- Aurora Cannabis is Alive After Soaring Back to Life Following the Cannabis Firm’s Surprise Q3 Earnings Results
- In Just 2 Trading Sessions, ACB Stock Rallied 123.2% Giving the Company’s Shareholders Renewed Optimism
- Can Aurora Sustain its Newfound Momentum and Continue to Improve its Financial Position? Here’s What Analysts Had to Say Following ACB’s Q3 Earnings
Shares of Aurora Cannabis (TSX: ACB) (NYSE: ACB) (FRA: 21P) roared back to life on Friday following the Canadian licensed producer’s (LP) surprise third-quarter fiscal 2020 financial results, which came out after the closing bell on Thursday.
Aurora reported Q3 net revenue came in at $78.4 million, excluding provisions of $2.9 million, up 18% quarter over quarter. The company’s revenue figure easily surpassed the average analyst estimate, which projected Aurora would report revenue of $66.7 million for the third quarter.
Another positive takeaway from Aurora’s Q3 earnings included a substantial reduction in the company’s cash burn. Aurora announced that it’s cash use decreased by $118 million compared to the previous quarter. The company expects its burn rate reduction to continue into Q4 and says it’s on target to reach positive adjusted EBITDA by Q1 2021.
Aurora still has work to do to achieve this goal as the company reported Q3 adjusted EBITDA, excluding one-time termination costs associated with the firm’s business transformation plan, came in at a negative $45.9 million. While still an improvement of $34.4 million compared to last quarter’s adjusted EBITDA loss of $80.3 million, the company has a ways to go to achieve positive adjusted EBITDA.
“I am incredibly proud of the Aurora team for working through these challenging times in order to maintain uninterrupted operations at all of our production facilities and ensure we continue to meet the needs of our patients and consumers. I am also pleased that our third quarter 2020 financial results were in-line with our expectations and that we remain firmly on track with the cost-savings and capex goals we detailed during our business transformation plan in February 2020,” stated Aurora’s Executive Chairman and Interim CEO Michael Singer.
For more information and to view additional details related to Aurora’s Q3 2020 earnings, please view the company’s official news release here.
Here’s What Analysts Are Saying About Aurora
PI Financial analyst Jason Zandberg released a research update to his clients Friday, which saw the analyst maintain his ‘Neutral’ rating on Aurora Cannabis while also reducing his price target on ACB stock from $24 to $12 per share.
Zandberg stated that Aurora’s revenue increase was a pleasant surprise, but the company still has a ways to go as it relates to cost-cutting measures.
“Aurora management had guided that Q3 revenue would show modest growth on April 13. We would characterize the +35% qoq growth as robust. That said, we have concerns with ACB’s ability to reduce expenses without cutting to the bone,” said Zandberg.
The PI Financial analyst projects Aurora will report fiscal 2020 revenue and adjusted EBITDA of $284 million and negative $162 million, respectively. Zandberg is forecasting much-improved numbers for fiscal 2021, which include positive adjusted EBITDA of $15.5 million on revenue of $356.8 million.
“ACB production was 36,207kg during the quarter but only sold 12,729kg. This supply-demand imbalance has been in place for several quarters, and we anticipate the Company will continue to flood the market with low price flower. The biggest question with ACB is its cost structure, which has made significant reductions already but still requires deep cuts,” added Zandberg.
Cantor Fitzgerald analyst Pablo Zuanic stated “encouraging signs, for a change,” in his note to clients on Friday. Zuanic reiterated his ‘Overweight’ rating and $22 price target on shares of Aurora Cannabis.
“[Aurora] began to show cost and cash flow improvements that give credence to the notion of positive EBITDA by the Sep quarter and positive cash flow by late FY21,” said Zuanic.
Jefferies analyst Owen Bennett said the numbers offered reasons to be optimistic but noted that sales were never the issue for Aurora, but rather its cost structure. The Jefferies analyst currently has a ‘Hold’ rating and $1 price target on ACB stock.
“To this, although a headline EBITDA miss today, we think consensus will warm to Aurora’s chances of hitting their +ve adj. EBITDA target, especially given commentary around further levers to pull. As before, all eyes remain on 1Q as the big catalyst,” wrote Bennett in his note to clients.
ACB Stock Price Action & Chart
Shares of Aurora Cannabis (TSX: ACB) soared an incredible 66.85% on Friday, closing the day at $15.35 per share. In just two days, ACB stock has rallied 123.2% after hitting a low of $7.50 on Thursday. For those that have been out of the loop for a bit, bear in mind, Aurora recently completed a 1-for-12 reverse stock split. Regardless of the reverse split, Aurora’s recent price action has given the company’s loyal/cult-like shareholders a reason to cheer again.
Disclosure: The Cannabis Investor does not hold a position in any of the stocks mentioned in this article.