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Aurora Cannabis Has Significant Long-Term Promise

May 02, 2018 3:53 PM ETAurora Cannabis Inc. (ACB), ACB:CA28 Comments
Gary Bourgeault profile picture
Gary Bourgeault


  • What is probably the major factor weighing on Aurora Cannabis?
  • If the company meets supply expectations, it could surprise to the upside in the latter part of 2018.
  • Any delay in legalization will probably have more of an impact on Aurora than its competitors.
  • There could be some short-term hiccups, but long-term, the company looks solid.

Source: technical420

Aurora Cannabis (ACBFF) has been one of the more disappointing of the larger cannabis stocks recently, as the company has failed to gain traction even after taking some significant steps to boost production while lowering production costs per gram.

Along with its major peers Canopy Growth (TWMJF) and Aphria (APHQF), it's been underperforming so far in 2018, although that is probably going to change as legalization of recreational cannabis in Canada approaches. Whether or not that holds in the short term will be determined by supply and demand factors.

At this time, there is a wide range of estimates as to how much recreational cannabis demand will come with legalization, so it has been difficult to build reliable models; all of which have contributed to the performance of Aurora Cannabis and others.

That is likely to continue until we get real numbers coming in that confirm the overall market potential in Canada.

For that reason, I think that after the initial predictable boost in share price that will accompany legalization, it'll pull back some until there is more visibility in the size of the market that emerges.

The depth of the pullback will be determined by whether or not market expectations are fairly accurate, or if demand starts off slow. Assuming expectations are exceeded, Aurora will get a good boost in its share price; especially if its "Aurora Sky" facility is fully operational when legalization is implemented.

CanniMed Therapeutics Inc. deal

I think the major weight on Aurora in 2018 has been its acquisition of CanniMed Therapeutics Inc. (OTC:CMMDF). The market simply believes management was too impatient and paid more for the company than it needed to.

Shareholders see the acquisition as being overly dilutive to the company, even though there are a number of positives to consider that

This article was written by

Gary Bourgeault profile picture
I am a former investment advisor and owner of several businesses. These days I invest only for myself while continuing to write on a variety of financial and economic topics.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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