Let’s cut to the chase. Yes, Aurora Cannabis (NYSE:ACB) could be a millionaire-maker stock. Given a large enough initial investment and enough time, many stocks — including Aurora — could generate returns of $1 million or more.
The real question, though, is whether an investor buying a reasonable stake in Aurora Cannabis has a realistic chance of becoming a millionaire from this initial investment over a period of time that’s not ridiculously long. For example, could a $10,000 initial investment in Aurora turn into $1 million within 25 years?
Few stocks can achieve such a feat. To pull it off would require a compound annual growth rate (CAGR) of a little over 20%. Could Aurora Cannabis deliver this level of growth…
What it would take
To become a millionaire-maker stock, Aurora Cannabis would need to grow its market cap from around $6 billion today to $600 billion. The marijuana producer would probably have to generate annual revenue in the ballpark of $125 billion to justify that kind of market cap.
Is it possible that Aurora Cannabis could make $125 billion annually in the future? Assuming the company continues to focus on the cannabis industry, the answer depends on just how big the global marijuana market will be.
Aurora itself says that the total global cannabis opportunity is around 200 billion in Canadian dollars, or roughly $150 billion. That’s in line with what other marijuana executives state publicly as well.
However, the figure only includes medical and recreational use of marijuana. There are several other markets that could be disrupted by cannabis producers, including alcoholic beverages, tobacco, and pharmaceuticals. Canopy Growth CEO Bruce Linton thinks all of these potential markets that could be disrupted total $500 billion in annual sales.
Let’s assume that Linton is right. If so, Aurora Cannabis would need to capture around 25% of the total global opportunity. That isn’t a totally outlandish proposition. Aurora claimed a market share of around 30% in Ontario soon after the Canadian recreational marijuana market opened. Ontario is Canada’s largest province and is a very competitive market.
Why it’s not likely
You might have noticed a lot of “ifs” in what it would take for Aurora to be a millionaire-maker stock. Let’s add another one: If any of those assumptions fall through, Aurora…
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