Aurora Cannabis Stock Hits All-Time Low After Massive Earnings Miss

Aurora Cannabis stock dropped for a third consecutive day.

Shares of Aurora Cannabis fell to a new all-time low after the company released a disappointing earnings report last week. During the fiscal first quarter, the company’s revenue fell by 24%. 

Its wholesale cannabis revenue was down by 49%, and Canadian sales of its recreational marijuana fell by 33%. And the company continues to burn through its free cash flow.

Aurora Cannabis blamed these recent losses on an insufficient number of retail cannabis stores in Canada. And there may be some truth in this since Canopy Growth, Cronos Group, and Tilray all shared disappointing earnings reports as well. 

But it’s getting harder for investors to make justifications for the flailing cannabis industry. Here are three things to know about Aurora Cannabis going forward.

1. The company’s medical cannabis sales are up

One of the few bright spots in the first-quarter earnings report is that the company’s net sales of medical cannabis increased by 3%. It wasn’t a huge increase, but it’s something. And the company’s active medical cannabis patients increased by 8% from the previous quarter.

And the company’s international medical cannabis sales grew 11% from the previous quarter. The demand for medical cannabis should continue to grow in the coming years, so this presents a significant opportunity for Aurora. 

2. Canada is still rolling out its second wave of cannabis regulations

Canada’s next wave of cannabis regulations is often referred to as “Cannabis 2.0.” Initially, Canadian cannabis sales were limited to dry flowers, capsules, and tinctures. As of Oct. 17, this list expanded to edibles, beverages, and vaping products.

However, sales of these products won’t start until at least mid-December. This delay is because Health Canada requires a 60-day notification period for all new products. The sales growth will be slow at first, but we should see things start to pick up midway through 2020. 

3. Aurora’s headwinds will end eventually — but when? 

And finally, many of the headwinds Aurora Cannabis is facing are temporary. These issues will take time to work out, as the company acknowledged on the earnings call. But the question is, when will they be resolved? And will investors still be on board if and when that happens? 

Wall Street is currently divided on the stock, with about half of analysts recommending to buy the stock. The other half recommend selling or holding the shares. What Aurora Cannabis needs now is to find a way to show investors that it has a realistic path to profitability.