Aurora Cannabis (NYSE:ACB) is currently one of Canada’s largest cannabis stocks with a market capitalization of just under $10 billion. The company’s stock is up more than 50% year-to-date, but down from its March high of $10 per share.
Cannabis companies find themselves in an interesting position right now. More than 30 countries have already legalized medical cannabis. And more countries seem ready to make the move to legalize cannabis for recreational use.
Opinions are varied on just how big global cannabis sales will be but even the most modest estimates put the figure at $75 billion. Cannabis companies like Aurora foresee product replacing commonly used items like medicine, alcohol and tobacco.
3 Things You Should Know About Aurora Cannabis
Analysts are mostly bullish about the company’s prospects while others prefer competitors like Canopy Growth (NYSE:CGC). If you’re looking to invest in the cannabis industry, here are three things you should know about Aurora.
Large production capacity: Aurora cannabis stock is already one of the top revenue generators in the industry with 15 production facilities. Few other cannabis companies can match their production level. The company recently reported it has the means to produce up to 625,000 kilograms annually by 2020. When this happens, Aurora should be one of the first companies to become profitable in the cannabis industry.
Posed for global growth: Cannabis is set to become a global industry in the coming years. And with operations set up in 24 different countries, Aurora already has a head start on many untapped markets. The company is also focused on ways to expand its business, including launching products like cannabis-infused edibles.
Unwilling to give up a stake in the company: Canopy Growth, Canada’s other large cannabis stock, and, arguably, Aurora’s biggest competitor received a higher valuation than Aurora, mostly thanks to its $4 billion investment from Constellation Brands. Aurora has looked into partnerships with other companies like PAX Labs. But so far, company executives have been unwilling to give up a large stake in the company in exchange for outside investment. This could prove problematic for the company since it can’t make the same strategic investments as Canopy. If Aurora can secure a sizeable equity investment from a brand-name partner, this would give the company the ability to make strategic business investments.
Final Thoughts on ACB Stock
Companies like Aurora and Canopy certainly have momentum on their side. But while Aurora has a number of factors working in its favor, it also has several things that could hold it back in the long run.
The company has doubled its market cap since the beginning of the year yet its shares have actually declined. That’s because the company continually dilutes its shareholders by financing acquisitions with its own stock instead of looking for outside investors.
Perhaps Aurora cannabis stock will find the right company to partner with in the future. But for the time being, it’s probably a good idea to wait to buy the company’s stock.
As of this writing, Jamie Johnson did not hold a position in any of the aforementioned securities.