In early February, Canadian cannabis producer Aurora Cannabis Inc. (TSX:ACB) announced its co-founder and CEO Terry Booth would be retiring and stepping down from his post, while retaining board oversight.
This announcement came on the same day the firm announced a writedown of approximately $1 billion, 500 job cuts, a restructuring of the company’s credit facility, and lower forward guidance for Q2. Talk about ripping off the band-aid (some might call this "taking a bath").
Aurora is not done in making such announcements. Other Canadian cannabis producers have recently announced layoffs, forward guidance reductions, and writedowns - this is a trend I expect to see continue across the sector for some time to come.
While most companies tend to blame these events on the failure of Provinces to roll out retail locations, and other external factors outside their control such as a lack of ability to brand/package or advertise their product, the reality is cannabis is as much a commodity as soybeans or corn- an agricultural good in which cannabis producers will be price-takers, facing long-term prices down and eroding profitability.
Aurora will need to show profitability, as investors are now getting impatient. If Aurora is able to show profitability, and sustain said profitability for a reasonable timeframe, then maybe consider this name.
For the time being, however, I would encourage all investors to steer clear of Aurora, or any cannabis producer, for at least the next 12 months.
Invest wisely, my friends.
