Aurora Cannabis Revenue Warning is No Big Deal

In this market news, Aurora Cannabis Inc. (TSX:ACB), one of the Canadian marijuana stocks, offered up revenue guidance for its second-quarter 2019

SmallCapPower | January 11, 2019: Aurora Cannabis Inc. (TSX:ACB) (NYSE:ACB), one of the Canadian cannabis stocks, Tuesday provided revenue guidance for its second-quarter 2019. The Company expects revenues for the period to come in between $50 million and $55 million (net of excise taxes), representing a 327% YoY growth and 68% growth on a sequential basis. It was, however, less than the $67 million analyst consensus according to Thomson Reuters. The main factors attributing to the growth is the strong demand for adult-use and medical cannabis in the domestic market and stable demand internationally. Aurora Cannabis has reached a customer base of 71,000 patients for medical cannabis in Canada.

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Production capacity ramp up from 70,000 kg/annum (November 2018) to 100,000 kg/annum as of today would greatly benefit Aurora’s supply base. Further, the Company reaffirmed its expectation to achieve at least 150,000 kg/annum of production capacity by Q3 2019. Based on a current production capacity of 100,000 kg/annum and cultivation and harvest schedules, Aurora Cannabis expects its production available for sale will be approximately 25,000 kg equivalent of cannabis in Q4 2019, with continued production volume increases in subsequent quarters.

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Aurora Cannabis CEO Terry Booth said, “Aurora continues to execute effectively across all market segments, as demonstrated by its revenue growth anticipated to exceed 68% as compared to last quarter, supported by continued strong performance in the Canadian adult consumer use market. Our consistent and high-quality production continues to significantly ramp up as expected, fueling even further growth. Going forward, we see sustained strong demand from the adult usage market, as evidenced by public statements from the Canadian provinces, as well as strong patient-driven demand for medical cannabis in Canada and abroad. These factors, together with our focus on disciplined management of operating expenses, and our growing portfolio of higher margin products, put us in a position to rapidly achieve positive EBITDA within the next two quarters.”

Furthermore, FY 2019 margins will be supported by the introductions of high-margin products such as softgels and vape-ready CBD oil cartridge product Aurora Cloud. Pending draft regulations regarding sale of derivative products like vape pens, beverages, and edibles would provide a margin boost during the fiscal year.

Additionally, disciplined cost management is anticipated to result in SG&A costs to be roughly consistent with the previous quarter, including a full quarter of costs related to all integrated subsidiaries in MedReleaf, Anandia and Agropro. Consequently, management believes the combination of substantial revenue growth and disciplined cost management positions the Company well to achieve sustained positive EBITDA beginning in Fiscal Q4 2019.

Strong revenue growth and buoyant margins will help the Company to achieve superior returns. Currently, Aurora Cannabis stock trades at a market capitalization of C$7.8 billion with a price-to-book multiple of 1.46x.

Disclosure: Neither the author nor his family own shares in the company mentioned above.

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