Aurora Cannabis: A Risky Investment Even During a Market Crash
Examining the Performance and Future Outlook of Aurora Cannabis Stock
Investing in Aurora Cannabis has been a disappointing venture for many investors. However, during the market crash in March 2020, when stock valuations were at an all-time low, could buying Aurora have been a profitable move? This article explores the stock’s performance since then and delves into the current state of the cannabis producer.
How Aurora Cannabis Stock Has Performed Since March 2020:
In March 2020, the outbreak of the coronavirus sent shockwaves through the markets, leading to a temporary plunge in stock prices. During this period, Aurora Cannabis reached a low of $0.60 per share on March 18, 2020. If an investor had purchased $15,000 worth of Aurora stock at that time, they would have owned 25,000 shares. However, due to the company’s reverse split, which aimed to maintain a share price above $1, those 25,000 shares were consolidated into just 2,083 shares on May 11.
Today, Aurora’s stock trades at around $0.48 per share, meaning the stock price is still lower than it was in March 2020. The current value of those 2,083 shares would amount to approximately $1,000, resulting in a staggering loss of 93%.
The Company’s Progress Despite Stock Performance:
Despite the downward trajectory of Aurora’s stock, the company has made notable progress in improving its financials. Notably, Aurora expects to achieve positive free cash flow next year, a significant achievement in the cash-burning cannabis industry.
In November, Aurora posted an adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) profit for the fourth consecutive quarter. The company has also diversified its operations by acquiring plant propagation business Bevo Farms, which now contributes over 11% to Aurora’s net revenue.
Reasons for Bearish Investor Sentiment:
Despite these improvements, bearish sentiment persists among investors. The cannabis industry’s poor outlook, coupled with Aurora’s inconsistent revenue growth, particularly in its marijuana operations, are key factors contributing to this sentiment. Additionally, challenging macroeconomic conditions, such as high interest rates, have led investors to seek safer investment options like bonds, making risky stocks like Aurora less attractive.
The Future Outlook for Aurora Cannabis Stock:
Given its history and current market conditions, it is difficult to be optimistic about Aurora’s stock. The company faces stiff competition within the marijuana industry, and though its financial results have improved, the lack of consistent growth remains a concern. Without significant growth catalysts on the horizon, investors are advised to explore safer growth stocks rather than invest in Aurora.
Conclusion:
Aurora Cannabis stock has proven to be a risky investment, even during a market crash. Despite the company’s progress in improving its financials, the lack of consistent revenue growth and the challenging macroeconomic climate have contributed to bearish sentiment among investors. Without compelling reasons to be bullish on Aurora’s stock and with safer investment options available, it is advisable for investors to steer clear of Aurora and explore alternative opportunities for growth.