Canada-based Aurora Cannabis (NASDAQ:ACB) has long been a favorite of investors, having made many of them millionaires in the past after it began selling medical cannabis in the first quarter of 2016 (Canada legalized medical cannabis in 2001). In just the two years between 2016 and 2018, Aurora’s share price shot up by 2,400%. However, Aurora didn’t focus on its expenses while ramping up its operations, and this led to great financial distress and took a toll on its stock price.
The year 2020 was a dreadful one for the company, which repeatedly failed to live up to its promise of achieving positive earnings before interest, tax, depreciation, and amortization (EBITDA). And results from the third quarter, which ended March 31, show that management still isn’t doing enough to get back to safety. Here are two ways Aurora is still shooting itself in the foot.
Ineffective growth strategies
While U.S. cannabis companies are generating triple-digit revenue growth even with a limited legal market (cannabis is federally illegal in the U.S.), Aurora Cannabis’s revenue picture doesn’t look good. Massachusetts-based Curaleaf Holdings’ (OTC:CURLF) revenue grew 170% year over year to $260 million in its first quarter ended March 31. Meanwhile, Aurora recorded a revenue decline in its fiscal Q3 2021, which also ended March 31. Its total net revenue fell 25% year over year to 55 million Canadian dollars. On the recreational front, cannabis sales fell 53% to CA$18 million from the year-ago period.
The worst part is that Aurora is failing to generate enough revenue from its medical cannabis sales even in Canada, where it should have established a stronger market by now. It had an early mover advantage in Canada and started generating sales from medical cannabis in January 2016. But Aurora’s domestic medical cannabis sales actually fell 17% year over year to CA$36 million in the recent quarter.
For the same period, peer Canopy Growth (NASDAQ:CGC) recorded a 37% jump in total net revenue to CA$546 million from the year-ago period and saw CA$55 million in revenue just from medical cannabis in Canada. That company also saw a drastic 32% jump year over year to CA$229 million from recreational cannabis, with much of the credit going to its new, innovative high-margin cannabis derivatives products.
Not taking advantage of the new derivatives market
Canada legalized cannabis derivatives, which include vapes, edibles, beverages, concentrates, and more, in October 2019 as part of “cannabis 2.0” legalization.
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