Needham initiated coverage of Aurora Cannabis Inc. on Tuesday with a hold rating and $1.50 price target. Analysts Matt McGinley and Evan Greenblatt said the company has established itself as a low cot producer of cannabis, but remains deeply unprofitable and has to scale back its operating structure while attempting to grow revenue. "We expect restructuring to produce an entity capable of generating positive EBITDA by F1Q21, but any shortfalls in cost reduction or market development places the company at liquidity risk in 2H20," the analysts wrote in a note to clients. The Canadian cannabis market is structurally impaired with a shortage of retail stores clashing with excess production capacity, price pressures from the black market, challenging branding rules and limited signs that Cannabis 2.0 will have a meaningful impact in the first half. "We are optimistic that Canada will work through some of these issues over the next 2-years, but don't expect to see many of the 300 LPs in Canada make it to that point," the Needham analysts wrote. Aurora shares rose 2.6% premarket in a rebound from Monday's steep selloff across all markets. The stock has fallen 79% in the last 12 months, while the ETFMG Alternative Harvest ETF has fallen 57% and the S&P 500 has gained 15%. Read More...
Needham initiated coverage of Aurora Cannabis Inc. on Tuesday with a hold rating and $1.50 price target. Analysts Matt McGinley and Evan Greenblatt said the company has established itself as a low cot producer of cannabis, but remains deeply unprofitable and has to scale back its operating structure while attempting to grow revenue. “We expect restructuring to produce an entity capable of generating positive EBITDA by F1Q21, but any shortfalls in cost reduction or market development places the company at liquidity risk in 2H20,” the analysts wrote in a note to clients. The Canadian cannabis market is structurally impaired with a shortage of retail stores clashing with excess production capacity, price pressures from the black market, challenging branding rules and limited signs that Cannabis 2.0 will have a meaningful impact in the first half. “We are optimistic that Canada will work through some of these issues over the next 2-years, but don’t expect to see many of the 300 LPs in Canada make it to that point,” the Needham analysts wrote. Aurora shares rose 2.6% premarket in a rebound from Monday’s steep selloff across all markets. The stock has fallen 79% in the last 12 months, while the ETFMG Alternative Harvest ETF has fallen 57% and the S&P 500 has gained 15%.
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