At its core, the case for any cannabis-based organization is astoundingly elemental: nothing has turned into something. Prior to the wave of North American marijuana legalization initiatives, cannabis was largely a black market commodity, disconnected from the mainstream financial system. But with legal authority comes untapped corporate and government (tax) revenues. However, is this enough to save Aurora Cannabis (NYSE:ACB) and Aurora stock?
As I and others have mentioned, ACB stock, along with major cannabis players like Tilray (NASDAQ:TLRY), Cronos Group (NASDAQ:CRON) and Canopy Growth (NYSE:CGC) don’t necessarily have a credibility problem regarding their longer-term narrative.
With the company’s size, lucrative acquisitions and/or partnerships with well-heeled corporate backers, its potential is massive. Furthermore, interest in legal cannabis is unlikely to fade, which represents great news for Aurora Cannabis stock.
According to the latest read from the Pew Research Center, slightly more than two-thirds of Americans favor marijuana legalization. This represents a steady increase in botanical sentiment over recent years. Moreover, only 8% of Americans support keeping marijuana illegal in all circumstances.
To be blunt, most of these botanical extremists are going to die soon anyway. Cynically, this is a demographic tailwind for Aurora stock.
Therefore, from a sentiment perspective, ACB stock benefits from all angles. So, what then is the problem?
As InvestorPlace contributor Chris Markoch notes, Aurora Cannabis stock might not “make it to the finish line.” Obviously, Aurora has terrible financials, with the rising cash burn a particularly worrisome development. Essentially, ACB is an all-star quarterback whose team is down deep in the fourth quarter, and the opponent has the ball.
Does ACB stock have any chance for one last Hail Mary pass?
Why Aurora Stock Remains Compelling
A major reason for Markoch’s bearishness is the lack of a meaningful catalyst in the here and now. For instance, several weed plays have jumped on news that the House of Representatives voted favorably for the Marijuana Opportunity Reinvestment and Expungement (MORE) Act.
MORE is groundbreaking in that it would basically legalize marijuana (the psychoactive kind) at the federal level. Further, it will overturn past convictions for cannabis-related crimes.
On the surface, such measures are net positive for ACB stock. However, the rub is that the Democrats control the house. Since the Republicans control the Senate, MORE is unlikely to pass. Therefore, Markoch labels this event as an “empty gesture.”
He’s right that this is meaningless in the interim. However, I believe that MORE has long-term implications for Aurora stock that the bears may not appreciate.
As I referenced above, Pew has closely tracked Americans’ opinion about cannabis legalization. In just over a decade, public opinion has doubled in favor of marijuana. I’m not sure if there are any other political opinions that have shifted so dramatically so quickly.
And while MORE has no more than a snowball’s chance in hell of passing the Senate, we shouldn’t dismiss the act’s importance. As I noted a few days ago, this is the first time that a Congressional committee has voted for legalization. In other words, the political machinery is finally aligning with the will of the people.
Additionally, don’t overlook that the Republicans are carefully monitoring marijuana opinion polls. Every major living demographic supports legalization, except for the Silent generation (born 1928 to 1945). As I said earlier, they will die soon.
If the Republicans want their relevancy to die with them, so be it. But that’s probably not going to happen.
But What About Now?
Invariably, the criticism of my argument is that I’m again talking about the longer-term thesis for ACB stock. But what about the here and now? Does the underlying company have enough time to see this narrative play out?
It’s an incredibly risky idea, but I believe it does. The reason is that investors are also looking at American opinion polls. If the marijuana market opens up on a federal basis, Aurora stock is well positioned due to the company’s investments in international operations.
Plus, with Aurora Cannabis stock at ridiculously cheap prices, it should encourage more contrarians to take a shot. Because think about this: how much more bad news can legitimately impact ACB stock? Due to the disappointing supply chain hang up in Canada, Wall Street has consistently lowered expectations for the green industry.
Granted, Aurora stock is backed by some of the ugliest financials I’ve seen among major cannabis competitors. But with lowered standards and rising public sentiment, ACB is hardly a confirmed lost cause.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.