On Sep. 8, Aurora Cannabis (NYSE:ACB) announced that it was promoting chief commercial officer Miguel Martin to chief executive officer effective immediately. The move ought to be very good for owners of ACB stock.
Here’s why I feel this way.
An Executive with the Right Mixture of Experiences
Martin joined Aurora Cannabis in July. Before Aurora, he was the CEO of Reliva, a Massachusetts-based manufacturer of premium cannabidiol (CBD) retail products. Before that, he was president of Logic Technology, a maker of electronic cigarettes.
With 25 years of experience in the consumer packaged goods industry, it is Martin’s time spent at Altria (NYSE:MO) as senior vice president of sales and distribution that ought to make him a refreshing change from former CEO and co-founder, Terry Booth.
In Martin’s role as SVP of Sales at Altria, he oversaw a field sales force of more than 2,700 people across the U.S.
“Given my 25 years of executing against regulated product opportunities, including serving as President of one of the largest electronic cigarette companies, I believe we will be successful both with the current portfolio and emerging margin accretive formats,” Martin stated in the company’s press release announcing his promotion.
With Aurora at a critical juncture in its historical development, the fact it could promote someone internally who is ready to lead the company out of the doldrums saves it a considerable amount of time that an external candidate would require to get up to speed on its operations.
“In his short time at Aurora, Miguel has demonstrated decisive leadership. Miguel is a highly experienced executive with an exceptional track record of performance in a number of consumer products categories,” stated executive chairman Michael Singer.
“After an extensive search which included evaluation of many highly-respected candidates, Miguel stood apart with both strong commercial and cannabinoid sector expertise, as well as his passion for Aurora’s success.”
Night and Day Difference from Terry Booth
In January, I discussed why it made sense to move then CEO Terry Booth out of the chief executive role to chairman. I got the idea from Cantor Fitzgerald analyst Pablo Zuanic, who had suggested in a Jan. 2 note to clients that the company needed to bring in someone who was better equipped to operate a growth business.
If not for Booth, Aurora likely doesn’t exist today. As a serial entrepreneur, he provided Aurora with $3 million in capital in 2013 so that it could build a state-of-the-art cannabis production facility between Calgary and Red Deer, Alberta. In December 2014, Booth jumped into the CEO chair and took it as far as his entrepreneurial skills could take it.
Booth stepped down as CEO in February, acknowledging that Aurora needed someone different to run a scaled-down, profit-driven business.
“It’s time for more of a button-up CEO, not a growth CEO,” Booth stated in February a day after stepping down. “You want a capital market guy or gal. You really need to have someone with their eye on the ball for positive EBITDA.”
Well, as it turns out, Aurora went for somebody with both sales and executive management experience within regulated businesses. Martin is far more corporate than Terry Booth could ever be.
I believe, like the board, that Martin can bring stability to a cannabis business that’s been reeling since at least November.
What It Means for ACB Stock
The last time I wrote about Aurora in early June, it was trading around $14. They had just done a 12-for-1 reverse stock split to meet New York Stock Exchange compliance rules. Today, it’s about half that value.
“Once upon a time, I was a believer. No longer,” I wrote on June 3.
“Despite the split, Aurora Cannabis still has major holes in its business plan. There are definitely better cannabis buys at this point in the game.”
Most of InvestorPlace’s contributors who’ve written about Aurora in recent weeks have been less than complimentary about its chances. However, David Moadel had some optimism in a recent article.
“Even with the company’s challenges, it’s perfectly OK to keep ACB stock on your watch list. Timing is essential, though. Before buying the shares, investors should wait until Aurora and the cannabis industry in general show signs of improvement,” Moadel wrote on Aug. 26.
As part of Aurora’s Sep. 8 announcement of Martin as its CEO, it also provided an update to its business.
It expects to generate positive adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) in the second quarter of 2021. However, it also plans to report a $1.8 billion goodwill impairment when it releases its fourth-quarter results on Sep. 22.
“The Company is now operating at its quarterly SG&A run-rate in the low $40 million range, and expects operational cost reductions from facility closures up to $10 million per quarter starting in the second half of fiscal 2021,” Aurora’s Sep. 8 press release stated.
“With a tailwind of growth in the Canadian recreational market, the Company is better positioned for its next phase focused on profitability.”
The new CEO is taking the helm of a business that’s been completely humbled over the past seven months. It will be a tremendous challenge for Martin as he focuses on Aurora’s four goals for growth.
If you’re an aggressive investor, having lost 30% of its value over the past month, now is an excellent time to make a bet on ACB stock, but only if you can afford to lose the entire bet.
Aurora is far from a sure thing.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.
