Aurora Cannabis’ Q3 Loss Wider than Expected; Shares Plunge 10%

Shares of Aurora Cannabis (ACB) fell more than 10% in early trading Friday after the company posted a disappointing third quarter with lower-than-expected sales as COVID-19 lockdowns and increased competition outshined gains in its medical cannabis business. Aurora Cannabis is one of the world’s largest cannabis companies, serving both the recreational and the medical cannabis market.

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Total net revenue for Q3 2021 came in at C$55.2 million, down 25% year-on-year. Sales in Aurora’s Canadian recreational business fell 53% to C$18 million. In contrast, medical business revenue increased 17% to C$36.4 million. Net selling price of cannabis rose to C$5.00 per gram in the third quarter, from C$4.64 in the prior-year quarter.

Meanwhile, net loss was C$164.7 million (C$-0.85 per share) in the quarter ended March 31, down from a net loss of C$139.3 million (C$1.40 per share) for the same quarter in fiscal 2020.

The Adjusted EBITDA loss was C$24 million in the three months ending March 31, compared to $49.6 million from the prior-year quarter.

Aurora Cannabis’ CEO Miguel Martin said, “Consistent with many of our peers, the quarter presented challenges in the Canadian adult-use segment. This reinforces the importance of Aurora’s broadly diversified business model that balances domestic medical, international medical, and adult-use platforms. To that point, we delivered the strongest performance in domestic medical and the best results in international medical cannabis of any Canadian LP during the period.”

Aurora revealed a plan to achieve an annualized C$60 million to C$80 million cost savings over the next 12 to 18 months. Selling, general and administrative expenses fell 42% to C$45.1 million in the quarter. (See Aurora Cannabis stock analysis on TipRanks)

Yesterday, Canaccord Genuity analyst Matt Bottomley downgraded ACB to Sell from Hold and lowered its price target to C$7.00 (from C$14.00) for 14.2% downside potential.

Bottomley said in a research note that Aurora’s Q3 financial results were significantly lower than estimates as the company’s adult-use sales in Canada continue to fall fast.

The rest of the Street is cautiously pessimistic on ACB with a Moderate Sell consensus rating based on 3 Holds and 6 Sells. The average analyst price target of C$8.91 implies 9.2% upside potential to current levels.