Aurora Cannabis (TSX: ACB) to acquire TerraFarma: Is it a buy stock?

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Aurora Cannabis (TSX: ACB) to acquire TerraFarma: Is it a buy stock?

Aurora (TSX: ACB)
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Highlights
  • Aurora Cannabis Inc (TSX: ACB) created a buzz in the Canadian market on Tuesday after it announced to acquire TerraFarma Inc, which owns Thrive Cannabis.
  • Stocks of Aurora Cannabis galloped by nearly 20% in the past one week.
  • Aurora Cannabis expects the purchase would help strengthen its market position by focusing on premium products and advancing its recreational pot portfolio.

Aurora Cannabis Inc (TSX: ACB) created a buzz in the Canadian market on Tuesday, March 22, after it announced to acquire TerraFarma Inc, which owns the vertically-integrated cannabis firm, Thrive Cannabis.

According to the agreement, Aurora Cannabis will purchase all the issued and outstanding shares of TerraFarma for C$38 million, payable in cash and Aurora shares. 

In addition, the deal includes two earnout considerations payable in cash or Aurora shares if Thrive Cannabis attains revenue targets within two years of closing the transaction.

With this new development, let’s look at Aurora Cannabis’s financial and stock performance.

Also read: HEXO & Nova Cannabis (NOVC): 2 TSX pot stock firms with recent reports

Aurora Cannabis (TSX: ACB)’s financial performance

The C$994-million market cap company recorded a total cannabis net revenue of C$60.58 million in Q2 2022. It narrowed down its adjusted EBITDA loss to C$9 million in the latest quarter compared to C$11.5 million in Q1 FY2021.

Aurora (TSX: ACB)’s Q2 FY2022 results

Aurora Cannabis’s stock performance

Stocks of Aurora Cannabis galloped by nearly 20% in the past one week and closed at C$4.63 apiece on Tuesday, March 22, with 1.16 million shares switching hands. On Wednesday, the stock was trading at C$4.73 apiece, up by over 2% at 11:58 AM EST.

Bottomline

Aurora Cannabis expects this acquisition to strengthen its position in the Canadian market by focusing on innovative premium products and advancing its recreational pot portfolio.

The Edmonton-headquartered company anticipates that this transaction would provide immediate positive adjusted EBITDA and help it derive adjusted EBITDA profitability in Q1 FY2023.

Also read: Tilray (TLRY) partners with HEXO: 2 TSX pot stocks to closely watch?

Please note, the above content constitutes a very preliminary observation based on the industry, and is of limited scope without any in-depth fundamental valuation or technical analysis. Any interest in stocks or sectors should be thoroughly evaluated taking into consideration the associated risks.

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