Aurora Cannabis (ACB) stock has been rising before its fourth-quarter earnings on Thursday. The stock has risen 12.4% this month. Strong cannabis stocks and investors’ optimism about the company’s fourth-quarter performance led to a rise in the stock price. The ETFMG Alternative Harvest ETF (MJ) and the Horizons Marijuana Life Sciences Index ETF (HMMJ) have returned 6.2% and 6.1% in September, respectively.

Aurora Cannabis: Investors Are Optimistic about Q4 Earnings

Aurora Cannabis’s revenues

On August 6, Aurora Cannabis’s management expected its fourth-quarter revenues to be 100 million–107 million Canadian dollars. Analysts expect the company to report revenues of 108.3 million Canadian dollars—a rise of 66.2% from 65.2 million Canadian dollars in the third quarter. During the same period, Aphria (APHA), Canopy Growth (WEED) (CGC), and Cronos Group (CRON) reported sequential revenue growth of 75%, -3.8%, and 58.3%, respectively.

We expect the growth in medical and consumer cannabis sales to drive Aurora Cannabis’s revenues. During the third-quarter earnings call, the company announced that its Aurora Sky and Bradford facilities were operating at full capacity, which increased the company’s production capacity. Notably, management expects the cannabis production to be at the higher end of 25,000 kg–30,000 kg for the fourth quarter.

Aurora Cannabis started exporting full-spectrum cannabis extracts to Germany in the third quarter. At the beginning of the fourth quarter, the company expanded its internal oil extraction capacity to 7,000 kg per quarter. We expect all of these initiatives to drive the company’s revenues in the fourth quarter.

Will the EBITDA improve?

Aurora Cannabis’s management expects its adjusted EBITDA to be positive in the fourth quarter. The company expects its production and manufacturing costs to fall as the Aurora Sky facility starts to operate at full capacity.

Analysts expect the company to report a negative EBITDA of 19.6 million Canadian dollars during the quarter. The EBITDA was -48.2 million Canadian dollars in the third quarter. Overall, we expect revenue growth and increased gross margins to drive the company’s EBITDA.

Very few cannabis companies reported a positive adjusted EBITDA. During the comparable quarter, Aphria (APHA) reported an adjusted EBITDA of 0.2 Canadian dollars. However, Canopy Growth and Cronos Group have reported a negative EBITDA of 92.0 million Canadian dollars and 17.8 million Canadian dollars, respectively.

YTD stock performance

Aurora Cannabis has returned 21.7% YTD (year-to-date). This year, the company has delivered strong returns. Aurora Cannabis outperformed its peers and the broader equity market. Last month the company completed the acquisition of Hempco Food and Fiber. Management provided better-than-expected guidance for the fourth quarter. The company also sold its remaining stake in The Green Organic Dutchman Holdings for 86.5 million Canadian dollars earlier this month. All of these factors led to a rise in the company’s stock price.

During the same period, Aphria, Canopy Growth, and Cronos Group returned 16.3%, -1.5%, and 7.4%, respectively. The S&P 500 Index, the ETFMG Alternative Harvest ETF, and the Horizons Marijuana Life Sciences Index ETF rose 18.8%, 2.2%, and 4.5%, respectively.

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