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At least on two fronts, there is no competition between Aurora Cannabis (NASDAQOTH: ACBFF) and Auxly Cannabis Group (NASDAQOTH: CBWTF). One is the market capitalization: the market capitalization of Aurora is nearly 18 times higher than that of Auxly. Then there is the performance of the shares. So far this year, Aurora has grown by almost 38%, while Auxly has lost 33%.
However, market capitalization and past performance are not key factors in determining which of these two marijuana stocks is most likely to generate solid returns in the future. Here's how the Aurora Cannabis and Auxly Cannabis groups compare in the areas that matter.
Source of the image: Getty Images.
The Aurora Cannabis Case
Aurora Cannabis has long been preparing for the opening of the Canadian market for recreational marijuana. The company embarked on a major shopping street by acquiring several small and large marijuana growers. These agreements and its own expansion plans have allowed Aurora to have an annual production capacity of 150,000 kilograms by mid-2019 and over 500,000 kilograms in the future.
The company should be able to serve the Canadian market for recreational marijuana for adult use. In the words of its CEO, Terry Booth, Aurora has termed "supply agreements from coast to coast to coast" with the Canadian provinces. In addition, Aurora holds an interest in alcanna and partnering with the major liquor retailer to open retail cannabis stores under the Aurora brand in Canada.
Aurora could also become a major player in the cannabis drink market. Canada has not yet finalized regulations on the legalization of cannabis-based edible products (including beverages). However, Aurora has already attracted the interest of major beverage companies, Coca Cola, as a potential partner in the development of cannabis-infused drinks.
Aurora should have even greater growth prospects outside of Canada, particularly in Europe. The company already has a strong presence in Germany, the largest international market for marijuana, with the exception of the United States and Canada. Aurora also has European subsidiaries in Denmark and Italy. It is also active in other international markets for medical cannabis, including Australia, the Cayman Islands, Colombia and Malta.
While Aurora Cannabis develops its business both domestically and internationally, its stock is also on the cusp of becoming more readily available to millions of investors. Aurora has recently filed a listing application for its shares on the New York Stock Exchange (NYSE). The company expects its shares to trade on the New York Stock Exchange by the end of October under the symbol "ACB".
The case for Auxly Cannabis Group
Auxly Cannabis Group has also been busy. Like Aurora, Auxly has made several acquisitions. But the company also concluded multiple streaming transactions in which it provided initial capital in exchange for a portion of future cannabis crops, future income and / or equity investments.
One of the benefits of the various Auxly transactions is that they provide the company with enviable vertical integration in the cannabis industry. Auxly is involved in upstream cannabis cultivation, downstream extraction and processing, as well as in downstream retail and distribution activities.
And although Auxly's market capitalization is relatively small, its production capacity is not. Through its network of distribution and acquisition partners, Auxly expects to have an annual financing capacity of more than 150,000 kilograms, ranking 4th among Canadian marijuana growers according to internal estimates of the company.
Auxly does not focus solely on the Canadian market. The purchase of an 80% stake in the Uruguayan cannabis breeder Inverell is ongoing. The company has cultural partnerships in Colombia, Denmark, Lesotho, Slovenia and South Africa. And Auxly has distribution partnerships in 22 countries on five continents.
Perhaps the most appealing aspect of the Auxly Cannabis Group is that its business model reduces risks to some degree. If some of its partners fail, do not force too much Auxly.
Best marijuana stock
Bigger is not always better. I think that Auxly is the best choice compared to Aurora Cannabis.
Aurora has huge growth prospects. However, the stock price already reflects this growth potential and others. Auxly provides a much better value for money at the current valuation.
These two actions are however risky. I am afraid that an overabundance of supply will hit the Canadian marijuana market some years down the road. And I'm not convinced that international markets for medical marijuana are growing fast enough to prevent companies, including Auxly and Aurora, from being hard hit by the situation of excess supply at they.
Auxiliary at the head of Aurora in my book. But I think there are better stocks of marijuana for investors to buy that might have lower risk levels.
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