uploads/2020/02/aurora-cannabis-stock.jpg

What Drove Aurora Cannabis Stock Yesterday?

By

Updated

On Monday, Aurora Cannabis (NYSE:ACB) announced that its Aurora River production facility received EU GMP (European Union Good Manufacturing Practice) certification. The facility is located in Bradford, Ontario. The certification will allow the company to export its products to most European markets. Also, the company’s management announced that it received approval from German regulators to sell its medical cannabis products. In December 2019, German authorities suspended Aurora Cannabis from selling its medical cannabis products. Read Why Did Germany Halt Aurora Cannabis’s Sales? to learn more. The company’s management said that it would utilize its inventory currently held in Germany to fulfill existing orders.

Article continues below advertisement

Aurora River has a cultivation capacity of 28,000 kilograms per year spanning across 17 rooms. With EU GMP certification, the company expects to allocate a higher quantity of dried and extracted products for international markets. Aurora River is the third facility after Aurora Mountain and Aurora Ridge to receive EU GMP certification. Aurora Mountain, located in Alberta, has a production capacity of 4,800 kilograms per year, while Aurora Ridge, located in Ontario, has a production capacity of 7,000 kilograms per year.

Why is Germany an important market for Aurora Cannabis?

In the last quarter, Aurora Cannabis’s sales were 75.25 million Canadian dollars. Among the revenue, approximately 40.5% or 30.5 million Canadian dollars were from medical cannabis. The company’s international sales contributed approximately 16.3% of its medical cannabis sales. Aurora Cannabis sells its products in more than 25 countries. Germany is one of the important markets. The company owns one of the three cultivation licenses granted by the country. Also, Aurora Cannabis earns higher gross margins from its product sales in Germany. So, Germany is an important market for the company.

Article continues below advertisement

Stock performance

On Monday, Aurora Cannabis’s announcement improved investors’ confidence, which caused the stock price to rise. Yesterday, Aurora closed at 2.66 Canadian dollars, which implies an increase of 6.4% from the previous day’s closing price. Despite the rise, Aurora Cannabis is still trading 4.7% lower YTD. Last year, the company lost 58.9% of its stock value. The stock price fell due to a weak performance in the previous two quarters, analysts’ downgrades, and management’s decision to scale down its expansion plans.

Meanwhile, Canopy Growth (NYSE:CGC), Aphria (NYSE:APHA), and Cronos Group (NASDAQ:CRON) have returned 7.5%, -9.6%, and -4.8% YTD, respectively. The ETFMG Alternative Harvest ETF (NYSE:MJ) lost 2.7% of its stock value during the same period.

Analysts’ recommendations

Among the 19 analysts that follow Aurora Cannabis, seven recommend a “buy,” seven recommend a “hold,” and five recommend a “sell.” Overall, analysts have a target price of 4.48 Canadian dollars, which implies a 12-month return potential of 68.6%.

Advertisement

More From Market Realist