Canada’s Aurora Cannabis (NYSE:ACB) is down over 45% from its 2019 high of $9.96, after sliding 0.54% to close at $5.55 on Thursday. ACB stock surged briefly earlier in August after the company issued a fourth-quarter update suggesting cannabis production for the quarter would be at the high end of its previous guidance, but its since given that back. In fact, at the current price it is approaching its 2019 low of $5.03.
This makes ACB a tempting option for investors who are interested in getting in on the cannabis market. The company has been publicly traded for five years. And with a current production capacity in excess of 625,000 kilograms it’s not just Canada’s largest cannabis producer — it’s one of the largest in the world.
So, is ACB stock the one to choose? If so, is now the time to pull the trigger?
Should Aurora Cannabis Be Your Pot Stock?
There has been a huge increase in interest in the cannabis market over the past several years. Canada’s legalization of recreational pot last fall resulted in a rush to buy. With production ramping up, it’s turned out that some of these companies have been poorly run, resulting in a rash of corporate shakeups that have rattled investors.
Aurora Cannabis has been a stable presence amid the turmoil. In operation since 2013, the company has a solid business in producing medical marijuana in addition to recreational cannabis products. It has invested in 15 global production facilities including the highly automated, 800,000 square foot Aurora Sky facility in Edmonton — capable of producing over 100,000 kilograms per year on its own. In addition, Aurora Cannabis has active operations in 25 countries.
It’s worth checking on how ACB stock has performed relative to other stocks in the industry. Despite the steep drop since March, Aurora Cannabis has performed better in year-to-date terms, showing modest growth of 5.7%. In comparison, Canopy Growth (NYSE:CGC) is down by 13% so far in 2019. For a real horror story, investors in CannTrust Holdings (NYSE:CTST) — under investigation in Canada for illegal growing operations and one of the companies that fired its CEO this year — have taken a bath, with CTST down over 65% so far in 2019.
In short, if you want to invest in a cannabis stock, you could do a lot worse than choosing ACB stock.
The big wildcard here is Q4 earnings. Aurora Cannabis is expected to report in roughly two weeks and the results are going to have an immediate impact on ACB stock. As mentioned in the intro, the company already issued a Q4 update that puts its production for the quarter at the high end of previous guidance. That was a positive that resulted in a 10% surge for Aurora Cannabis stock, which hit $6.83. However, its guidance for Q4 net revenue in the $100 million CAD to $107 million CAD range was well below the $114 million CAD that analysts had been expecting. And there was no mention of earnings. It’s been a downhill slide for ACB stock ever since.
Depending on what gets announced when Aurora Cannabis delivers its Q4 earnings report, which should be before Sept. 15, ACB stock will be on the move.
Is Now the Time to Buy ACB Stock?
Despite a slow start, Canada’s recreational marijuana sales have been picking up. In December the country will be legalizing edibles and other cannabis-infused products. Aurora Cannabis has been building up inventory to take advantage of this new market which could kick off another wave of growth among cannabis stocks. The long-term prospects for ACB stock seem good. More markets for its products are coming online. And, its investment in cutting-edge production facilities is poised to pay off.
The big question remains whether to buy Aurora Cannabis stock now, or wait two weeks for those Q4 results. Among the nine analysts surveyed by Nasdaq, four currently have a hold on ACB stock, while two have it rated as a “Buy” and three call it a “Strong Buy.” It’s a bit of a roll-the-dice situation, but now might just be the time to buy ACB. Even if it slides a bit after those Q4 results are in, it’s a pretty safe bet for long-term growth.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.