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<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "The risk of decline"data-reactid =" 21 ">The risk of decline
Analysts predict that Aurora will lose 50 cents a share on a $ 67.5 million business figure. The company generated net revenues of C $ 54.2 million and net proceeds of C $ 47.6 million for cannabis in the December quarter and a substantial loss of C $ 238 million due to losses. investment.
The risk here is down, with monthly sales reported in Canada remaining relatively stable. The only revenue growth is expected to come from recent acquisitions such as Whistler Medical Marijuana Corp., which closed during the March quarter.
Some key figures for the quarter are the gross margin and the average net selling price. In FQ1, Aurora saw the gross margin drop to 54% and the selling price of dried cannabis fell 26% sequentially to $ 6.23 Cdn per gram. Any weakness here is problematic for the stock.
The lack of organic growth would normally crush an expensive stock, but the stock market will likely remain hopeful for the global cannabis market.
<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "High hopes "data-reactid =" 26 ">High hopes
The question Aurora has to answer for investors is what happens with the additional supply coming into the market during the quarter. The large cannabis company has long been planning to reach an annual production rate of 150,000 kg by the end of March.
Due to the time period for cannabis supplies to come on the market, Aurora expects 25,000 kg will be available for sale in the June quarter. The number is 3.5 times the 6,999 kg sold in the December quarter, while demand is not growing, largely because of the illegal market.
In conjunction with forecasts of increased production and sales levels, management has promoted the concept of positive EBITDA for Aurora in the month of June. With the quarter at mid-term, management is likely to fall behind this target due to weak sales and prices.
Aurora has increased its planned total capacity from 500,000 kg to 625,000 kg in early April, a figure that is expected to reach my average calendar by 2020. A big question remains the rationale for the increase of the planned capacity of 25% without any sign of the total capacity of cannabis will be absorbed. Any failure to explain this business decision could weigh on the stock.
Ontario's opening of new retail stores after a first restriction of retail stores and the opening of the consumer products market in October offers a positive potential. The addition of beverages, edibles and beverages will create new revenue streams currently limited, but the company has a long lead time to make the transition to these new products.
<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "To take away"data-reactid =" 32 ">To take away
The main benefit to investors is that Aurora shares are in a precarious position in which the company will have difficulty maintaining its high expectations. With about 1.1 billion shares outstanding, the stock still has a market value of about $ 9 billion, despite the decline of $ 8 to its lowest level over several months.
The risk is down if management confirms some of the worst fears about pricing, increased losses and wild capacity growth. The likely outcome is that Aurora shares continue to be bullish because of the global expansion and increased openness of the Canadian cannabis market. The market is likely to have an impact on the weak results.
<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "To know more about what is happening in the cannabis industry in full swing, & nbsp;click here"data-reactid =" 35 "> To learn more about what's happening in the booming cannabis industry, click here.
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