Aurora Cannabis (ACB.TO) (ACB) is one of the most well-known names in the cannabis industry and is an opportunity that we have been highly focused on.
From raising more than $135 million to being approved to be part of a French medical cannabis study, Aurora Cannabis has been executing on a multi-national growth strategy and has reported several significant developments so far this year. Last year, a new management team took over the business following the acquisition of Reliva (a leading North American CBD brand) and we are favorable on the direction the business is heading.
So far this year, Aurora Cannabis’ stock price has rallied more than 50% and the market has responded favorably to several key developments that were reported by it. The performance of the business caused a leading Canadian broker-dealer to raise its price target on Aurora Cannabis and we are favorable on this trend.
Below, we highlighted some of the most important milestones that were reported by Aurora Cannabis earlier this year. We believe that our readers need to be aware of these developments and are of the opinion that Aurora Cannabis represents a turnaround story in the making:
- February 8th: CIBC raised its price target on Aurora Cannabis to $17 from $15 (CAD). This price target implies that there is less than 4% upside to current levels and we will expect additional broker-dealers to raise price targets on Aurora Cannabis
- January 27th: Signed a five-year supply agreement with MedReleaf Australia to act as the exclusive supplier of Aurora’s cannabis brands in Australia. The agreement does not require any investment from Aurora Cannabis and includes EU GMP certified products like dried flower, oils, soft gels, and future products that use new delivery mechanisms. Aurora owns 10% of MedReleaf Australia
- January 26th: Closed a $137.5 million bought deal private placement that included the entire over-allotment option. Aurora Cannabis plans to use the net proceeds for general corporate purposes, which may include opportunistically reducing debt and believes that in falls in line with its strategy to have a strong balance sheet while maintaining maximum flexibility to work towards being a global leader in cannabinoid market
- January 14th: Signed an agreement where Great North Distributors will be exclusive representative for Aurora’s leading portfolio of brands across the Canadian cannabis retail environment. Great North has leverage to every Canadian province and has established relationships with provincially owned and operated retailers and private retailers. The firm applies industry-leading data analytics capabilities to the sector and provides suppliers with a powerful data-driven approach to cannabis sales.
A Turnaround Story that is Focused on Cutting Costs
During the last quarter, Aurora Cannabis announced plans to lower its monthly cash burn by scaling back the size of its Canadian cannabis production footprint. This type of development is often referred to as rightsizing and we consider it to be one of the most important announcements to be recently be reported by Aurora Cannabis.
By scaling back production, Aurora Cannabis will be able to conserve capital and use its resources to focus on some of the most attractive aspects of the cannabis value chain. From the cannabis opportunity in the EU to the US, the Canadian cannabis company has substantial growth prospects, and this is a trend that we are following.
Is Aurora Cannabis About to be the Subject of a Re-Rating Cycle
Based on how Aurora Cannabis’ story has advanced so far this year, we would not be surprised if additional broker-dealers became more bullish on the opportunity. Based on Aurora Cannabis’ performance in these burgeoning international markets, we believe the company could go through a re-rating cycle and believe that our readers need to be aware of this trend.
Earlier this year, Alliance Global Partners re-rated a good portion of the cannabis companies that it covers. HEXO Corporation (HEXO.TO) (HEXO) and Aphria Inc. (APHA.TO) (APHA) were beneficiaries of Alliance’s re-rating cycle and these are two Canadian cannabis products that have been capturing the market’s attention.
In late 2020, Aphria and Tilray announced a merger agreement that sent shockwaves throughout the cannabis industry. Going forward, we expect to see additional consolidation of leading cannabis operators and expect Aurora Cannabis to be a beneficiary of this trend.
If you are interested in learning more about Aurora Cannabis, please send an email to [email protected] with the subject “Aurora Cannabis” to be added to our distribution list.