In case you didn’t get the memo, what’s popularly known as “Cannabis 2.0” is coming to Canada on Oct. 17 as the nation finally legalizes cannabis-infused beverages, edibles, vapes, and similar products. Owners of Aurora Cannabis (NYSE:ACB) stock could potentially be sitting on a green-hued gold mine if the pot-stock sector explodes to the upside in the wake of this historic event.
Or, it could be a great big dud; you just never know with these things. With the vaping controversy bringing negative publicity to the cannabis industry, October might not be so auspicious for Aurora stock holders — but then, we could perhaps dig a little deeper to find some very good reasons to hold onto those Aurora Cannabis stock shares.
One Analyst’s Mixed Messages on ACB Stock
It’s funny how an analyst can run hot and cold on the same exact stock at the same exact time, and we’ve got a textbook example of this with Aurora stock. In particular, Jefferies analyst Owen Bennett recently proclaimed that ACB stock is “one of the best-placed to succeed on a global basis over the long term,” a ringing endorsement if I ever heard one. He also predicted that the company’s EBITDA will turn positive during Q2 of 2019.
In the same breath, however, Bennett turned around and literally halved his price objective on Aurora Cannabis stock from C$14 to C$7. And yet, he’s assigning a “buy” rating on ACB stock — go figure.
Bennett reminds me of those Katy Perry lyrics: “You’re hot and you’re cold/You’re yes and you’re no.” In a way, though, I can understand the price-target cut, as the ACB stock price has recently dipped under the C$5 level, making C$14 perhaps a bit unrealistic even with Cannabis 2.0 coming up. So yes, I understand why Bennett chose C$7 as a price target, but it still felt drastic when I first heard about it.
The Incredible Edibles Market
In order to sidestep the controversial vaping market, some cannabis companies have chosen to focus on edibles, a niche which I find fascinating. It’s important to understand that the term “edibles” covers a variety of products: as the University of Colorado Boulder’s Jacob Kirsch explains in a highly informative research paper on taxation in the cannabis industry, extracts from the hemp plant are “infused into food and beverages to produce edibles. Additional ingestible goods such as capsules and tinctures are also sold as edibles.”
Moreover, a study conducted by research firm Deloitte found that half of surveyed respondents were likely to try cannabis-enhanced cookies, while nearly as many (49%, to be exact) were likely to try cannabis-infused gummies. It’s probably no coincidence, then, that Aurora Cannabis is shifting towards edibles in a time when vaping is less fashionable.
To that end, Aurora has been granted a processing license from Health Canada (the nation’s regulatory agency) for a facility known as Aurora Air. This particular facility will produce edible products including chocolates and gummies, which are expected to go public in Canada as soon as December of this year.
I consider that to be a very forward-thinking move on Aurora’s part, as edibles don’t carry the stigma that vaping products do. The fact that Health Canada granted the Aurora Air license, moreover, is a sign that the nation’s regulators accept and embrace edibles as a publicly purveyed commodity; you can love ’em or hate ’em, but edibles are here to stay.
The Takeaway on Aurora Stock
Don’t let the Jeffries analyst’s mixed bag of expectations on ACB stock throw you for a loop; with an early move into the burgeoning edibles market and the green light from Health Canada, Aurora will flourish through Cannabis 2.0 and beyond.
As of this writing, David Moadel did not hold a position in any of the aforementioned securities.
