The global legal marijuana market size was valued at $9.1 billion in 2020 and is forecast to expand at a compound annual growth rate (CAGR) of 26.7% from 2021 to 2028. Two of the companies operating in this booming market…
Today, I will analyze these two companies and identify the key risks as to why I believe investors should avoid them in the final quarter of the year.
Aurora Cannabis Inc. (ACB)
ACB is a Canada-based medical cannabis company, focused on the production, distribution, and sale of cannabis in Canada and internationally. Its cannabis products are used in the global medical cannabis market, global hemp-derived cannabidiol (CBD) markets, and in the consumer use cannabis market.
ACB offers varieties of cannabis-infused products under various brands that include Aurora, Aurora Drift, San Rafael ’71, Daily Special, AltaVie, MedReleaf, CanniMed, Whistler, and ROAR Sports. Its products portfolio includes dried cannabis, cannabis oil, soft-gels, oral dissolve strips, edibles, vaporizers, and cannabis-infused chocolates.
The company lost 12.2% of its market capitalization since the beginning of the year, underperforming its benchmark, the ETFMG Alternative Harvest ETF (MJ), which is mostly flat year-to-date, down 0.3%.
While the financial metrics of the group have increased steadily over the past year, ACB is expected to experience a decline of its top-line growth in 2021, down 12.2% year-to-date to CAD 245m. However, this figure is expected to accelerate back to its double-digit growth pattern in the next two years, up 11.8% to CAD 274m in 2022 and up 20.4% to CAD 330m in 2023.
In terms of bottom line, ACB posted a massive loss of CAD 3.3b in 2020, after it incurred a massive goodwill impairment of CAD 2.54b, due to its numerous…
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