Last October, Aurora Cannabis (NYSE:ACB) went public on the New York Stock Exchange. At the time, investors were full of optimism about the Canadian pot stock. The company beat out its rivals in terms of production capacity and was already expanding globally.
But nearly a year later, ACB stock’s prospects don’t seem quite as strong. The company lost $6.8 billion in market cap as the stock has fallen steeply from its 52-week high of $12.53 per share. And Wall Street is deeply divided when it comes to the company.
In general, most analysts are incredibly bullish or bearish when it comes to Aurora Cannabis stock, with very little in between. Out of the 15 analysts that are currently reviewing the stock, six consider it a buy, six recommend holding the stock, and three recommend selling.
Of course, the cannabis industry is expected to be huge in the coming years. But it’s hard to disagree with the fact that Aurora’s first year as a publicly-traded company has been a bit of a disaster. Listed below are three things you should know about ACB stock going forward.
ACB’s Balance Sheet Has Taken a Hit
One of the things that made ACB stock so appealing in the first place is also the company’s biggest downfall. Aurora Cannabis came out of the gate swinging and quickly blossomed into a global cannabis company. The company offers a diverse range of products, yet a bigger investor hasn’t acquired it.
The company’s balance sheet has taken a significant hit as a result. Aurora has acquired over nine companies and in the process built up CA$3.17 billion in goodwill. Goodwill refers to the premium paid beyond the company’s tangible assets during an acquisition.
Canadian Retail Licenses Hit Major Snag
This problem affects all Canadian cannabis companies, including ACB stock. Health Canada is in charge of approving the cultivation and sales licenses for Cannabis companies. And the approval process has been taking longer than anyone expected it would.
The agency is sitting on an enormous backlog of licensing applications, meaning cannabis companies are sitting on products that they are unable to sell. And individual provinces have been struggling with their own licensing approval issues.
Wall Street Quickly Souring on ACB Stock
Over the past month, Aurora Cannabis has received three sell ratings. And one of these ratings came from Stifel analyst Andrew Carter.
Carter lowered the company’s price target and lowered its rating, citing the company’s domestic and global weakness as the reason why. MKM Partners also gave the company a sell rating, saying the company needs to raise more capital before it can hope to become profitable.
Analyst ratings aren’t always accurate or the best indication of whether you should buy a stock. But these ratings encapsulate the general wariness many people have toward the company. Aurora stock is going to have a lot of ground to make up to prove it can reach profitability.
As of this writing, Jamie Johnson did not hold a position in any of the aforementioned securities.