Aurora Cannabis stock forecast: Heading towards new lows?

15:00, 3 November 2021

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Aurora Cannabis stock forecast

After hitting C$23.95 on 11 February 2021, Aurora Cannabis (ACB) has lost more than 60% of its value. After such steep losses, what’s next for the stock? 

Read on for the latest Aurora Cannabis stock news and analysts’ forecasts. 

Overview of the ACB performance

Aurora Cannabis stock forecast

The ACB share price has been steadily declining since March 2019. While a broad market rally helped the stock rise to C$26.80 in May 2020, gains were short-lived. The share price dropped to an all-time low of C$4.93 on 28 October 2020 as the company announced a share price dilution to the tune of $500m over 25 months. 

The stock managed to stage a rebound from the nadir, starting to rally in November 2020 on the back of Joe Biden’s Presidential election win and hopes of favourable cannabis legalisation in the US, propelling the share price higher into 2021. 

It kicked off January 2021 at C$10.78, more than 100% higher than its all-time low, and continued to rise, reaching C$24.10 on 10 February. Once again, the spike was brief, and the share price resumed its downward trend to around C$8.55, where it closed its most recent trading session on 2 November.

Why has Aurora Cannabis been underperforming?

The disappointing stock performance could be linked to the company’s inability to grow revenue. The last we heard from Aurora Cannabis was back in September when it released fiscal Q4 results. The company posted a 20% decline in net revenue to C$54.8m, down from C$68.4m a year earlier. For the full fiscal year 2021, total revenue declined to C$245m, 9% lower than the previous year.

Meanwhile, Aurora reported a net loss of C$135m. While still a loss, it was a significant improvement on the C$1.9bn loss reported in the same quarter a year earlier.

The business lost more than C$3bn in its previous fiscal year, which prompted a major reshuffle and a business transformation plan. Part of that transformation process was the appointment of new chief executive officer Miguel Martin. For the most recent year, full-year losses of C$695m were recorded as the new CEO refocused the company on medical marijuana after struggling to compete successfully in the recreational market.

The medical cannabis segment has been a strong point for Aurora as it benefitted from early mover status. Canadian medical cannabis revenue came in at C$107m. Meanwhile, consumer cannabis net revenue plunged 45% year-on-year.

Furthermore, due to the shift towards the medical market, which commands higher average net selling prices and margins, adjusted gross margin before fair value adjustments on cannabis net revenue was 54% in Q4 2021. This was up from 49% compared to the same period a year earlier and 44% from Q3 2021.

Following those results, Martin said in a press release: "We are very pleased with our strategic and financial progress in growing our high-margin medical revenue, rationalising expenses, strengthening our balance sheet, and reducing our cash burn during fiscal year 2021. 

“Given ongoing challenges in the Canadian adult recreational market, our broad diversification across domestic medical, international medical, and adult recreational segments provides us with underlying strength, stability, and growth opportunities in an evolving industry for global cannabinoids.”

Aurora Cannabis is due to report Q1 2022 earnings on 9 November. Investors will likely continue to be interested in the business transformation plan, specifically looking for signs of continued growth in the international medical business.

ACB share price chart: the technical picture 

The ACB share price has been forming a series of lower highs and lower lows across the past nine months. At the time of writing (2 November), the stock traded below its descending trendline dating back to mid-February and below its 50- and 200-day simple moving averages (SMAs). The relative strength index (RSI) was neutral at 50, giving away few clues.

Aurora Cannabis stock forecast

The 50-day SMA was being tested. A break above this level could open the door to C$9.45, the falling trendline resistance. It would take a move above C$9.85 to negate the near-term downtrend and expose the 200-day SMA at C$10.93.

Meanwhile, sellers could look for a move below C$7.47 to target C$4.93, the all-time low.

After losing more than 60% from its 2021 high, is the stock a buy, sell or hold? Let’s take a look at some analysts’ latest ACB stock projections.

ACB stock predictions: will the transformation plan help lift the company’s shares?

Emily Flippen, senior analyst at the Motley Fool, was downbeat on the outlook for Aurora Capital. In a note to Capital.com, she said: “Over the short-term, a business' share price may significantly deviate from its underlying business performance. However, over the long-term, separating the two becomes virtually impossible.

“In the case of Aurora Cannabis, its business has faced severe headwinds alongside egregious mismanagement of capital that have caused massive losses for long-term investors. Aurora is not only experiencing declining revenue due to the 'right sizing' of its operations, but management is still having to write down tens of millions of dollars of cannabis assets as well as impair its intangible assets, most of which were purchased with shareholder provided capital. Aurora's hope is that a smaller, more efficient, business will be able to generate enough cash to become self-funding.”

Flippen added: “However, given stiff competition that is not only better capitalised but fundamentally more efficient and less dilutive with its capital, it is unlikely that Aurora's business (and thus, it's stock price) will turn into long-term out-performers."

Alexander Voigt, founder and CEO of daytradingz.com, draws on the upcoming results as a potential catalyst for future direction. In his ACB stock analysis, he noted: “In the last decade, Aurora Cannabis had several years with negative operating cash flow and missed earning expectations various times. The biggest potential lies in the further legalisation of cannabis in more countries.

“The upcoming earnings announcement on 9 November 2021 (after market close) will provide better guidance on the company's perspective. Long-term investors should wait to see actual profitability unfold before considering buying Aurora Cannabis.”

Meanwhile, Jeff Sampson, founder and CEO of Everscore, forecasted expansion into the US in similar fashion to that of the company’s peers, Tilray (TLRY) and Canopy (WEED). He said:

“As the third-largest cannabis company in Canada, I expect an expansion plan to enter US states with recreational and adult use markets similar to that of Tilray and Canopy.” 

He added that “CEO Miguel Martin's Altria background suggests CPG tactics will be similar to Irwin Simon's at Tilray – brand-focused and building distribution infrastructure.”

At the time of writing (2 November), according to MarketBeat, nine analysts had issued ratings on Aurora Cannabis over the past 12 months. There were five ‘hold’ ratings and ‘four sell’ ratings, with the consensus rating being a ‘hold’. The average one-year ACB share price forecast was at C$6.81, with the high Aurora Stock price target set at $8.50 and the low at $6.00.

In the meantime, according to algorithm-based forecasting website Wallet Investor, the stock was suggested to rise strongly over the coming year. Its Aurora Cannabis prediction for the end of 2021 was at C$9.92, 2022 – at C$11.28, 2023 – C$12.63, 2024 – at C$14.22 and 2025 – at C$15.62. According to the website’s ACB stock 5-year forecast, the share price could reach C$15.89 by November 2026. 

Note that this article does not constitute financial or investment advice. Remember that analysts and online forecasting sites can and do get their predictions wrong. And, as always, keep in mind that past performance is no indicator of future returns.

We recommend that you always do your own research and consider the latest market trends and news, technical and fundamental analysis, and expert opinion before making any investment decisions. And never invest money you cannot afford to lose.

FAQs

According to Market Beat, no analysts covering the stock have issued it a buy rating, as of 2 November 2021. Whether ACB stock is a suitable buy for your investment portfolio depends on your personal financial situation and risk tolerance. You should research the stock to decide whether it is a good fit for your investing goals. Remember that past performance is not an indicator of future returns. And you should never invest money you cannot afford to lose.

On 2 November 2021, according to MarketBeat, the average one-year ACB share price forecast was at C$6.81, with the high price target set at $8.50 and the low at $6.00. In the meantime, algorithm-based forecasting website Wallet Investor suggested the stock could post gains over the coming years, reaching C$15.89 in November 2026.

Whether you believe those stock predictions is a decision only you can make. It’s vital to carry out your own research.

Whether ACB shares are a suitable long-term investment for your portfolio depends on your personal financial situation and risk tolerance. You should research the stock to decide whether it is a good fit for your investing goals. Remember that past performance is not an indicator of future returns and you should never invest money you cannot afford to lose.

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