The official fiscal Q4 numbers from Aurora Cannabis (NYSE:ACB) haven’t been reported yet. But, if Tuesday’s 10% pop of ACB stock in response to some preliminary figures is any indication, investors are expecting  mostly good results.

The primary catalyst for the jump of ACB stock was the increase of the company’s  revenue and volume outlook.

The cannabis company had previously suggested that it would sell about 25,000 kilograms of legal marijuana during the three-month stretch ending in June, translating into cannabis revenue of somewhere between C$90 million and C$95 million. On Tuesday, ACB raised its volume guidance to a range of 25,000-30,000 kilograms, translating into a top-line outlook of between C$100 million and C$107 million.

That still shouldn’t be enough to pull the company out of the red. It may not even be enough to keep Aurora stock price moving higher; Aurora stock price was already peeling back from its intraday high on Tuesday, and it fell yesterday.

 Any further glimmer of hope, though, may be enough to spark a bullish run by ACB stock.

Slowly But Surely

Although most cannabis companies haven’t reported their Q2 numbers yet, the figures the marijuana industry have supplied this earnings season have been encouraging.

Aphria (NYSE:APHA), for instance, reported a profit, which is rare for young cannabis companies. As a result, Aphria became, along with  the relatively obscure OrganiGram Holdings (NASDAQ:OGI) , two of the few profitable cannabis companies. Better known marijuana companies like Canopy Growth (NYSE:CGC) and the aforementioned Aurora Cannabis are still losing money, despite their enormous sales growth.

Most of Aphria’s operating profit, however, stemmed from its acquisition of a distributor, CC Pharma. Without that deal,  the company may have reported a quarterly loss.

Still, the industry and most of its individual components are making solid forward progress as Canada’s legal pot industry continues to get off the ground.

Aurora’s  expected loss of $51.4 million for the quarter that ended in June is less than the company’s  loss of $66 million during the same period a year earlier. Perhaps more importantly, the figure  was more or less in-line with the $49.7 million loss it reported for the previous quarter.

The company’s anticipated loss of 5 cents per share of ACB stock for the June quarter is notably better than its 15 cents per share loss during the same period in 2018.

That’s  all part of a broad trend that has Aurora on track to swing to a net profit during Q2 of calendar 2020.

The Price Action of ACB Stock  Suggests Skepticism

But can we trust that analysts have foreseen every contingency? And will the market wait another year for profits that aren’t guaranteed?

There is no clear answer to either question.

The expected move into the black by ACB next year should be viewed with a healthy amount of skepticism.

Assuming the price of cannabis holds steady, Aurora may well start cranking out operating earnings in 2020. Nothing kills prices, however,  more than overproduction based on the assumption that pricing power can withstand any degree of supply.

Just ask Micron Technology (NASDAQ:MU), which once again found itself trapped by a memory chip glut that it helped create. Ask homebuilders about the mismatched supply and demand of 2007. Ask oil and gas drillers about excessive prospecting in 2013.

In other words, never say never. Indeed, although current and projected cannabis prices firmed up through July, they are far from being on a firm foundation.

Meanwhile, it’s unlikely investors who’ve already embraced marijuana mania will be willing to stick it out — fully — in the absence of clear proof that Aurora Cannabis will indeed become permanently viable. The fact that ACB stock hasn’t actually made any net progress since late 2017 speaks volumes about the lack of real confidence in its future, even though it has never been closer to true profitability.

The Outlook of ACB Stock

The cannabis craze took hold of investors about a year before most of these companies were ready to deliver on the hype. Struggling to live up to lofty expectations, these marijuana companies have struggled lately. ACB stock has been no exception.

The worst may not be over, though.

We’re nearing a critical gap between the last stage of marijuana mania and the first real evidence that the legal pot business can be profitable.

How long that phase will last isn’t clear. But it’s highly likely that the Aurora stock price will need to suffer one last capitulation before the decks are cleared for an advance that’s more fully driven by its fundamentals.

In recent years, several manias have exhibited a similar pattern, including solar mania in 2013 and the crypto craze that crashed and burned last year. Both ideas have merit, but their profitability wasn’t part of the conversation at the time. All investors knew about them was  “buy now,” and they paid the price for being too early.

So investors should tread lightly with marijuana stocks at this point, but they should be ready to buy them when it’s scary to do so.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can learn more about James at his site, jamesbrumley.com, or follow him on Twitter, at @jbrumley.