Cannabis stocks were some of the worst investments in 2019 and early 2020. The Canadian cannabis legalization rollout left a lot to be desired on a provincial level. Its early development was plagued by supply issues and then further issues over retail availability. Interestingly, the COVID-19 pandemic may have given the fledgling industry a boost.
There are few stocks that needed it more than Aurora Cannabis (TSX:ACB)(NYSE:ACB). Shares of Aurora have surged 75% over the past month as of close on May 19. Aurora stock has spiked 124% in a week. However, the stock is still down 85% over the past year. Should investors jump in on this surge?
The company released its third quarter fiscal 2020 results on May 14.
Net revenue increased 18% from the prior quarter to $78.4 million with consumer net cannabis revenue rising 24% to $41.5 million. Perhaps the best piece of news came for Aurora’s balance sheet. The company saw its Q3 cash use fall 43% compared to Q2. This should alleviate concerns over its precarious cash position in the near term.
Aurora set out a business transformation plan in February 2020. It is early, but progress has been good so far. The company is currently on track for positive EBITDA for the first quarter of fiscal 2021.
Aurora stock last had a favourable price-to-book value of 0.4. On the other hand, the spike in share price now puts Aurora at an RSI of 73. This puts it in technically overbought territory.
