Optimism about the potential for further legalization of marijuana in the U.S.—including at the federal level—have this year improved the prospects of pot companies significantly. But while most cannabis operators are well positioned to take advantage of the growing domestic and international marijuana market, some companies seem to have lost steam due to stiff industry competition…
As legalization efforts gain momentum, several new players from Canada and the United States are setting up new cannabis operations. This has dramatically increased the level of competition in the cannabis space.
Against this backdrop, Wall Street analysts are extremely bearish about the prospects of Aurora Cannabis Inc. (ACB – Get Rating) and Sundial Growers Inc. (SNDL – Get Rating). Both companies are struggling to stay afloat financially. And, considering that their fundamentals are weak and losses high, we believe it’s wise to avoid them now.
Canada-based ACB is a producer and distributor of medical cannabis products worldwide. The company develops oral, topical, edible, and inhalable products, as well as grinders and vaporizer lockable containers. Its services include patient counseling, design and construction, and cannabis analytical product testing.
ACB’s revenue declined 25% to CAD55.16 million ($44.46 million) in its fiscal third quarter, ended March 31, 2021. The company also reported a CAD142.96 million ($115.32 million) operating loss , representing a 71.4% increase year-over-year. Also, ACB’s net loss came in at CAD164.65 million ($132.86 million) over this period, and its gross loss was CAD85.46 million ($68.85 million) for this quarter, compared to a CAD19.65 million ($15.83 million) gross profit in the first quarter of 2020.
Analysts expect ACB’s revenue to decline 1.4% year-over-year to $206.78 million in the fiscal period ending June 2021. The stock has declined 27.6% over the past year and 8.1% over the past month.
ACB’s POWR Ratings are consistent with this bleak outlook. The stock has an overall F rating, which translates to Strong Sell in our proprietary ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock also has an F grade for Sentiment, and a D grade for Momentum and Quality. Within the F-rated Medical – Pharmaceuticals industry, it is ranked #225 of 225 stocks. To see more of ACB’s component grades, click here.
Of the 11 Wall Street analysts that rated the stock, seven rated it Sell. Closing yesterday’s trading session at $8.88, analysts’ average target of $6.74 represents a potential 24.1% decline.
SNDL produces, distributes, and sells medicinal and adult-use cannabis. Cannabis products from the company are used as medical medications as well as to enhance social, spiritual, and recreational experiences. Sundial Cannabis-branded dried flower cannabis products are available in various formats, including pre-rolls, oils, capsules, and sublingual.
In May, SNDL and Inner Spirits Holdings Ltd. entered an agreement under which SNDL will purchase all Inner Spirit’s issued and outstanding common shares for approximately $131 million. The merger could…
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