Aurora Cannabis (ACB) has been going through a rough stretch this year. The company hit its 52-week high of 13.67 Canadian dollars on March 19. Since then, the company has lost 76.4% of its stock value as of December 11.
Plus, the company has failed to meet analysts’ revenue expectations in its last two quarters. Further, its management announced that it would scale back its expansion plans due to a decline in the global cannabis demand. The company also allowed the early conversion of convertible debentures. Along with these factors, the weakness in the cannabis sector has brought the stock down.
Year-to-date, Aurora Cannabis stock has fallen 52.5%. Compared to its peers, the company has underperformed. During the same period, Canopy Growth (CGC) (WEED), Aphria (APHA), and Cronos Group (CRON) have fallen by 27.2%, 17.8%, and 37.6%, respectively. With the stock losing more than 50% of its value, let’s see what analysts are recommending for it over the next 12 months.
Analysts lower their price target
Following Aurora Cannabis’s weak first-quarter performance, four analysts have cut their price targets. On November 15, Scotiabank had lowered its price target from 8.75 Canadian dollars to 4 Canadian dollars. Both Canaccord Genuity and Cowen & Co. slashed their price targets by 25% to 6 Canadian dollars.
On November 16, PI Financials lowered its price target from 7 Canadian dollars to 6 Canadian dollars. These price cuts appear to have brought analysts’ consensus price target down by 22.7% from 7.22 Canadian dollars on November 11 to 5.58 Canadian dollars on December 11. The new price target represents a 12-month return potential of 73.4%.
Analysts have mixed opinions about Aurora Cannabis
On November 18, Cantech Letter reported that Jason Zandberg of PI Financial pointed out several positive aspects of Aurora’s first-quarter performance. Zandberg stated that Aurora Cannabis missed his revenue estimates. However, the company didn’t face issues such as product returns or writedowns, which has been the case for other cannabis players. He believes that Aurora can maintain a leadership position in Canada and rightly commands a premium valuation.
However, the chairman of Strategic Analysis Corporation, Ross Healy, is not so bullish on the stock. As reported by Cantech Letter on December 5, Healy said that despite the recent decline in Aurora’s valuation multiple, he had advised investors to avoid the stock.
Analysts still favor a “buy” for Aurora Cannabis
Since Aurora Cannabis reported its first-quarter earnings, there have been no rating changes. On December 11, three of 17 analysts favored a “strong buy,” while five analysts favored a “buy” rating. Of the remaining nine analysts, seven gave a “hold” rating, and two analysts gave a “sell” rating.
From the above graph, we can see that there has been a significant increase in analysts’ coverage for Aurora Cannabis in the last 12 months. In December 2018, only five analysts covered the stock.
Let’s look at analysts’ recommendations for Aurora’s peers:
- Analysts favor a “hold” rating for Canopy Growth, and 12 of the 21 analysts gave a “hold” recommendation. The remaining nine analysts recommend a “hold.” On November 20, the stock received a rare upgrade from Bank of America.
- Analysts are bullish on Aphria, with 10 of 13 analysts favoring a “buy” rating. For more, please read Aphria: Update on Analysts’ Target Prices and Ratings.
- For Cronos Group, seven of the 12 analysts favor a “hold” rating. Of the remaining five analysts, four gave it a “buy” rating, while one gave it a “sell” rating. Please read Cronos Group: Analysts’ Ratings after Q3 Earnings for more detail.
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