(ACB), Canopy Growth Corp. (NYSE: CGC) – Stifel: Aurora's "Bad" T4 Exceeds Headline Figures

Cannabis company Aurora Cannabis Inc (NYSE: ACB) (TSE: ACB) reported financial results for the fourth quarter last week that looked "bad" on the surface, but looked even worse if key figures were not taken into account, according to Stifel.

L & # 39; analyst

W. Andrew Carter lowered the rating of Toronto-listed shares of Aurora from Hold to Sell with a price target lowered from C $ 7 ($ 5.29) to C $ 5 ($ 3.78).

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The thesis

Aurora's shortfall this quarter is evident due to a $ 20.1 million wholesale turnover that is not expected to recur at the same level, said Carter in a note of degradation. (See his record here.)

Total net cannabis proceeds of US $ 94.7 million suggest a net cannabis revenue base close to Can $ 75 million, compared to Stifel's estimate of $ 92.5 million.

The "inferior" performance marks a reversal from the company's update in August, when it alluded to a strong market performance and leadership position in Canada, said the company. 39; analyst.

Instead, the company recorded adult sales of C $ 44.9 million in Canada, which implies Canopy Growth Corp (NYSE: CGC), which has announced adult use sales of $ 49 million, including a charge of $ 6.5 million in potential revenue, he said.

The Aurora report suggests that it is far from achieving profitability, and any sequential improvement over the published quarter was "disappointing" if we were considering single events, such as a profit. C $ 14.9 million resulting from accounting changes, Carter said.

The analyst expects a "more moderate" market for adults in the first half of 2020 and believes that Aurora's sales are likely to reach a plateau in the near term.

The Cannabis 2.0 business figure is expected to accelerate in the second half, but Stifel is pushing its annual revenue goal down from $ 600 million to $ 485 million. of dollars.

EBITDA loss for fiscal year 2020 was also revised from C $ 32 million to C $ 89 million loss.

The company is likely to oversee a "significant" increase in the capital market before the end of the first quarter of 2020, and would end up in a difficult position to aggressively invest in the US market, according to Stifel.

Price action

Aurora's US-listed stocks were down 6.89% to $ 5.54 at the time of publication on Monday.

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