On Thursday, Zuanic and Associates began coverage on shares of Aurora Cannabis (NASDAQ:ACB), assigning a Neutral rating to the stock. The firm highlighted Aurora Cannabis as one of the top two global medical cannabis companies, poised to capitalize on emerging international markets. According to the firm, these markets could see a tenfold increase over the coming decade.
The firm believes that Aurora Cannabis's growth potential and solid financial position are not fully reflected in its current enterprise value to sales (EV/Sales) multiple of 1.5 times. While this valuation is comparable to or higher than many of its direct competitors, the firm suggests that the stock's true value may be underappreciated.
Despite the positive long-term outlook, Zuanic and Associates pointed out several short-term concerns that influenced their neutral stance. They noted the uncertainty around the growth rate in international markets in the short to medium term, the absence of a strategy for the U.S. market—which could serve as a catalyst for other cannabis stocks—and the need for Aurora Cannabis to fulfill its promise of achieving positive free cash flow (FCF) by the end of the current calendar year.
The firm's commentary indicates a cautious optimism, recognizing Aurora Cannabis's potential in a growing industry while also acknowledging the hurdles the company must overcome to meet its financial targets and expand its market presence.
Aurora Cannabis's performance and strategic decisions in the near future are expected to be closely monitored by investors as the company aims to demonstrate its capacity for growth and profitability.
In other recent news, Aurora Cannabis Inc. posted a record fiscal year, demonstrating a 21% increase in net revenue and a 49% adjusted gross margin. This significant growth was largely driven by the company's focus on the medical cannabis market, particularly in Canada and Australia. The company also announced the appointment of Simona King as the new CFO, who brings extensive experience from the pharmaceutical and biotech industries.
Aurora Cannabis reported a 40% growth in international medical cannabis business in Q4 and a record 66% adjusted gross margin for medical cannabis due to cost reductions and higher selling prices in Australia. Still, consumer cannabis net revenue decreased to $10.2 million from $14.5 million as the company shifted its focus to the high-margin international market.
The company is looking forward to continued growth in the controlled environment agricultural industry following its investment in VIVO. It expects to achieve positive free cash flow by the end of calendar year 2024 through revenue growth and disciplined capital management. These are the latest developments in Aurora Cannabis's strategic focus on the medical cannabis market.
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