Shareholders of Aurora Cannabis (NYSE:ACB) have been very disappointed and this is not surprising. ACB stock once seemed to have a tremendous amount of potential, but things have not worked out very well and it has been losing a significant amount of money.
For fiscal 2019, which ended in June, Aurora reported a loss of $290 million. This worked out to be a loss of 29 cents a share.
Because of these losses, it is not surprising that ACB stock has seen a significant decline. At this time last year, shares were trading at close to $12. Since then the price has dropped by about 60% to current levels around $4.
That was before yesterday’s bleak outlook from Hexo (NYSE:HEXO), which sent the entire pot stock sector lower, including Aurora Cannabis stock which lost 9.5%.
Aurora’s Global Growth Strategy
One of the ways that the company believes can help it to turn things around is to have an extensive focus on expanding its global operations. Last year it expanded its sales and operations to more than 20 countries. It is trying to increase its distribution channels and to develop one of the largest distribution networks in the cannabis industry.
By securing various supply agreements and partnerships in strategic locations throughout the world, the company believes that it will be well positioned to access new markets as they emerge and grow.
In Aurora’s most recent report, the management discussed what it believes are important developments with regards to this global growth strategy.
The Italian government picked Aurora to be the sole provider of medical cannabis. The Federal Institute for Drugs and Medical Devices in Germany selected it to be one of only three companies to grow cannabis in the country.
Aurora was also given approval to ship medical cannabis to a pain treatment center in Poland and in Malta the authorities approved its application to establish a cannabis operation.
In addition to these developments, Aurora also secured a supply agreement with a wholesaler in the Czech Republic. It was also picked by Luxembourg’s Health Ministry to supply medical cannabis. Aurora is clearly making global expansion a significant part of its strategy.
Time will tell whether this strategy will be successful or not. However, some investors question whether the company has taken on more than it can effectively manage.
The large number of acquisitions that Aurora has recently made pursuing this strategy has given the company a very big helping of Goodwill and intangible assets in its valuation. They have probably contributed to the company’s losses and to the decline in its stock price.
A Look at ACB stock
ACB stock went into a freefall in mid-September after breaking support the $5.50 level. This level was support at the end of August. After dropping about 20% and becoming very oversold it found support around the $4 level and broke its recent downtrend. Since then it has been consolidating between support around $4 and resistance around $4.50.
At the time of this writing, Mark Putrino did not have any positions in any of the aforementioned securities.