Aurora Cannabis Inc. (TSX:ACB) is a Canadian cannabis company with an IPO on the TSX, which will report its Q1 2019 earnings on May 2nd. The company has already seen strong growth in sales and production, but it faces challenges ahead as Canada moves toward legalization of recreational marijuana.
The aurora stock a good buy is a question that has been asked by many people. Aurora cannabis reports earnings every month, so it’s important to keep an eye out for what’s going on in the company and how it affects the stock price.
Aurora Cannabis (NASDAQ:ACB) will announce its fiscal fourth quarter results after the markets close on September 21. The struggling Canadian marijuana company’s stock is already down nearly 20% year to date, compared to the industry benchmark Horizons Marijuana Life Sciences ETF, which is up 5%, and the forthcoming report may be crucial in deciding if the stock price recovers in 2021. Aurora isn’t expected to make a profit in the fourth quarter of its fiscal year, but there are other ways for the business to demonstrate success. When the business reports next week, these are the three key areas to keep an eye on.
1. Handwritten notes
In the cannabis business, write-downs are frequent since projected plant values vary with time, and if any of a company’s goods aren’t selling or have degraded in quality, they may need to be written off. Although write-downs are non-cash costs that investors may overlook, they provide vital information about how effectively a company’s business is running and how correctly it is valuing its assets.
Normally, when the fiscal year draws to a close, businesses prefer to conduct some financial housecleaning and correct inflated values. When Aurora published its year-end results in 2020, it wrote down 1.6 billion Canadian dollars in goodwill and intangible assets, increasing its total write-downs for the fiscal year to more than CA$1.8 billion. Sure, such figures are subtracted from the company’s adjusted profits before interest, taxes, depreciation, and amortization (EBITDA), but that doesn’t imply investors should disregard them.
Investors shouldn’t let businesses off the hook for large write-downs simply because they aren’t cash expenditures. Another large write-down this time may result in a rapid and unexpected sell-off of Aurora’s stock.
2. The cost of doing business
Over the last year, Aurora has been cutting costs everywhere. Management has been making the company leaner in an attempt to shore up its financials and bring it closer to positive adjusted EBITDA by closing down sites and laying off workers.
Investors can expect to see some progress toward adjusted profitability as the expenditure cutbacks trickle through the income statement. The company’s selling, general, and administrative (SG&A) expenditures of CA$42 million in the fiscal third quarter, which ended March 31, were down 42 percent from the prior-year period. Its adjusted EBITDA loss of CA$24 million was also less than half of its CA$50 million loss a year ago.
Aurora, on the other hand, still has a long way to go if it wants to catch up to its more lucrative cannabis industry competitors. In May, when the firm released its fiscal Q3 results, management indicated that it might save another CA$60 million to CA$80 million in annual costs over the next 18 months.
3. Income
Aurora has failed to expand, which is one of the reasons it has lost popularity among growth investors. Sales of CA$55 million in the third quarter of fiscal year were down 25% year over year and 18% from the second quarter of fiscal year. To make things worse, Aurora has been seeing sales declines in the consumer cannabis market as a result of COVID-19 lockdowns, especially in Ontario, Canada’s biggest province. And, given that Ontario just emerged from its third-wave lockout in June, we may expect to learn that Aurora was still feeling the effects of the headwinds in Q4. (On April 7, the Canadian government implemented new stay-at-home orders.) Given all of this, it may be difficult for the business to even equal its sales from the previous quarter. But investors are unlikely to accept it as an explanation, given that the Canadian marijuana industry just had another record month in June, with sales topping CA$318.7 million, up 1.7 percent from May’s total of CA$313.2 million.
Investors should hope for the best, but brace themselves for the worse.
If Aurora avoids write-downs and makes significant headway in improving its adjusted EBITDA figure, investors’ concerns about a future drop in sales may be alleviated. Investors, on the other hand, have presumably learnt by now not to anticipate much from this firm on results day.
Aurora Cannabis Inc. (TSX: ACB) is a Canadian cannabis company that has been on the market for about 2 years now. The company has reported earnings in the past and will be reporting them again this month. Here are 3 things to watch out for when Aurora reports earnings this month. Reference: aphria stock.
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