Why Is Cowen Still Bullish on Aurora Cannabis?

On January 16, TheStreet reported that Cowen reiterated its “buy” rating for Aurora Cannabis (NYSE:ACB). Cowen maintained its target price of 6 Canadian dollars. The target price represents a return potential of 116.6% from Aurora’s stock price of 2.77 Canadian dollars as of January 17. As reported by TheStreet, Cowen analyst Vivien Azer expects Aurora to be cautious about its production, SG&A expenses, and capital spending while it restructures its debt arrangements.

In her research note, Azer wrote that Aurora’s initial sales of gummies and chocolates beat the expectations. Vape product sales were in line with the expectations. Also, the temporary ban on vape products in Alberta and Quebec and a 20% excise tax on British Columbia were a drag on vape sales. In international markets, she stated that the company’s revenue growth was below the expectations. However, she’s optimistic about the company’s long-term opportunity despite management’s cautious near-term expansion.

Cowen isn’t the only investment firm that’s optimistic about Aurora Cannabis. On January 13, The Motley Fool reported that Pablo Zuanic of Cantor Fitzgerald also reiterated his “buy” rating for Aurora Cannabis. According to the report, Pablo Zuanic wants Aurora to implement the following two things, which could drive its stock price.

  • Zuanic wants Nelson Peltz, who joined Aurora in March 2019 as a strategic advisor, to take a more active role and bring in financial discipline to the company. He said that Peltz should look for a consumer packaged goods company that could acquire some stake in Aurora Cannabis.
  • Zuanic wants Aurora Cannabis to appoint a new CEO.

Not all of the analysts are optimistic about Aurora Cannabis

Earlier this month, MarketWatch reported that Piper Sandler downgraded the stock to a “sell” from a “hold.” MarketWatch gave the company a new target price of $1. To learn more, read Aurora Cannabis Gets a Price Target of $1.

As reported by MarketWatch, Christopher Carey of Bank of America Merrill Lynch also downgraded the stock to an equivalent of a “sell” rating. Carey stated that the company’s balance sheet issues overshadowed its strong position in the Canadian recreational market. In his research note, Carey said that Aurora has the weakest balance sheet among the companies that he covers. He added that his team doesn’t think the company can meet the terms of its 400 million Canadian dollar credit facility.

Overall, 20 analysts followed Aurora as of January 17. Among the analysts, eight recommend a “buy,” seven recommend a “hold,” and five recommend a “sell.” On the same day, analysts’ consensus target price was 4.54 Canadian dollars, which implies a 12-month return potential of 64.0%.

Stock performance

Aurora stock fell after Piper Sandler and Bank of America Merrill Lynch’s downgrade. The stock reached a low of 1.96 Canadian dollars on January 13. However, the company’s stock price rose due to positive commentary from Cowen and Cantor Fitzgerald. As of January 17, Aurora Cannabis was trading at 2.77 Canadian dollars. The price implies an increase of 41.3% from the lows on January 13. Despite the rise, Aurora is still trading 0.7% lower YTD. Last year, the company lost 58.8% of its stock value.

Meanwhile, Canopy Growth (NYSE:CGC), Cronos Group (NASDAQ:CRON), and Aphria (NYSE:APHA) have performed better this year. They have returned 19.3%, 12.1%, and 1.5% YTD, respectively. The ETFMG Alternative Harvest ETF (NYSE:MJ) has returned 9.5% during the same period.