Marijuana Stocks: Aurora Cannabis To Report As These ‘Structural’ Hurdles Draw Concern

Canadian cannabis producer Aurora Cannabis (ACB) reports fiscal third-quarter earnings after the close. ACB stock and other marijuana stocks rose.




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The company reports the results after rivals Cronos Group (CRON) and Aphria reported results that missed expectations, and as analysts grow concerned about fresh coronavirus-related lockdowns in Canada, where cases have spiked and few are fully vaccinated.

Aurora Cannabis Earnings

Estimates: Wall Street expects Aurora Cannabis to lose 17 cents per share, or 21 cents Canadian. Revenue was seen ticking 2% lower to $55.17 million, or 66.92 million Canadian dollars.

Results: Due after the close.

Canada’s marijuana industry has grown more competitive. Aurora’s retail market share was 5.5% from January through March, according to Stifel. Aphria, the largest, had 11.5%.

After expanding aggressively and, later, cutting staff and closing facilities, Aurora has said it wants to focus more on premium weed products. The move would leave others to fight it out over cheaper product to compete with the illicit market. Aurora also said it would focus more on working with third-party suppliers, after churning out more weed from its cultivation facilities than customers wanted.

ACB Stock, Marijuana Stocks

ACB stock rose 1.2% to 7.80 on the stock market today. Shares have a 26 Composite Rating and a 29 EPS Rating.

Among other marijuana stocks, Canopy Growth (CGC) was up 1.5% early Thursday. Tilray (TLRY), which merged with Aphria this month, added 3.3%. Cronos gained 1.3%.

Marijuana stocks exploded earlier this year, as investors wagered bigger legalization moves in the U.S. Other investors, potentially egged on by the Redditors who launched GameStop

(GME) higher, climbed aboard. Much of that rise has evaporated after peaking in February.


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Canadian Marijuana Stocks And Covid

Cronos and Aphria in recent weeks reported falling sales, a trend they attributed to coronavirus restrictions. Retail cannabis sales in Canada have largely increased in the Covid-19 era. But they fell in January and February.

Stifel estimates that Canada’s recreational market will surpass 4 billion Canadian dollars in sales this year, helped by the large province of Ontario, where stores were initially slow to open. However, Stifel analyst Andrew Carter said “continued lockdowns could present a risk to our market estimates for the year.”

He said trends suggest “relatively anemic” market growth for the first three months of this year, as provinces, which buy cannabis from the producers, cut inventory levels.

He also pointed to broader risks for Canada’s marijuana stocks.

Carter also said the industry suffers from broader “structural” difficulties. When provinces change their purchasing patterns in response to downtrends, “private market operators bear the vast majority of the downside risk.” And he said that even as some producers say profitability is on the horizon, other risks remain.

“We believe it will be increasingly difficult to profitably capture growth in the Canadian market with ‘strengthened balance sheets’ across the sector likely facilitating continued irrational deployment of capital with limited prospects of a shakeout driving the market towards rationality,” he said.

Follow Bill Peters on Twitter at @IBD_BPeters.

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