Aurora Cannabis (TSX:ACB) (NYSE:ACB) is perhaps one of the most well-known cannabis companies in Canada. But not everyone is as optimistic about the company as expected. Earlier this week, while most cannabis stocks were trading higher, Aurora stock was splashed with red.
Today is no different. Here's what we know.
Aurora Stock Drops on Neutral Rating
Yesterday, August 14, Piper Jaffray gave Aurora Cannabis a neutral rating. Even worse: the investment banking company analyzed five other cannabis companies, giving each buy ratings. Essentially, Piper Jaffray is not overly confident in Aurora Cannabis primarily due to the likelihood of oversupply in 2020. Plus, the firm believes the company's rich valuation does not yet look compelling.
“Aurora has a premium valuation relative to peers but less visibility on these key growth opportunities,” the investment firm wrote. “It has leading scale in Canada, but oversupply looks likely in 2020. EU-GMP certification at scale is a slow, opaque process and still pending, and without visibility on U.S. market entry (CBD or THC), Aurora’s relatively rich valuation does not yet look compelling to us.”
Yesterday, Aurora stock was seen trading down 0.5% in pre-market trade. Today, things are looking a little worse for wear. According to Yahoo Finance, at the time of writing, Aurora stock is trading at $6.33 on the New York Stock Exchange, which puts the cannabis stock down 4.98%. Meanwhile, on the TSX, ACB stock is down 4.31%.
Can Aurora Stock Turn Around?
It will be interesting to see where Aurora stock closes the week. It is possible that ACB is down as much as it is today because more investors are learning of the Piper Jaffray neutral rating. Or, it's because seeing companies like Cronos Group (TSX:CRON) (NASDAQ:CRON) get a buy rating and Aurora a neutral, people are losing a bit of confidence in the Canadian company.
That said, this was just one rating by one investment banking firm. At the end of the day, Aurora Cannabis is still the most widely held of the cannabis producers in Canada, so it’s unlikely that everyone is going to drop and run because of yesterday’s rating. All we can do, really, is watch the cannabis stock and see the direction it heads in the following weeks.
Do you have any predictions? Let us know in the comments below.
Featured image: PixaBay