After Aurora Cannabis Inc. (ACB.TO) (ACB) reported fourth quarter financial results that came in well below expectations, the shares plunged almost 30% on very heavy volume and traded at $0.40 on a pre-split basis.
Do not get confused, Aurora Cannabis did not trade above the $15 level in August due to the shares trading higher on positive developments. The Canadian cannabis producer was forced to conduct a 12-for-1 reverse split in order to remain listed on the NYSE. The reverse split reduced the number of shares outstanding and increased the share price. The transaction did not create value for shareholders, and we believe that our readers need to be aware of this.
In the fourth quarter, Aurora Cannabis announced a $1.8 billion asset write down and this number was not received well by the street. Following the earnings report, several broker-dealers lowered their respective price targets on Aurora Cannabis which we have highlighted below:
- Canaccord lowered its price target to $8.50 from $10 (CAD)
- CIBC lowered its price target to $10 from $21 (CAD)
- Piper Sandler lowered its price target to $8 from $10 (USD)
- Cowen and Company lowered its price target to $10 from $11 (CAD)
- MKM Partners lowered its price target to $9 from $18 (CAD)
- ATB Capital Markets lowered its price target to $10.25 from $11.30 (CAD)
The trend of broker-dealers lowering price targets on Aurora Cannabis is concerning and we will be monitoring how these banks continue to view the opportunity. During the last year, Aurora Cannabis has faced challenges with raising capital and has signed debt structured financings to raise capital. This represents a major change from 2017 and 2018 when Aurora Cannabis was able to raise hundreds-of-millions of dollars by selling equity. Going forward, we are interested in how Aurora Cannabis is able to serve the debt and make the interest payments that are associated with it.
Going forward, the name of the game for Aurora Cannabis is execution and we will monitor how the story evolves from here. The company has become highly focused on the US CBD market and this is a vertical that we are too excited about.
If you are interested in learning more about the Canadian cannabis producer, please send an email to email@example.com to be added to our distribution list.