Aurora Cannabis ACB stock was once the absolute darling of cannabis investments. ACB Stock forecast at the time was a moonshot of cannabis stocks. But, reality has set in with Aurora Cannabis and ACB stock investors. I wanted to outline what is going on with Aurora Cannabis and get the ACB stock forecast out into the sphere.
While there were big dreams starting out with cannabis federal legalization in Canada, the reality was far different. Realistically, too many big companies thought they could all build enormous facilities and sell low-cost cannabis all through Canada. The wholesale cannabis market completely collapsed in Canada. This is when many of the biggest companies realized that consumers were only interested in premium branded products, that the market could only bear so much inventory, and the business models were unsustainable.
Aurora Cannabis proceeded to board up facilities and downsized as best they could. Operating costs have been cut as best possible; still a far cry from where they need to be. Gross margins still are long away from being competitive. If there is one thing I have picked up after evaluating over 100 cannabis stocks, it is that it is very difficult to grow excellent cannabis, consistently, and inexpensively.
That was over two years ago, and still, Aurora Cannabis has yet to get to the level necessary to sustain itself. Margins are still not even close to be able to compete against some of the biggest companies. This is not to say that eventually, Aurora Cannabis will go bankrupt as much as it is to say they simply have far more work to do.









Aurora Cannabis – First to Report
Aurora Cannabis ACB stock is one of the more important cannabis stocks for two big reasons:
- Nasdaq-Listed
- First To Report
- Widely followed
As of right now, I have 108 stocks that I cover on this site. They are all pure-play cannabis growers, producers, & sellers. We are just finishing up with end-of-year 2021 for cannabis stocks. I still have about 20 – 25 stocks that have yet to report. But, a lot of these stocks are delayed simply because it is end of year. Nonetheless, Already, however, Aurora Cannabis (And Tilray TLRY stock) has reported for Q1 2022. Effectively, earnings season for 2021 is over and we are already moving into 2022.
Being a Nasdaq-listed stock, Aurora Cannabis is an important stock because of deep access to a wider pool of investors (OTC stocks are not tradable at certain brokerages). Because of this bigger pool, ACB Stock is important as it will get a lot more traffic with searches and trades.
And, because so much was pined about ACB stock in the past, Aurora Cannabis is one of those cannabis stocks that could be a barometer for the overall cannabis investments sector.
Should ACB Stock turn upward
As I mentioned, ACB stock becomes important because of what it potentially could do for the overall broader cannabis stocks investments. Should Aurora Cannabis do well, and ACB stock turn upward, this could draw in a lot of outside investors wanting to capitalize on cannabis stocks turning upward.
Cannabis Federal Legalization & Aurora Cannabis ACB stock
Aurora Cannabis is predominantly a Canadian cannabis company where cannabis federal legalization has already occurred. But, here in the United States, we are just on the cusp of cannabis federal legalization. Expectations are for the Senate bill to drop sometime this summer and a vote to occur thereafter. But, the market is also holding out for the vote on this to happen prior to the general election in November of this year.
The Democrats have promised cannabis federal legalization and, this is the time to do it. Should this follow through, all cannabis stocks will head upward. Aurora Cannabis ACB stock is one of those stocks.
However, there really is not a big amount of correlation between Aurora Cannabis and cannabis federal legalization in the United States. Because of that, I would recommend taking the money and running if you are in this stock and there is an excited surge in cannabis stocks from federal cannabis legalization.
Aurora Cannabis Latest Financial Release
Here is a look at the latest financial release for Aurora Cannabis.
Aurora Cannabis Gross Profits
Revenues are not increasing, they are decreasing. This is having the effect of a deterioration across the board for Aurora Cannabis. Gross revenues narrowed last quarter. Gross margins also declined meaning that on a percentage basis, what Aurora Cannabis is retaining of its total revenue is a smaller portion than previous.
In order to get ahead, the exact opposite needs to occur. Aurora cannabis needs to see continually increasing revenues and with that better performing gross margins. This is the only way to increasing competitively competing against other firms and showing that margin ratios are outperforming.
But, gross revenue declines are not the only issue that Aurora Cannabis has as the Canadian company also is seeing its total equity decline as well as margins in other areas underperforming, including operating margins.
Aurora Cannabis Operating Profits
As it turns out, the back office costs a lot for Aurora Cannabis. In fact, from a revenue standpoint, Aurora Cannabis’ back office is costing over 100% of revenue. Total operating costs, and by extension, operating profits and operating margins, are in a position that are actually deteriorating. This is partly because of the math involved in total operating costs, divided over gross revenues yields operating efficiencies. Since gross revenues are declining, operating efficiencies are deteriorating.
This is the effect of too many big companies coming in to Canada all at once, with fists full of cash, building extraordinarily large quantities of operational grow facilities. Then, when all of these companies started putting product on shelves, prices crashed because too many players had far too much infrastructure. This is one of the reasons why I like Avant Brands as much as I do because they are a smaller company that focused on quality, not quantity.
Aurora Cannabis has been shuttering and selling off its production levels. But, they have not cut costs in the back office nearly sufficiently.
Aurora Cannabis EBTIDA & Net Profits
In a fledgling endeavor, a company needs to quickly achieve EBTIDA profitability in order to show that the business model could potentially be profitable. Once EBITDA profits are achieved, then a company needs only scale up revenues to achieve net earnings profitability. And, the marginal profits on the increasing products working through the system will be outsized. That is the magic of EBITDA profits.
We are told that Aurora Cannabis is going to hit this number this quarter, Q4, 2022. Let’s see. If Aurora Cannabis does hit this number this will be a significant milestone and, one can expect there is likely to be a fireworks show afterwards.
Despite having a plan, once a cannabis company sells its first product, the next major milestone is to achieve EBITDA profitability via scaling up sales & revenues, and achieving an economies of scale that will show that the business can become profitable. Competitive gross margins would be a solid start. Those would come in ~55%; higher if you were a far better-performing cannabis stock.
Aurora Cannabis has made significant strides in its cost-cutting within operating costs, and I am thinking that further scaling up of revenue would get them to a much better position.
Combining gross profit margins & operating profit margins to getting toward 22.5%, collective, less Depreciation & Amortization, would get Aurora Cannabis to EBITDA profitability; albeit, modest levels.
There is some work to be done to getting Aurora Cannabis to EBITDA profitability. But, they tell us we see this next quarter, so fingers crossed. I’ll nibble on this.
Aurora Cannabis Cash On Hand
Relative to debt, Aurora Cannabis has plenty of cash on hand. Further, many institutions are involved in Aurora so, very likely if Aurora ever needed more cash, this would not be a difficult task. But, relative to debt, Aurora is sitting very competitively at 62%.
Nonetheless, Aurora Cannabis also has a burn rate that is not doing them well. Eventually, Aurora Cannabis would run out of cash on hand. Certainly, Aurora Cannabis would not have any difficulties in raising more debt.
But, capital raises via debt financing dilute the current picture. Taking on more debt to prolong an endeavor that is like spinning tires in mud makes this a difficult sell to me. I would want to invest in a cannabis company that is increasing revenue continuously, improving margins and profitability, and expanding its foundation. In a word, I am looking for the best cannabis stocks.
Not so sure Aurora Cannabis is at that level.
Aurora Cannabis Total Equity
Just as Aurora Cannabis has plenty of cash on hand, they also have minimal debt relative to assets; they have a strong balance sheet. This, also, is the reason Aurora Cannabis will be able to continually raise cash. At the same time, however, assets and upward-climbing equity is the engine of producing increasing revenues. Assets are things like dispensaries and grow facilities that will continually give a company the capacity to produce and then sell products.
And, while assets are what drive the potential for future revenue and potentially profitability, in the case of Aurora Cannabis, I do not see a picture forward for either: Aurora Cannabis needs to increase revenue. Period.
Aurora Cannabis ACB Stock Forecast
Aurora Cannabis ACB Stock DCF
Assumptions | |
---|---|
Tax Rate | 25% |
Discount Rate | 12.500% |
Perpetural Growth Rate | 25.0% |
EV/EBITDA Mulltiple | 25.0x |
Transaction Date | September 1, 2022 |
Fiscal Year End | 12/31/22 |
Current Price | $1.470 |
Shares Outstanding | 344,088,011 |
Debt | $416,600,000 |
Cash | $267,600,000 |
Market Value | |
---|---|
Market Cap | $505,809,376 |
Plus: Debt | $416,600,000 |
Less: Cash | $267,600,000 |
Enterprise Value | $654,809,376 |
Equity Value/Share | $1.4700 |
Discounted Cash Flow | Entry | 2022 | 2023 | 2024 | 2025 | 2026 | Exit | |
---|---|---|---|---|---|---|---|---|
Date | September 1, 2022 | Dec 31, 2023 | Dec 31, 2024 | Dec 31, 2025 | Dec 31, 2026 | Dec 31, 2027 | Dec 31, 2027 | |
Time Periods | 1 | 2 | 3 | 4 | 5 | |||
Year Fraction | 1.33 | 1.00 | 1.00 | 1.00 | 1.00 | |||
EBIT | $17,500,000 | $23,125,000 | $33,750,000 | $55,000,000 | $81,250,000 | |||
Less: Cash Taxes | $4,375,000 | $5,781,250 | $8,437,500 | $13,750,000 | $20,312,500 | |||
Plus: D&A | $6,125,000 | $6,475,000 | $7,875,000 | $9,625,000 | $11,375,000 | |||
Less: Capex | $26,250,000 | $27,750,000 | $33,750,000 | $41,250,000 | $48,750,000 | |||
Less: Changes in NWC | -$8,750,000 | -$9,250,000 | -$11,250,000 | -$13,750,000 | -$16,250,000 | |||
Unlevered FCF | 1 | $1,750,000 | $5,318,750 | $10,687,500 | $23,375,000 | $39,812,500 | ||
(Entry)/Exit | -$654,809,376 | $958,750,000 | ||||||
Transaction CF | - 0 | $2,333,333 | $5,318,750 | $10,687,500 | $23,375,000 | $39,812,500 | $958,750,000 | |
Transaction CF | -$654,809,375 | $2,333,333 | $5,318,750 | $10,687,500 | $23,375,000 | $39,812,500 | $958,750,000 |
Intrinsic Value | |
---|---|
Market Value | -19% |
Upside | 9% |
Market Value v Intrinsic Value | |
Market Value | $1.47 |
Upside | -$0.28 |
Intrinsic Value | $1.195 |
I have a couple of companies that get the distinction of having only double-digit growth potential based upon using the DCF. Unfortunately, Aurora Cannabis is coming in negative given the information we have available at this time. The question is, does Aurora Cannabis hit its EBITDA positive target this quarter. If so, I will have to adjust these numbers. In the meantime, I lowered my stock target price for ACB stock.
Is Aurora Cannabis ACB Stock A Good Investment?
I have been hopeful for some time that Aurora could be a turn-around story. As I have said, Aurora Cannabis was one of the darlings of cannabis investments in Canada but, only to fall flat. Many people own this stock that rushed into green gold. Should these investments start producing profits, this could draw in more and more investors into cannabis investments. So, it is an altruistic dream that these behemoths succeed.
Aurora is not succeeding despite any hope I may have had. Eventually, if the industry turns around and there is a surge in stocks, and you were in this stock, it is very possible that you could see some gains. But, all cannabis investments are weighted down right now and so all stocks are likely to surge equally.
I would recommend getting out of this one and waiting for another lull in investment activity and then acquiring other stocks. Aurora Cannabis has a long way to go before I can see potential profits.
There is a high likelihood that when cannabis federal legalization hits in the United States, many will surge into cannabis stocks and push valuations higher. This will be artificial. If this happens to ACB Stock, my recommendation is to take the money and run. Then, when stocks settle down, find other cannabis stocks that have more improved metrics… and upside potential.
I posted my opinion about ACB just over 1 month ago. Since then it has continued to print lower target lows. This week it set a new target at .61. My rules state not to buy (and hold) until ALL target lows have been breached and a short term buy signal comes in. It will likely take guts to buy ANY cannabis stock being the the U.S. equity markets are setting up for complete crash and burn that will take the S&P500 all the way down below the March 2020 Covid lows. I’d suggest ye buy some ticker UVIX shares once the S&P500 trades above 4170. UVIX may well 10X over the next 12 months.
5/2/23 ACB update: ACB set a tradable bottom at .56 but then rallied to a confirmed top at .61. Now at .58 “live!” I will buy the pullback this time if it doesn’t blow through the 52 week low of .56 that was set on Wednesday, 4/26/23.
https://bigcharts.marketwatch.com/advchart/frames/frames.asp?show=&insttype=&symb=acb&x=38&y=7&time=18&startdate=1%2F4%2F1999&enddate=8%2F6%2F2022&freq=7&compidx=aaaaa%3A0&comptemptext=&comp=none&ma=0&maval=9&uf=0&lf=1024&lf2=2&lf3=0&type=2&style=320&size=4&timeFrameToggle=false&compareToToggle=false&indicatorsToggle=false&chartStyleToggle=false&state=11
I just can’t get on board with this one along with you:
5/13/23 ACB never did trade down to a buy signal so I avoided. The recent rally in the MJ stonks did generate some targets above. But the selling this week also generated signals which is now forcing me to lower target buys in CRON and TLRY, plus the ACB .56 low is now a new target low. So I can’t buy until it’s confirmed. Like I said in my previous spew, It’s going to be tough to buy anything with the entire financial market about to go into #CrashAndBurn mode. I have limits set to buy UVIX below $10 and also UVXY 4.50 strike calls for 6/2 expiry. The rally coming in VIX derivatives may well make up for any losses you have incurred in MJ stonks so I hope you take advantage of the opportunity. Otherwise, good luck…and keep the faith! MJ still the cheapest overall sector next to natgas.
5/13/23 Here’s another one that is already below my long term buy target numba at 5.55. Ticker MSOS. It left a target above at 6.37 during the recent rally and is now in a position to generate a buy signal if it sells down on the open Mon. The selling needs to breach 5.06, but it can’t break below appx 4.95. I’ll play the 5.50 strike calls for 5/19 expiry if I can buy them below $10 bux each. That would be a 9X+ gain if MSOS was to hit the upside target of 6.37 by 5/19. Not my best trade ever. But not too shabby. MJ stonks are still in trade only mode and can’t be held for the long term imo. https://bigcharts.marketwatch.com/advchart/frames/frames.asp?show=&insttype=Fund&symb=msos&x=38&y=15&time=18&startdate=1%2F4%2F1999&enddate=8%2F6%2F2022&freq=7&compidx=aaaaa%3A0&comptemptext=&comp=none&ma=0&maval=9&uf=0&lf=1024&lf2=2&lf3=0&type=2&style=320&size=4&timeFrameToggle=false&compareToToggle=false&indicatorsToggle=false&chartStyleToggle=false&state=11
8/25/23 12:46PM ACB update and target buy adjustment looower: ACB finally finished off the new major support/resistance area and it runs from .46-.434. That “forces” me to lower my low end buy target numba down to .25 from .30. ACB does still have targets above at .62 and .71. So the lower it goes the lower I am going to like it. Chances are good that it will be doing a reverse split I would imagine. https://bigcharts.marketwatch.com/advchart/frames/frames.asp?show=&insttype=&symb=acb&x=47&y=7&time=18&startdate=1%2F4%2F1999&enddate=8%2F6%2F2022&freq=7&compidx=aaaaa%3A0&comptemptext=&comp=none&ma=0&maval=9&uf=0&lf=1024&lf2=2&lf3=0&type=2&style=320&size=4&timeFrameToggle=false&compareToToggle=false&indicatorsToggle=false&chartStyleToggle=false&state=11
5/25/23 ACB update: Although ACB did trade to an upside target at .70 after my 5/13 spew it came back and posted a major trendlow just under .59. That forces me to lower my long term “buy and hold” target to .35. ACB is at .565..”live!” Sell any rally through .70. I will update my .35 buy target if it changes.
7/22/23 Weekend ACB update: Waiting for targets below to get tagged sure keeps one out of trouble. This week ACB generated yet another new n improved n looooower major support area at .52. So that now forces me to lower my long term buy and hold target numba from the previously stated .35 down to .31. Here’s what the new trendlow/major support looks like on the 10 day 15 minute chart. There is now a lower upside target of .618 and then .71 as sell targets on any rallies. https://bigcharts.marketwatch.com/advchart/frames/frames.asp?show=&insttype=&symb=acb&x=35&y=16&time=18&startdate=1%2F4%2F1999&enddate=8%2F6%2F2022&freq=7&compidx=aaaaa%3A0&comptemptext=&comp=none&ma=0&maval=9&uf=0&lf=1024&lf2=2&lf3=0&type=2&style=320&size=4&timeFrameToggle=false&compareToToggle=false&indicatorsToggle=false&chartStyleToggle=false&state=11
How’s all your technical work on this falling stone for more than a year now panning out for you?
If I remember correctly, CGC was also a “go go” stock at one time too. ACB has at least established a low end buy target at .31. CGC may be in the process of establishing a new major oversold condition after it breaks below the .346 low the market itself already told us is going to get taken out. If major support sets up below .346 it will dictate a future low at least 40% lower than that. Tis why I have stated here before, with the general market about to go into a major tailspin it’s downright double scary to even consider a long position in anything cannabis. I was thinking of buying puts on today’s sell signal in CGC. A trade to the .50 strike only costs $11 per put all the way out to 8/11/23 expiry. But it’s a good idea to avoid shorting things that are so low to a potential tradable low though…unless you are doing it as a hedge against a long position. The sheeple were obviously playing for CGC to break above .50 as there was at least 10X more calls to .50 bought than puts for the next 2 expiries. https://bigcharts.marketwatch.com/advchart/frames/frames.asp?show=&insttype=&symb=cgc&x=28&y=19&time=18&startdate=1%2F4%2F1999&enddate=8%2F6%2F2022&freq=7&compidx=aaaaa%3A0&comptemptext=&comp=none&ma=0&maval=9&uf=0&lf=1024&lf2=2&lf3=0&type=2&style=320&size=4&timeFrameToggle=false&compareToToggle=false&indicatorsToggle=false&chartStyleToggle=false&state=11
Ahh OK…. you’ve been doing shortside, that makes more sense now, along with pointing out the idea that game in these stocks may be getting too thin. Also, interesting comment about the general market.
8/13/23 Weekend ACB update: I’m still holding to my .30 long term buy target for ACB. There are still upside targets at .618 and .72, so ACB is a dangerous short. It closed on Fri at .532. The MJ stonks are a mixed bag. I just initiated a buy watch on MSOS at the “top picks” board/board that shows up on the most recent spews list. Here’s the 10 day 15 minute ACB chart. https://bigcharts.marketwatch.com/advchart/frames/frames.asp?show=&insttype=&symb=acb&x=22&y=2&time=18&startdate=1%2F4%2F1999&enddate=8%2F6%2F2022&freq=7&compidx=aaaaa%3A0&comptemptext=&comp=none&ma=0&maval=9&uf=0&lf=1024&lf2=2&lf3=0&type=2&style=320&size=4&timeFrameToggle=false&compareToToggle=false&indicatorsToggle=false&chartStyleToggle=false&state=11
What’s the fascination with ACB ?
@markshinnick I luv all of these dead or dying cannabis stonks as if they were my own children.