MKM analyst Bill Kirk slashed Aurora Cannabis Inc.’s stock. ACB,
ACB,
to sell on Friday, after fiscal second quarter results released late Thursday fell short of expectations. The numbers were “troubling on two fronts,” Kirk wrote in a note to customers. The company’s consumer cannabis revenues of C $ 28.6 million ($ 22.5 million) were 17% lower than in the first quarter and at its lowest level since the second quarter of 2019, he wrote. The company’s expectations for positively adjusted EBITDA also failed to materialize and deteriorated from the first quarter. “We don’t see a cost-cutting or growth path that will achieve positive EBITDA in the short term,” wrote Kirk. “For perspective, Aurora collected more COVID-related grants in 2Q than it generated in gross profit dollars.” Aurora could further commercialize its flower offerings by outsourcing sales functions and could struggle to differentiate itself from rivals and oversupply in the Canadian market, Kirk said. With price pressures still in play, the company’s decision to push towards higher price points is growing “seems like a recipe for consumer / county frustration,” the analyst said. In an industry now showing years of consecutive growth, Aurora has sold less recreational weed in the quarter than in any other quarter since Canada fully legalized cannabis in October 2018, he wrote. “It is to the company’s credit that Aurora has some strong IPs through the MedReleaf acquisition and strong brands in San Rafael and Whistler (both acquired),” said Kirk. “They will try to premium around those offerings, but we think the shift back to higher-priced products will be difficult. Downgrade to sales while maintaining our C $ 9 PT.” Aurora stocks fell 4.2% in premarket and are down 17% in the last 12 months, while the Cannabis ETF THCX,
has gained 99.9% and the S&P 500 SPX,
has won 16%.