Aurora Cannabis Sees a Path to Profitability. The Stock Rises.
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Aurora Mountain facility cultivation
Courtesy of Aurora Cannabis
Aurora Cannabis
was rising Tuesday after fiscal fourth-quarter sales missed analysts’ estimates but the Canadian cannabis company said cost savings should “clear a path” for being adjusted Ebitda positive.
Analysts at MKM Partners upgraded the stock to Neutral from Sell.
Sales in the period fell to C$54.8 million from C$68.4 million a year earlier. Analysts were projecting sales of C$56.4 million.
The company posted a fourth-quarter loss of C$134 million, much narrower than a year-earlier loss of C$1.84 billion.
“We are very pleased with our strategic and financial progress in growing our high-margin medical revenue, rationalizing expenses, strengthening our balance sheet, and reducing our cash burn during fiscal year 2021,” said Chief Executive Miguel Martin in a statement Monday.
“Given ongoing challenges in the Canadian adult recreational market, our broad diversification across domestic medical, international medical, and adult recreational segments provides us with underlying strength, stability, and growth opportunities in an evolving industry for global cannabinoids.”
Adjusted gross margin in the quarter was 54% vs 49% a year earlier. The company said the increase was due primarily to a shift in sales mix toward the medical market. Medical cannabis net revenue was $35 million, a 9% increase from a year earlier.
In a conference call following the earnings, Martin said
Aurora Cannabis
(ticker: ACB) was “in the best shape the company has ever been in.
“Building value starts with profitability on an adjusted Ebitda basis. The entire team is focused on this effort, and additional facility closures we announced last week is another proof point to show that these actions are well under way,” the CEO added.
Martin also said Aurora Cannabis was on track for C$60 million to C$80 million in incremental cost savings” and “these additional savings will also clear a path to being adjusted EBITDA positive by the first half of our next fiscal year, even if revenue was to remain constant with our fiscal 2021 fourth-quarter levels.”
The CEO said he expects revenue growth in 2022.
The stock gained 2.59% to $6.56 in trading Tuesday after closing with a gain of 7.3% in the previous session. Shares have declined 21% year to date.
Ten analysts surveyed by FactSet have an average rating of Underweight on the stock. The average target price is $6.35.
Analysts were mixed on the stock following the earnings report. While analysts at MKM Partners upgraded the stock, Needham maintained an Underperform rating on the shares.
Write to Joe Woelfel at joseph.woelfel@barrons.com
