Jim Cramer: Stay Away from Aurora Cannabis

Rajiv  Nanjapla - Author

Nov. 8 2019, Updated 1:22 p.m. ET

This year, Aurora Cannabis (ACB) has lost 30.5% of its stock value as of Thursday. Weak fourth-quarter revenues, analysts’ downgrades, and weakness in the cannabis sector caused the stock to fall. Also, the company was trading at a discount of 65.3% from its 52-week high of 13.57 Canadian dollars and at a premium of 2.6% from its 52-week low of 4.59 Canadian dollars. So, has the stock bottomed out? Should you start to consider buying the stock? Jim Cramer, CNBC’s Mad Money host, doesn’t think so.

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Jim Cramer says to stay away from Aurora Cannabis

On Wednesday, Jim Cramer commented on the stock during the lightning round on CNBC. He said, “The group is just under heavy pressure, and every time it sticks it’s head up, it gets completely whacked. They’re playing whack-a-mole with these. We’ve got to wait to until one of them shows a really big profit.”

Cannabis sector is under pressure

Since the beginning of September, the Horizons Marijuana Life Sciences Index ETF (HMMJ) has lost 27.8% of its stock value. However, the S&P 500 Index has increased 5.4% during the same period. Vaping-related deaths, the expectation of a slowdown in cannabis sales, higher operating costs, and the thriving black market appear to have dragged the sector down.

Last month, HEXO (HEXO) withdrew its revenue guidance for fiscal 2020 due to concerns about slower new store openings, a delay in allowing sales of cannabis-derived products, and pricing pressure. Many analysts have expressed similar opinions on these industrywide issues.

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Analysts’ recommendations on Aurora Cannabis

Since the beginning of last month, Jefferies, PI Financial, MKM Partners, and Cowen and Company have all lowered their target prices. On Wednesday, Compass Point cut its target price from $8.0 to $5.0. As of Thursday, analysts have given the stock a consensus target price of 8.11 Canadian dollars, which represents a 12-month return potential of 72.1%. Among the 16 analysts that cover the stock, 43.8% recommend a “buy,” 43.8% recommend a “hold,” and 12.5% recommend a “sell.”

Let’s look at analysts’ recommendations for Aurora Cannabis’s peers:

  • Among the 20 analysts that cover Canopy Growth (CGC) (WEED), 50% recommend a “buy.” Analysts’ consensus target price is 45.46 Canadian dollars, which represents a return potential of 80.9%.
  • Among the 13 analysts that follow Aphria (APHA), 76.9% recommend a “buy” rating. Analysts have given the stock a 12-month target price of 12.76 Canadian dollars, which implies a return potential of 100.3%.
  • Analysts favor a “hold” rating for Cronos Group (CRON). Among the 12 analysts that follow the stock, 58.3% recommend a “hold” rating. Analysts have a consensus target price of 15.85 Canadian dollars on Cronos Group, which implies a return potential of 51.5%.

Aurora Cannabis and Canopy Growth are scheduled to report their earnings on November 14. To learn more, read Aurora Cannabis’s Revenue: Here’s What Analysts Expect and Canopy Growth’s Q2 Earnings: What to Expect.

Both companies are market leaders in the cannabis space. A strong performance from Aurora Cannabis and Canopy Growth could drive the cannabis sector. Check 420 Investor Daily for more cannabis-related news and updates.


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