Can Aurora Cannabis climb the Great Wall of Unrest?

<p>Crazy … that’s what I call buyers of Aurora Cannabis (NYSE: ACB) today.

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From February 12 to February 19, the Aurora share rose 17% to about $ 1.71. At that time, ACB buyers considered this to be their pricing area. And many investors were keen to take a stake in the world’s second largest cannabis company on the “cheap” side. It was a mistake.

Since then, the ACB share has fallen by 40% and entered a new bargain cellar for potential buyers. But this is also a trap. A massive market pit that will swallow you and your money whole.

Despite the juicy price per share, I will not touch the Aurora share with a ten-foot rod and neither should you.

Here’s why:

The Aurora share has fallen 87% over the past year

Aurora shares are in free fall position.

Since the ACB shares reached their high water mark in May 2019, their value has fallen by over 87%. The company’s market capitalization has also fallen from about $ 12 billion to just over $ 1 billion over the same time frame.

The one-year table is awful:

Maybe investors who bought in last Friday assume that things can not get worse for ACB, but I have bad news for them …

Things can get a lot worse and I strongly believe they will.

When I look at the chart, I see no indication that ACB is creating a bottom. The Aurora share may fall another 50% -75% before enough buyers go in and help push shares higher with some significance.

And the marijuana company’s latest earnings report last Thursday gives some hope that the leadership of the besieged company can correct the ship. Simply put, the numbers are absolutely awful.

Here’s a quick walkthrough …

Loss of $ 981 million

Yes, you read that right …

ACB reported a total net loss of $ 981 million in its most recent earnings report. Earnings per share lost 18 cents per share, much worse than the consensus estimate of six percent per share loss, according to Nasdaq.com.

Going forward does not look promising either. The cannabis industry is still facing several headwinds.

Growth last year was much slower than expected in Canada. The industry is facing oversupply problems and a shortage of pharmacies to deal with this oversupply. All of this has significantly affected the bottom lines of many Canadian pot companies.

These problems can be fixed, but Aurora has its own unique problems in addition to these headwinds and it can be too much to overcome.

Aurora’s executives quickly noted that the “Cannabis 2.0” movement in Canada, which opened the door to edible and vape sales, will help boost revenue.

But the company also reported that domestic medical sales were unchanged from the previous year, with only 90,000 people on their patient lists to date.

Statista reports that over 360,000 Canadians have registered for medical marijuana as of June 2019, so we have to wonder why the second largest cannabis producer in Canada only gets 25% of the market.

In addition to the slow growth at home, CFO Glen Ibbott also noted during his earnings talk that European growth was “slower than originally expected.”

Another brick is added to ACB’s wall of concern …

However, the elephant in the room was never mentioned in Aurora’s income. And according to my information, no analyst has asked a question that everyone should ask …

When will ACB turn to recreational sales?

As far as my research shows, there is no indication that this pivot is on anyone’s radar at Aurora. For potential investors, this is a problem. The company must make money in some way and their medical efforts do not cut mustard.

In addition, Aurora has an identity crisis. The site looks and feels like a recreational product site, but they swear by (and strongly tell) the purely medical nature of their products. But unlike a company like MedMen’s product presentation, ACB feels easy years later.

Another problem that I suspect Aurora shares will face in the near future is when other wholesalers of cannabis flowers begin to fall below their wholesale prices. CFO Glenn Ibbott noted that Aurora currently produces cannabis at a cost of $ 0.88 CAD per gram.

Very good.

But now we see companies in other regions, regions with fantastic growing conditions, which produce the same quality of flowers for nickel and dimes per gram.

And all of this is on top of the massive depreciation and a new CEO layoff at ACB earlier this month.

Gathering these forces may prove too much to overcome for the ACB. Especially when faced with the relentless scrutiny that a listed company receives day by day.

My bold prediction is that ACB will be forced to remove listing from the NYSE before the end of the year.

Plan accordingly.

At the time of writing, Sean McCloskey had no position in any of the above securities.