Can Aurora Cannabis Regain Investors’ Trust?



Aurora Cannabis (NYSE:ACB) is scheduled to report its results for the second quarter of fiscal 2020 on Thursday before the market opens. In the last two weeks, the company delivered disappointing news. Last week, Aurora Cannabis discussed unaudited preliminary results for its second-quarter earnings. The results weren’t positive news. Let’s see what analysts said about its second-quarter earnings.

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Aurora Cannabis’s Q2 results

Aurora Cannabis’s last reported earnings were disappointing. There isn’t much hope after a string of negative news for the last two weeks. Analysts and investors were prepared for the company to report another quarter of disappointing results. Negative factors still impact the cannabis sector. The factors that impacted cannabis companies last year included a lower number of legal stores in Canada and rising black market sales. Canada planned to roll out more stores this year. However, regulations could cause a delay. Analysts don’t expect cannabis companies to rebound any sooner. Previously, I discussed how analysts reduced their revenue and other estimates for Aurora Cannabis in February due to these factors.

In the second-quarter preliminary results reported on January 6, Aurora Cannabis stated it expects its net revenue to be around 50 million–54 million Canadian dollars. The company didn’t expect to increase its medical revenue sequentially. Also, the company’s international revenue could decline due to supply interruptions.

However, analysts expect Aurora Cannabis to report net revenue of 65.4 million Canadian dollars—20.7% growth YoY (year-over-year). Sequentially, the revenue could fall by 13.0%, which would prove that headwinds are still impacting cannabis companies.

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Aurora Cannabis struggles to achieve profitability

Analysts expect Aurora Cannabis to report an EBITDA loss of 56.5 million Canadian dollars in the second quarter. Sequentially, the loss is higher than 39.6 million Canadian dollars reported in the first quarter. The EBITDA loss is an increase of 24.1% YoY. Aurora Cannabis has been working to reduce its expenses. The company reduced its expansion plans and made 25% job cuts to hit profitability. Analysts expect the company to report a negative EBITDA in the third and fourth quarters. However, the losses could reduce to 14 million Canadian dollars by the fourth quarter. Analysts expect the company to report a gross profit margin of 48.4%.

The company plans to writedown 1 billion Canadian dollars to hit a positive EBITDA by the first quarter of fiscal 2021. Aurora Cannabis also plans to bring down its SG&A expenses to 40 million–45 million Canadian dollars per quarter by the end of the fourth quarter of fiscal 2020. However, analysts don’t expect the company to hit a positive EBITDA before the second quarter of fiscal 2021.

Meanwhile, Canopy Growth (NYSE:CGC)(TSE:WEED) will report its third-quarter results on Friday. Analysts expect the company to have a revenue of 108.3 million Canadian dollars compared to an EBITDA loss of 110.1 million Canadian dollars.

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Stock’s downward trend

Aurora Cannabis CEO Terry Booth stepping down wasn’t good news for the stock. So far, the stock has fallen 18.5% in February as of Tuesday. Many analysts also reduced the target price and had bearish views about the company. To learn more, read ACB Made Analysts Skeptical, Stock Took a Massive Hit.

In February, Canopy Growth stock has fallen by 11.7%, while Hexo has fallen by 2.4%. Aphria (NYSE:APHA) has fallen by 9.0%, while Cronos Group (NASDAQ:CRON) has fallen by 4.1% in February.

According to analysts, it’s important for investors to note the negative comments discussed in the earnings call. So far, marijuana companies seem to be bad at forecasting. Analysts think that the negative indications could show investors the headwinds that the company faces and what could happen in the future. Will Aurora Cannabis give investors any hope for the future? We’ll know more after the company’s second-quarter earnings call.

Stay with us to learn how Aurora Cannabis performed in the second quarter.


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