Article by Connor Smith, Barron’s
Aurora Cannabis stock shed nearly 30% of its value on Wednesday after the company reported a full-year net loss of 3.3 billion Canadian dollars (US$2.48 billion). Investors knew that billion-dollar write-downs were coming, but the company’s report and outlook didn’t do much to improve sentiment for the struggling stock.
When adjusted for a 12-1 reverse stock split, Aurora shares hit their lowest levels in the past 12 months. The stock closed down about 91% from its year-ago close, to its lowest since August 2016, according to Dow Jones Market Data.
New CEO Miguel Martin said in the earnings release that the company has fallen from its leading position in the Canadian recreational-marijuana market amid efforts to improve its lower-price offerings. The report prompted MKM analyst Bill Kirk to title his Wednesday note to clients, “Please Stop Growing so Much Weed.”
“Aurora grows more stuff that people don’t want than they grow stuff people want,” Kirk wrote. “While Aurora’s cost to grow is low, it would be more noteworthy if a larger percentage of the harvests were sellable. In an industry with sequential growth, Aurora is poised to sell less product” in its fiscal 2021 first quarter than it did in the fourth quarter of 2019.
He thinks efforts to rework its offerings more toward premium pot will be difficult, citing “industry inventory levels and lack of mainstream pricing power.”