More Upside in Aurora Cannabis Stock?
With the market sell-off continuing, marijuana stocks are not exactly in the best of shape. Among the beaten-down tickers is Aurora Cannabis Inc(NYSE:ACB), a cannabis producer headquartered in Edmonton, Alberta, Canada.
Over the past month, ACB stock tumbled more than 30%. Ouch!
However, before you ditch the company, here’s another number: 260%. That’s how much Aurora Cannabis’ revenue has grown year-over-year in the latest quarter.
You see, the marijuana industry is known for its growth. And despite being one of the bigger players in the business, Aurora Cannabis still delivers growth like a startup.
Let me explain.
Firing on All Cylinders
The company reported earnings on November 12. In the first quarter of its fiscal year 2019, which ended September 30, 2018, Aurora Cannabis generated CA$29.7 million of revenue, representing a 260% increase year-over-year. (Source: “Aurora Cannabis Announces Financial Results for the First Quarter of Fiscal 2019,” Cision, November 12, 2018.)
To put it simply, the company was able to sell a lot more products at a higher price. Aurora Cannabis achieved an average net selling price of cannabis of CA$9.19 per gram in the September quarter, up 12% from the same period last year. Total products sold grew a whopping 201% year-over-year to 2,676 kilograms.
Bottom-line results were even more eye-popping.
For the quarter, Aurora Cannabis’s net income came in at CA$104.2 million, up a staggering 2,826% from a year ago. However, note that the massive increase was mainly due to unrealized non-cash gain on derivatives and marketable securities, partially offset by higher finance costs, share-based payments, acquisitions, and project evaluation costs.
Aurora Cannabis Inc Is Capitalizing on a New Market
One of the major news events in the cannabis industry was Canada’s legalization of recreational marijuana for adult use last month. While the country’s Cannabis Act came into force on October 17, Aurora Cannabis was already capitalizing on this new market in its September quarter.
This is because the company managed to deliver its first shipments to provincial wholesalers in Canada before the end of September. In fact, the earnings report that Aurora Cannabis just released already recorded CA$0.6 million in adult-use cannabis sales.
After the consumer market opened in Canada on October 17, the company’s products got some great responses. For the period up to October 31, Aurora Cannabis’s brands accounted for around 30% of the total market supplied through the Ontario Cannabis Store—the sole legal retailer of recreational marijuana in the province of Ontario.
“The commencement of adult consumer use sales in Canada has been very successful for Aurora, with strong performance across all product categories and brands,” said Aurora Cannabis Chief Executive Officer Terry Booth. (Source: Ibid.)
“Given the strong unmet consumer demand evident across Canada, we are confident that our rapidly increasing production capacity will result in continued acceleration of revenue growth,” he added.
Aurora Cannabis Inc Stock Chart
Because the stock market was experiencing a pullback on Monday—the Dow dropped over 600 points—Aurora Cannabis’s solid earnings report did not cheer up ACB stock investors.
However, over the past 12 months, Aurora Cannabis stock still climbed a solid 48.7%.
Chart courtesy of StockCharts.com
At the end of the day, keep in mind that Aurora Cannabis is one of the largest marijuana companies in the world, with a funded capacity of over 500,000 kilograms per year. It has operations in 19 countries on five continents. The top and bottom-line growth from the company’s first-quarter earnings report serves as the latest sign of strength.
Still, like most weed stocks, ACB stock could see some short-term volatility as sentiment continues to evolve in the U.S. equities market.