On Wednesday, Aurora Cannabis (NYSE:ACB) broke one of the cardinal rules of business: It promised results that it couldn’t deliver. Yes, I’m talking about the company’s fiscal fourth-quarter earnings report.
The company delivered its earnings report after market close and the results were not what investors were expecting. Aurora Cannabis stock fell short of revenue expectations and lowered its forecast going forward. As a result, ACB stock price fell nearly 10% in after-hours trading.
Let’s go right into the earnings report and where ACB stock fell short during this most-recent quarter.
What Happened During ACB Stock’s Fourth Quarter?
Going into the earnings report, analysts were predicting that Aurora’s net revenue would reach CA$108 million with adjusted losses of 6 cents per share. But in the months leading up to the earnings report, it seemed like Aurora executives were trying to temper investor expectations.
In August, Aurora lowered its guidance, saying net revenue would fall between CA$100 million and CA$107 million. Only the company couldn’t even meet its reduced guidance.
During the fourth quarter, the company’s net revenue was CA$98.94 million and net losses of CA$2.26 million. Aurora Cannabis stock also reported a net EBITDA loss of CA$11.7 million.
It’s Not All Bad News for Aurora Cannabis Stock
It can be hard to see past just a glaring misstep on revenue guidance, but there were some positive nuggets hidden away in the earnings report. In previous quarters Aurora struggled with supplier issues, but this didn’t seem to be an issue during the fourth quarter.
The company produced just over 29,000 kilograms, which is up from 15,590 kilograms during the third quarter. Gross margins increased 3% to reach 58%, which indicates that ACB is lowering its production cost per gram.
And while the company is still losing money, the pace seems to be slowing. During the third quarter, Aurora Cannabis lost CA$36.6 million so in comparison, CA$11.7 million doesn’t seem that bad. It will be interesting to see if management can alter the tone of this most recent earnings report.
What’s Next for ACB Stock?
Everyone wants to be excited about the cannabis industry, but recent developments have made that difficult. Cannabis companies across the board have struggled to grow and distribute the plant. Tilray (NASDAQ:TLRY), Canopy Growth (NYSE:CGC), and Aphria (NYSE:APHA) all reported disappointing losses in recent earnings reports.
It is encouraging that Aurora’s production capacity and gross margins continue to improve. The company just needs to find a way to meet its revenue guidance and forge a path to profitability.
Canadian cannabis companies are currently awaiting the second round of cannabis legalization in Canada. When this happens, the country will legalize edibles, cannabis-infused beverages, and other products. This should allow ACB stock to greatly expand its product offerings and capture more market share.
As of this writing, Jamie Johnson did not hold a position in any of the aforementioned stocks.