The global wave toward legalizing cannabis for both medical and recreational use has gathered momentum. This is especially true in Europe, where 23 countries, most recently including Germany, have decriminalized it. As a result, Aurora Cannabis (NASDAQ:ACB), one of the leading global medical cannabis companies, is well-positioned to see growth.
The stock is up over 93% so far this year. However, at current levels, it appears to be relatively overvalued, suggesting long-term investors may want to wait for more tangible evidence of growing profits to substantiate the assumed growth rate built into the current price.
Aurora Cannabis – Focused on Medical Use
Aurora is a cannabis company based in Canada. It operates globally across medical and consumer markets in various continents, including Canada, Europe, Australia, and South America. The company has acquired a diverse portfolio of brands, including Aurora Drift, San Rafael ’71, Daily Special in adult-use brands, MedReleaf, CanniMed, Aurora, and Whistler Medical Marijuana Co in medical cannabis brands. Aurora also owns a majority stake in Bevo Farms Ltd, a top supplier of propagated agricultural plants in North America.
The company has gained a significant position in the globally legal medical cannabis market, providing pharmaceutical-grade cannabis across 15 countries.
With the recent legalization of marijuana in Germany, Aurora Cannabis’s well-established presence may provide a considerable advantage, given it was among the first Canadian marijuana companies to establish a presence in Europe. It is one of three companies in Germany with permits to cultivate marijuana, which enables the company to produce up to 1,000 kilograms of medical marijuana annually.
Aurora’s Recent Financial Results & Outlook
The company reported results for the fiscal third quarter of 2024, indicating an increase in total net revenue of $64.4 million, up from $61.1 million the previous year. The revenue surge is credited mainly to growth in the global medical cannabis business and boosted quarterly revenue in the plant propagation business. However, Aurora recorded a net loss from continuing operations for the three months ending December 31, 2023, at -$25.2 million, a decrease from the prior year’s net loss of $62.4 million.
The company anticipates steady revenue from Canadian medical and consumer segments in fiscal Q4 2024, with modest growth expected from Europe and Australia. Management projects continued positive EBITDA in Q4 2024 and expects the company to turn free cash flow positive in 2024.
The company recently completed the final repayment of Convertible Senior Notes, which represents approximately $465 Million in total repayments since 2021. This move has cleared the company’s cannabis operations of any debt (the remaining $47.9 million is tied to Bevo Farms), suggesting a solid financial position and stability.
What is the Price Target for ACB Stock?
The stock has been highly volatile, most recently increasing over 137% in the past 90 days. It trades at the higher end of its 52-week price range of $2.84-$11.50 and demonstrates positive price momentum, trading above the 20-day (6.51) and 50-day (5.50) moving averages.
Understandingly, analysts following the company have taken a cautious stance on the stock. Based on the three Wall Street analysts’ recommendations (2 Holds, 1 Buy) over the past three months, Aurora Cannabis is rated as a moderate buy.
Their average price target for ACB stock is $4.58 (based on a range from $3.59 to $5.81), which is below current levels and represents a -41.66% downside.
Final Analysis on ACB Stock
Aurora Cannabis is well-positioned to benefit from the expansion of medical and recreational cannabis globally. Yet, enthusiasm about recent events in Germany has translated into a surge in the stock, driving it to an overly rich valuation. Long-term investors may want to let the dust settle and gather more evidence that Aurora is successfully capitalizing on the new markets opening up before taking action.
