Aurora Cannabis Plunges 19% On Revenue Decline, Dismal Outlook

US-listed shares of Aurora Cannabis were sliding 19.3% today as the company revealed a revenue decline in fiscal 4Q, with losses accelerating into 1Q as its value offering struggles.

Aurora Cannabis (ACB) reported a 4.5% Q/Q decline in its 4Q net revenue to C$72.11 million, which was slightly ahead of analysts’ estimate of C$72.08 million. Cannabis net revenue was down about 3% to C$67.5 million.

Consumer cannabis revenue fell 8.5% to C$35.3 million compared to the previous quarter as higher volumes of dried consumer cannabis were offset by lower average net selling price per gram as the Daily Special value brand accounted for a higher proportion of consumer cannabis revenue in the quarter.

Aurora and several other Canadian cannabis companies are struggling due to competition from the illicit market, lower-than-expected retail stores and slow international growth.

Meanwhile, Aurora’s medical cannabis revenue grew about 4% Q/Q to C$32.2 million. The company attributed this growth to a 2% growth in Canadian medical business and a 14% Q/Q rise in European business.

The company’s 4Q adjusted EBITDA loss came in at C$34.6 million, which marked a C$15.8 million improvement compared to the third quarter. Higher adjusted gross margin and lower selling, general and administrative expenses helped in trimming down the losses.

For the first quarter of fiscal 2021, Aurora Cannabis predicts cannabis net revenue between C$60 million and C$64 million. Analysts were expecting revenue of C$79.62 million. The guidance reflects the impact of the divestiture of the company’s non-core businesses in fiscal 2020. The company expects to deliver positive adjusted EBITDA in the second quarter of fiscal 2021.

In reaction to the results, Piper Sandler analyst Michael Lavery lowered the price target for Aurora Cannabis to $8 from $10 while maintaining a Hold rating. Lavery told investors in a research note that the new CEO Miguel Martin is shifting Aurora’s focus towards execution and building a broader portfolio strategy, as it had become too dependent on its value brand, Daily Special.

The analyst believes a shift in focus is the right move, but he expects the turnaround to take time. (See ACB stock analysis on TipRanks)

Aurora Cannabis stock (on NYSE) has plunged 72% so far this year and an average price target of $9.09 indicates a further downside of 24.2% compared to Tuesday’s closing stock price. The Street’s Hold consensus for the stock is based on 1 Buy, 10 Holds and no Sell rating.