[ad_1]
A senior analyst recently recommended to buy Cronos Group (NASDAQ: CRON). But Piper Jaffray was not so optimistic Aurora Cannabis (NYSE: ACB), initiating stock coverage with a neutral rating. It was not so long ago, however, analysts were much more positive about Aurora than Cronos.
Aurora has outperformed Cronos by a relatively small margin so far this year. Which stock is the best choice for the future? Here's what you need to know about how Aurora and Cronos compare.
Source of the image: Getty Images.
Production capacity
Aurora Cannabis ranks at the top of the industry in terms of production capacity. The company is in the process of producing at least 625,000 kilograms of cannabis on an annual basis. Aurora is not yet there: he produced about 30,000 kilograms of cannabis for sale during his last quarter.
The Cronos group is lagging behind Aurora on this front. The company's current annual production capacity is slightly over 40,000 kilograms. Cronos is set to increase its capacity to more than 115,000 kilograms.
trends
Growth in the current business figure
Aurora expects growth of at least 54% of its net business from one quarter to the next when it will announce its fourth quarter results of its 2019 year-end next. Cronos recently announced that its net sales for the quarter ending June 30, 2019 had more than tripled compared to the previous quarter.
But as Cronos' revenue grows faster, Aurora generates a lot more money. Aurora is expected to report net sales of nearly C $ 105 million in its last quarter, compared to only C $ 10.2 million for Cronos.
Related Articles
Canadian market position
As you can imagine, Aurora has a much larger market share in Canada. The company is preparing for the launch of the Canadian cannabis derivatives market in October, with a particular focus on the vapes. Aurora is also developing cannabis-based beverages, but chief executive Cam Battley said at the company's last teleconference: "Given the relatively low market share expected of these products, we are not in a hurry to do it because we prefer to get it just to get there quickly, by launching a product whose resonance on the market is limited. "
Cronos is also a key player in Canada, although its sales are lower than Aurora's. Like Aurora, the company plans to launch vapor control products later this year. However, Mike Gorenstein, CEO of Cronos, thinks that "[cannabis-infused] consumer products will be an important and attractive category in the long term. "
International Operations
Aurora is a leader in the European medical cannabis markets, particularly in Germany. The company boasts the largest international sales of medical cannabis among Canadian cannabis producers. It is also one of three producers to have received permission to cultivate cannabis in Germany for the medical cannabis market. However, Aurora has not yet announced its strategy to enter the US market.
Cronos is also very active internationally, with partnerships and joint ventures in Germany, Poland and Israel. The company recently announced the acquisition of four operating subsidiaries of the Redwood Holding Group, the manufacturer of the CBD luxury consumer products line Lord Jones. This agreement will give Cronos a strong position in the US hemp CBD market.
Major partnerships
In May, Aurora announced its partnership with UFC, a mixed martial arts organization, to look for CBD products for athlete wellness and recovery. The company has also hired billionaire Nelson Peltz as a strategic advisor to help align partners outside the cannabis sector. But until now, no agreement has been concretized by this effort.
Cronos, on the other hand, already has a major partner. Tobacco giant Altria (NYSE: MO) invested $ 1.8 billion in 45% of Cronos' capital. This relationship allows Cronos to access the formidable Altria retail experience and its expertise in vaping products. It has also provided Cronos with a large stock of money to use for expansion.
Better buy
The confrontation between Aurora and Cronos boils down to the largest scale of Aurora compared to Cronos' partnership with Altria. I think that the relationship with the big tobacco company makes Cronos much more formidable than it would otherwise be. The Altria connection should allow Cronos to create a niche in the US market, for example.
Cronos also has a lower market capitalization than Aurora. However, based on historical sales and production capacity, I think Cronos is currently valued at a significant premium over Aurora. However, I am afraid that Aurora will have to raise more money in the future in order to dilute the value of the existing shares.
My prediction is that Aurora will find a partner who will help it to enter the US hemp CBD market, although it is unlikely that any transactions involve an equity investment. I think the opportunities for Aurora to team up with one or more major players outside the cannabis industry give it more potential catalysts in the short term. The company's advance length in Europe and its industry-leading production capability should also allow Aurora to maintain its leading actor status on the world stage.
Although I continue to appreciate the overall prospects of the Cronos group, I think that Aurora Cannabis is the best buy at the moment.
[ad_2]
Source link