2019 saw the unraveling of many of the biggest companies in the cannabis industry due to a range of sector-wide issues; however, the same cannot necessarily be said about Aurora stock. Aurora Cannabis's (TSX:ACB) (NYSE:ACB) issues go deeper than a sector-specific slowdown.
Another Blow for Investors
In a new development this Thursday, there was more bad news for the cannabis major as Piper Sandler downgraded Aurora stock from a hold to sell. That was not all. The bank also cut the price target from $3 to $1.
The bank stated that Aurora Cannabis is currently suffering from a cash deficit of as much as C$200 million, and under those circumstances, it would be difficult for the company to generate any kind of growth.
Michael Lavery, the analyst who authored the note, stated that Aurora’s balance sheet is a significant risk for the company, and he does not believe that it is going to move into the positive any time before the fiscal third quarter. He went on to add that the company would also need to refinance a debt of as much as $360 million, which is going to be due in August next year. Over the course of the past year, Aurora stock has dropped by as much as 72%.
The company has consistently missed its own financial goals despite being the biggest marijuana producer in Canada and among the biggest companies in the industry. In addition to that, Aurora has also suffered from massive losses and then diluted its equity considerably over the past years. The financial situation of Aurora is quite precarious, and even the emergence of Cannabis 2.0 might not be enough to get the company off the hook.
Analysts believe that due to its prodigious burn rate, Aurora Cannabis could well run out of money at some point in 2021. The only option left for the company might be further dilution, and that is not something that its investors would be looking forward to.
At the time of writing, Aurora stock is down 7.80% at $1.72 and made a new 52-week low of $1.66.
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