No sector in the market has been safe for the past month, and the cannabis sector has especially been hit hard. As the COVID-19 crisis unfolds many investors are concerned about where the cannabis sector is heading next…
Before the whole crisis unfolded investors in Aurora Cannabis (NYSE: ACB) were concerned for many reasons; management, debt, and a clear path to revenue, just to name a few. These problems, many speculate, have compounded as capital gets harder to obtain, revenue is projected downwards, and investors flee to cash.
So does ACB have what it takes to weather this challenging economic environment?
The company is one of the worst-performing stocks in the cannabis sector, falling almost 93% in just 12 months. During their last quarterly earnings report the company missed guidance. And CEO Cam Battley, who is no longer with Aurora Cannabis, had predicted positive EBITDA in 2020. Instead, during their last quarter, the company reported an adjusted EBITDA loss of CA$11.7 million.
In addition, ACB has had diminishing sales numbers for the past two quarters. First to $75.2 million CAD and then again to $56 million CAD in the most recent quarter.
The reason investors were willing to pay such a high premium more than a year ago was that they anticipated cannabis companies to grow revenues dramatically. What happened instead was the total opposite.
Based on it’s share price, it’s clear that investors have not been happy about the numbers coming out of Aurora Cannabis and that’s a significant reason why the stock has fallen so dramatically.
Now on the topic of cash, in the second quarter ACB reported having cash and cash equivalents totaling CA$156.3 million. Over the past six months, the company has burned through roughly CA$229.6 million in operating expenses. So it’s not surprising that some analysts feel that ACB has just a few months left of liquidity before it runs out.
So with all of this bad news piled on for ACB, what can we look for if the company is to make an epic comeback…
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