Investing

Aurora Cannabis Climbs 16% On Profit Guidance Despite Missing Q1 Analyst Forecasts

Shares of global cannabis industry leader Aurora Cannabis (CA:ACB, US:ACB) ended the week with a 16% share price boost following the release of the group’s first quarter financial update to investors.

At a first glance, the company actually missed consensus analyst forecasts at both the top and bottom line but continued to excite investors thanks to its outlook commentary.

For the first quarter of FY23, Aurora’s total revenue declined -18% to $49.2 million from $60.1 million in the prior year and fell short of analyst forecasts around $53 million. When compared to the prior quarter, revenue only declined -2%.

The group’s SG&A expenses declined by -8% to $42.2 million, while R&D expenses were slashed -56% to $1.6 million.

Aurora’s adjusted EBITDA, a key measure of the group’s underlying profitability, improved +21% over the year to -$8.7 million and came in marginally below the streets’ -$8.1 million forecast.

Cannabis sales volumes declined -7% over the quarter to 12.2 tonnes and the net average sale price increased +4% to $5.32. Prices have continued to recover from all-time lows following industry wide overproduction causing supply and demand imbalances in the rapidly growing industry.

Aurora ended the period with $428.2 million in cash, falling from $488.8 million in the prior quarter.

During the quarter, ACB management discussed that they remain on track to achieve up to $170 million in cost savings over 2022 with $140 million realized during the quarter. Due to the cost savings already achieved, Aurora reduced debt obligations with the early repurchase of $160 million of convertible notes.

Looking ahead, management reiterated that Aurora expects to achieve adjusted EBITDA profitability by the 31st of December in 2022.

For the next quarter, Aurora expects to generate similar levels of Cannabis revenue as in Q2 but will include the first full quarter of revenue contribution from the firm’s recent Bevo farms acquisition. Bevo Farms will add positive revenue and positive adjusted EBITDA to the stocks income statement.

Cantor Fitzgerald analyst Pablo Zuanic sees Aurora as more of a pure Cannabis play when compared to peers as the firm generates more than 80% of profits from the domestic and international cannabis business.

Zuanic believes the discount in the stock is unwarranted as it has a stronger balance sheet. The firm remains ‘buy’ rated on the stock with a $3 price target.

On average, the street remains ‘neutral’ rated on the stock with an average $2.10 price target suggesting the stock is trading around fair value.

The Fintel platform highlights that the company has experienced above average levels of institutional accumulation described by an ownership accumulation score of 64.59.

The score ranks ACB in the top 25% of 35,250 screened global securities. Aurora has a total of 296 institutions on the register that collectively own 61.9 million shares.

Some of the largest institutions include: Millennium Management, Renaissance Technologies, Mirae Asset Global Investments, D. E. Shaw & Co. and Two Sigma.

This article originally appeared on Fintel

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