With the dramatic and in many ways unprecedented fallout in the markets, very few investments have escaped the scourge. Unfortunately, the volatility extends to one of the more promising sectors, the legal cannabis market. Among the terribly beaten down names is Aurora Cannabis (NYSE:ACB). Once prominently featured for its extensive international exposure, ACB stock is now but a shell of its former self.
Recently, I sent out a note to investors acknowledging the fears and growing uncertainties regarding the coronavirus. The bottom line is that the virus is here and it’s spreading throughout our communities. In response, state and federal governments have enacted unprecedented policies to mitigate the potential damage to national health. Essentially, the markets are reacting to the potential severity of this impact. We may have a wild ride ahead of us.
However, one of the biggest mistakes that investors made following the 2008 financial meltdown was not considering the longer-term picture. No matter what – and for whatever reason – we will endure at times severe corrections. This will pass, providing us an opportunity to access once-exorbitantly expensive stocks at ridiculous discounts.
On the other side of the coin, there will be companies that simply won’t make it. Sadly, I’d put ACB stock on this list. As you likely know, Aurora Cannabis made the decision to eschew profitability for growth. And they continued to double down on this philosophy despite supply chain troubles in its native Canadian cannabis market.
Without a big financial backer such as Altria (NYSE:MO) and Constellation Brands (NYSE:STZ), which support Cronos Group (NASDAQ:CRON) and Canopy Growth (NYSE:CGC) respectively, this was a risky move. Now, ACB stock is paying the price.
Regrettably for ACB Stock, Fundamentals Matter
One of the saddest things about Aurora Cannabis is that, in this present situation, it really needs more time to have its expansionary strategy work out. Because if the company could get that lifeline, we’re seeing powerful public developments that could save ACB stock.
For instance, California shook the nation (and the world) when it announced a mandatory statewide stay-at-home order. The only exceptions to this order are essential tasks, such as grocery shopping. Further, businesses have been ordered to close, with the exception of those providing essential services.
Sure enough, the governor’s office deems marijuana dispensaries essential.
Of course, the juxtaposition is, on the surface, jarring. I think we’ve all seen the memes about the Golden State getting their priorities straight. But joking aside, it’s the reason why dispensaries can remain open that is the key here. Under California’s law, cannabis dispensaries with medical licenses are labeled under “healthcare operations.”
A top concern that the media has reported over the last few weeks is that China pretty much owns our medical supply chains. Whether we’re talking about prescription drugs or over-the-counter meds, our dependency on China has highlighted an awkward vulnerability.
Now, I’m not suggesting that cannabis can provide an alternative therapy for the coronavirus. However, patients use medical marijuana to address myriad symptoms and conditions. Further, scientists are always conducting research into other possible applications. It’s toward these conditions where a robust North American cannabis network could have helped in addressing some of the broader supply chain issues we’re facing in this panic.
However, this is such a long-term narrative, which is why it doesn’t suit ACB stock well. What Aurora needs is an immediate influx of bullish news. Instead, it’s getting the opposite.
Executive Departures a Credibility Issue
In recent months, the biggest headlines (aside from the coronavirus) concerning ACB stock came from the executive departures. In late December, Aurora chief commercial officer Cam Battley left. Last month, Aurora co-founder and CEO Terry Booth stepped down. These were necessary changes if the company had any hope of recovering.
Interestingly, though, Booth remains in a strategic advisor role with the organization. That means he still has an inside perspective on the company he helped create.
So, it’s awfully jarring that Booth dumped 12.2 million shares of ACB stock. Yes, he’s stepped off the top leadership role but come on! You’d expect him to have some semblance of caring about the organization, of which he is still an advisor.
And with that, I think must be super careful with Aurora Cannabis. Previously, it lacked good leadership and adequate funding. Now, it has no credibility.
Matthew McCall left Wall Street to actually help investors — by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. The power of being “first” gave Matt’s readers the chance to bank +2,438% in Stamps.com (STMP), +1,523% in Ulta Beauty (ULTA) and +1,044% in Tesla (TSLA), just to name a few. Click here to see what Matt has up his sleeve now. Matt does not directly own the aforementioned securities.