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Aurora Cannabis: 2020 Catalysts - Retail Stores

Mar. 01, 2020 5:53 PM ETAurora Cannabis Inc. (ACB), ACB:CAOGI, OGI:CA70 Comments


  • Aurora Cannabis should benefit from expanded Canadian cannabis retail store openings in 2020.
  • The Canadian market remains very inefficient with key provinces of Ontario and Quebec lacking retail stores.
  • Even based on planned store expansions in 2020, the company would only see a 25% boost to consumer cannabis revenues.
  • The stock has a $2 billion valuation with analysts only forecasting sales reaching $356 million in FY21.
  • This idea was discussed in more depth with members of my private investing community, DIY Value Investing. Get started today »

As Aurora Cannabis (NASDAQ:ACB) flounders around $1.50, the negatives surrounding the stock shouldn't completely overshadow the opportunities for the Canadian cannabis market in 2020. The company has substantial catalysts in 2020 including additional retail stores in Canada, the rollout of Cannabis 2.0 products and global expansion including the U.S. CBD market. This article is the first in a series of articles discussing the 2020 catalysts for Aurora Cannabis with a focus on the opportunity for more retail stores in Canada.

Image Source: Aurora Cannabis website

More Stores Needed

The retail store issue in Canada was identified as an issue all the way back with the start of legalized recreational cannabis in October 2018. The market long identified the delayed Ontario stores as a problem for cannabis sales, but the issue was probably larger than expected.

Even back last May, Globe and Mail reported on this detailed analysis by AltaCorp Capital of the retail store issue in Canada. The firm analyzed the amount of retail stores in Colorado compared to the amount in Canada based on the comparison of populations.

The study suggested last May the need for 1,400 store in Ontario and over 800 in Quebec. The largest two provinces based on population in the 2016 Canadian census only have ~60 stores now when the estimate is a need for over 2,200 stores based on Colorado.

Not only are these two provinces the largest based on population, but the combined population of 21.6 million people in 2016 accounts for 61.5% of the population in Canada. A lot of people probably wrongly assume Alberta and British Columbia are more populated provinces, but the reality is that Quebec is a huge part of the problem with slow cannabis store rollouts.

Source: Statistics Canada (via Wikipedia)

According to estimates for 2019 populations, Ontario and

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This article was written by

Stone Fox Capital profile picture

Stone Fox Capital (aka Mark Holder) is a CPA with degrees in Accounting and Finance. He is also Series 65 licensed and has 30 years of investing experience, including 10 years as a portfolio manager.

Mark leads the investing group Out Fox The Street where he shares stock picks and deep research to help readers uncover potential multibaggers while managing portfolio risk via diversification. Features include various model portfolios, stock picks with identifiable catalysts, daily updates, real-time alerts, and access to community chat and direct chat with Mark for questions. Learn more.

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.

The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion or consult a financial advisor. Investing includes risks, including loss of principal.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (70)

Cookiebear222 profile picture
they still have the cheapest per gram sold. They have most R&D. The need a really good CEO pick. I think CBD and the UFC Roar is gong to be big. I see where you are coming from but i am longterm with this company.
Cookiebear222 profile picture
@Stonefoxcapital so you think this stock is going belly up???
Stone Fox Capital profile picture
No, predicted $1 all along. $ACB can raise more money due to the promises of cannabis, but it doesn't make the stock necessarily a buy here.
Cookiebear222 profile picture
@Stonefoxcapital first of all I appreciate the fact that I see that you have pretty much written everybody back which is really cool. I know it's a high-risk stock but for $1 I think it's worth buying because just if they do get a partnership or any positive news it can go up and there is money there to be made.
Stone Fox Capital profile picture
think its just a 50/50 that buying here pays off. Not sure somebody does a partnership with $ACB with their financial position.
Cookiebear222 profile picture
Mexico is going to legalize and ACB has an early foothold there.
Stone Fox Capital profile picture
Now do you really think the drug cartels and Mexican govt are going to let a Canadian company sell a material amount of weed?
Cookiebear222 profile picture
Stone Fox Capital profile picture
Well, you are absolutely wrong... this is why bulls continue to be wrong about $ACB while the stock is about to hit my $1 target.
Here2Learn&Earn profile picture
Thanks. Suggest double checking your spelling and wording (editing) before publishing. Getting my small positions in now and letting them sit, but not ACB currently. Management messed up big time. Sort of like "their eyes were bigger than their stomachs." Too large of a float among many other issues. They could of been a contender. What happen, greed and stupidity took over? Trying to buy everything in sight among other naive moves without establishing a good business foundation to support growth. Excuse my briefness, need to move on.
Stone Fox Capital profile picture
So you had time to slam on my spelling and wording (grammar?), but you had to move on due to lack of time...smdh!

No such thing as too large of a float. Shares outstanding is just a number. The issue was the greed in buying everything under the sun and building a global business when the markets didn't even exist.
PenelopeVitale profile picture
For investors bullish on the cannabis industry I would say this: It's going to be a massive pie that'll be big enough for everyone to get a piece. No need to rush in blindly, but the industry is moving so fast that you don't want to sit on the sidelines too long.
Stone Fox Capital profile picture
FOMO has killed a lot of people b/c they chased bad businesses. Find a company with a good balance sheet and a solid revenue base that will survive and thrive like $APHA. Too many questions on whether $ACB will survive and thrive.
Donnascott profile picture
In recent years, AB gov has given $1.5B to ATB to assist businesses during industry downturns. This trend looks to continue with $ACB and a potential deal in the next few weeks? Remember ATB was created by the Crown in the Depression to help get low % loans/cash for AB companies.
Stone Fox Capital profile picture
Potential deal? Where have you seen this? Cannabis isn't in a downturn.
fidel george profile picture
Great news for Aurora Cannabis $ACB on Mexico front. Current policy is for only 40% of licences to be given to those impacted by drug war, compared to the 80-100% feared. Very soon the party in charge of each layer of gov intends to push through wide stroking legalization.
Stone Fox Capital profile picture
@fidel george
How does this benefit $ACB? We all know Mexico will favor local companies, not a Canadian.
timothy russell profile picture
I hadn't even glanced at this since I made 800% on my 1.50 puts a few weeks ago. This thing has turned from bad to worse. The good news is it's falling a little slower than it used to be, but that's the only good news.
wilkinson99 profile picture
If you are brave enough to short the beat down cannabis sector leaders CGC and ACB you deserve any money you make. ACB will triple on any positive cash flow news. And CGC has been spending truckloads of money on something. Shorting made sense until Dec now just gambling.
Stone Fox Capital profile picture
Why would the stock triple on positive cash flow news? You are really going to pay 10x sales just b/c $ACB might make a few dollars.
Erman profile picture
I'lll never buy another Canadian company.
Chris Lau profile picture
@Erman Many pump and dump sectors in Canada over the last 20 years with Cannabis being one of them. There are diamonds in the rough that DIY Marketplace Guide has.

ACB's 18 cents away from this author's one buck target.
Chris Lau profile picture
May your one cannabis pick on the DIY value marketplace guide pay off. Just like your $TWTR Twitter call.

$ACB is back on my personal watch list. Looking for buying the dip and expect the weakness to eventually end.
Store count is one thing, but if they keep asking for a 200 %premium for an ordinary product it won't matter if you have 10K stores, the disappointment will just be bigger
Stone Fox Capital profile picture
Yes, my exact point of how the store count only impacts a small portion of their current revenues and other issues exist. $ACB isn't going to capture the Canadian market by the country just opening more stores.
Your last two sentences tell the story. With the focus on LP's shifting to valuations instead of hype, it will be difficult for major investors to consider this bloated share count behemoth with low prospects.
Stone Fox Capital profile picture
Yes, every time the stock seems "cheap", the valuation still doesn't make sense. Several 2020 catalysts should help sales going into 2021, but lower prices could still hit revenues despite additional kgs sold.
Ash Gaux profile picture
It is about time somebody wrote an article detailing the debacle of Canadian cannabis store rollout. Well done SFC for bringing us data that means something. Would you please now investigate the sea of internet rumors surrounding the possibility of a Mondelez/ACB partnership.
Pouvez vous s'il vous plaît donner un lien vers un article qui parle de ce partenariat éventuel entre ACB et MONDELEZ ? Merci.
Stone Fox Capital profile picture
@Ash Gaux
How does a partnership benefit $ACB? Has Constellation Brands benefitted $CGC outside of the cash?
Chris Lau profile picture
@Ash Gaux I reside in Canada and had a first-hand watch on the store rollout. It wasn't an operational bungling. It was politics.

Mondelez/ACB partnership? I doubt the former would make a mistake like that. ACB is cheap, it will get cheaper, can get the stock at a discount compared to last year's levels.
US and Canada Marijuana Industry profile picture
Will be Up early Monday given Futures direction and government responses on economic and social and risk mgmt side on the negative side you are trying to ride SFC
Stone Fox Capital profile picture
@global not Canada focus
$ACB is flat and $CGC is down 2% with an hour left in trading. So you were saying?
Based on the small $ in sales this stock should be $.50 or less. Lets not forget there’s 1 billion + shares out there now.
Stone Fox Capital profile picture
probably at least 1.3B by now.
US and Canada Marijuana Industry profile picture
Your store count discussion. Alberta and B.C. alone will take the store numbers over 1000. There will be more than the small 25perc store count increase or whatever u referred to when consider all provinces. Cannabis 2.0 has an incremental sales impact. Ie new users, more frequent and higher price, volume and margin sales and more sales moving to legal side. Ontario is talking about licenses issued not stores. Store caps on licenses allow for faster store count increase
Stone Fox Capital profile picture
@global not Canada focus
but all new store counts aren't the same. It's only Ontario and Quebec and somewhat BC that will move the needle in a big way.
US and Canada Marijuana Industry profile picture
Note sure what your talking about. Stores in general are needed as market is underserved in general with in person stores.
Always the same deliberate attempt by Seeking Alpha to harm ACB! But what interest has Seeking Alpha had in doing this for months? One more article to sink in, erase every little bit of positive news... WHY?
Because they suck
I think it’s the self-serving authors that suck. I can’t count how many times there’s a feel good article about a security along with a negative one right behind II. This has been going on for years and quite frankly I don’t believe what I read on SA, Of necessity I do my own research via other sources and use SA for stock quotes and fast references to news articles but as far as the contributors both positive and negative, I take them all with a grain of salt.
TrumptyDumpty profile picture
markets are made out of differing opinions....why would every article be equally as bullish as the last? you do realize when you're buying someone else is selling, right?
bigman7100xxx profile picture
I would not touch it with your money, let alone mine!!!...10 CENTS a share would be a buy anything short of that No way. short Aurora maybe but there is always dangers connected with that plan, pelts have done nothing but he knows very powerful people and I would not short this with him still in the game, could a partner help?...yes that would be putting Aurora on a safer footing which in my view is the only way out of this bad place booth and company put them in by paying to much on there spending spree, but then they are history and what happens now is anyone's guess, worth keeping an eye on it though good luck everyone.
Good old Doug Ford told us we are going to have more stores in Ontario than the rest of Canada put together. Like to see if that happens.
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