does, Aurora stock would most likely surge on the news.
Now the company’s quarterly earnings report is on the horizon (expected but not confirmed for May 11th), and with shares predominantly moving sideways in recent weeks, it’s hard to predict what to expect from Aurora stock.
What do you think? Are you bullish on Aurora stock?
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