Is Aurora Cannabis a Strong Buy Now?
- The Canadian marijuana stock, Aurora Cannabis, experienced a 99.5% drop from its early 2019 highs and reported $818 million in annual losses. However, the company’s performance is expected to improve by 2024, with a record level of gross profitability ($25.5 million) reported in the second quarter of its fiscal 2024 and a 30% annual increase in sales.
- Despite lack of profitability in the first half of fiscal 2024, Aurora Cannabis management is optimistic about the company’s potential to achieve positive free cash flow and possibly net profit in the coming year. This perspective is not shared by Wall Street analysts who foresee a negative income year for Aurora Cannabis in fiscal 2024 and expect the company to break even only by fiscal 2026.
- The potential legalization of marijuana in 2024 could provide a significant boost to the performance of Aurora Cannabis. The U.S. Department of Health and Human Services has recommended a relaxation of marijuana regulations and legislation is in progress towards the legalization of marijuana-related financial services. If these developments occur in tandem with the expected improvement in Aurora Cannabis’s financial performance, the company’s stock could become a promising investment.
Aurora Cannabis Stock: A Potential Buy in 2024?
The Canadian marijuana stock, Aurora Cannabis (ACB) has seen its share price plummet 99.5% from its 2019 highs with sales at $225 million and annual losses at $818 million. However, circumstances may shift in 2024 which could make buying Aurora Cannabis an attractive proposition.
Aurora Cannabis: A Brief Financial Overview
Aurora Cannabis reported earnings for Q2 of fiscal 2024, with sales at $46.9 million and a gross profit of $25.5 million, marking their highest profitability level since mid-2020. Despite operating costs amounting to $27.6 million, the company’s operating loss was its smallest since mid-2017. The CEO, Miguel Martin, expressed optimism, citing 30% YoY sales growth and the company’s best fiscal year to date.
Aurora Cannabis has successfully cut about $295 million from its cost structure and aims to cut an additional $30 million, bolstering its chances of achieving profitability in fiscal 2024. Despite this, analysts from S&P Global Market Intelligence predict negative earnings for fiscal 2024 and 2025, anticipating a breakeven only by fiscal 2026.
Potential for Profitability: A Closer Look
While Aurora Cannabis is still in the red, with Q1 losses over $21 million, its management’s cost-cutting efforts could lead to positive free cash flow in fiscal 2025. This progress towards profitability is something that Wall Street isn’t expecting.
Legalization: A Potential Game Changer
The potential for marijuana legalization in 2024 is another important factor to consider. Despite previous disappointments, recent events suggest change may be on the horizon. The HSS recommended relaxing marijuana use regulations, and President Biden expressed support for medical marijuana legalization. If marijuana is legalized in 2024 as Aurora Cannabis moves towards profitability, the resulting profits could be significant.
While conditions must align perfectly for this scenario, Aurora Cannabis stock may represent a promising investment opportunity should these circumstances materialize.
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