On December 21, Aurora Cannabis (ACB) announced that Cam Battley had stepped down as its chief corporate officer on December 20. He was an advocate of cannabis legalization in Canada and had joined the company in 2016. Since then, he’d served in various roles before becoming the company’s chief corporate officer in 2018. The company didn’t provide a reason for the sudden resignation.
In the related press release, Aurora’s CEO, Terry Booth, said, “Our roots run deep, and Cam has been an integral part of the development, growth and expansion of Aurora. We are grateful for Cam’s leadership and passion over his many years with Aurora. I am sure Cam will be successful as he moves on to tackle Australia.”
Aurora’s troubles continue to increase
Battley’s resignation comes at a time when Aurora has lost 56.5% of its stock value this year. After reporting weaker-than-expected fiscal 2019 first-quarter earnings, the company announced that it would scale down its expansion plans. It also decided to offer an early conversion privilege for debenture holders with a maturity date of March 9, 2020. The development caused investors to worry about the dilution of the company’s stake.
Last week, TipRanks reported that Gordon Johnson of GLJ Research had given the stock a “sell” rating. Johnson also said he expected the company’s stock price to fall to zero by the end of the next year. He cited the increase in Aurora’s debt and dilution for the expected decline. He pointed out that Aurora’s debt had increased from 64 million Canadian dollars to 796 million Canadian dollars in the last two years. Also, its number of shares outstanding had increased from 183.6 million at the end of the first quarter of fiscal 2018 to 1.023 billion at the end of the first quarter of fiscal 2020.
On December 21, Grizzle reported that ACB’s EV (enterprise value) stood at 28 times analysts’ EBITDA expectation for fiscal 2021. The article stated that it was much higher than the EVs of 10–15 times EBITDA for liquor, beer, and pharmaceutical companies. Grizzle’s article also pointed out that Aurora had cash to run the company for just six more months.
Overall analysts’ recommendations
Despite the negative news, nine out of 20 analysts still favor “buy” ratings on Aurora. Of the remaining 11 analysts, eight are in favor of “hold” ratings, while three recommend “sells.” Overall, analysts have a 12-month price target of 5.15 Canadian dollars on the stock, implying a 12-month return potential of 74.6%.
The performance of the cannabis sector
So far, this year, the marijuana sector has underperformed the broader equity market. Year-to-date, the S&P 500 Index has risen by 28.5% as of December 20. However, during the same period, the ETFMG Alternative Harvest ETF (MJ) and the Horizons Marijuana Life Sciences Index ETF (HMMJ) have fallen 31.5% and 37.5%, respectively. Prominent cannabis players Canopy Growth (WEED), HEXO (HEXO), and Aphria (APHA) have fallen 28.0%, 43.9%, and 16.6%, respectively. For more cannabis-related news and updates, visit 420 Investor Daily.