Aurora Cannabis (TSX:ACB) reported quarterly results that are nothing short of disappointing. Revenue grew by just 10.7% Y/Y to $52.7 million. EBITDA of $-80.2 million is a reminder that bankruptcy filings will follow, if not this year then by early next year.
Bullish investors may slow ACB stock from hitting the $0.75 - $1.25 bottom in the stock. In the days following the report, the company still had a market capitalization of ~$1.8 billion. Paying ~eight times sales for ACB stock is too high when the firm is struggling to grow.
On its conference call, Aurora acknowledged that the 2.0 market (vapes, concentrates, gummies, chocolates, mints, and cookies) launched in the just reported quarter (Q2/2020). But sales will develop slowly. The company may manage the business accordingly but the stock will need to reflect the modest outlook ahead.
Dubbed as a medical cannabis play, Aurora posted medical sales falling to $1.8 million, down from $5 million in Q1. Restrictions in Europe and slow performance in both the Canadian and German markets hurt medical sales. The company still forecasts its EU GMP certification for its Aurora River facility will have a run rate of ~30,000 kg a year.
Finally, provisions of $10.6 million against consumer cannabis is due to price reduction agreements with the Canadian provinces. Deals like this will only bring more losses for Aurora.
Avoid ACB stock.
