Aurora Cannabis (TSX:ACB) stock high despite Q4 revenue dip. Buy call?

Highlights

  • Aurora Cannabis announced results for Q4 2021 in which it achieved total net revenue of C$ 54.8 million.
  • The Aurora Cannabis stock could have surged due to its strong balance sheet. It had cash worth C$ 440.9 million as of June 30.
  • In the last 12 months, the ACB stock had a relative growth of 19 per cent.

Stocks of Aurora Cannabis (TSX:ACB) jumped seven per cent on Monday, September 27, and closed at C$ 8.08 per share. The surge in share prices came despite a mild fall in revenues in the fourth quarter of fiscal 2021.

Around 1.5 million ACB shares traded hands on the Toronto Stock Exchange on September 27.

The cannabis producer announced results for Q4 2021 in which it achieved total net revenue of C$ 54.8 million, reflecting a decrease of 19 per cent year-over-year (YoY). The medical cannabis revenue surged by nine per cent YoY to C$ 35 million in Q4 2021 and the consumer cannabis revenue declined by 45 per cent YoY to C$ 19.5 million in the same period.

Meanwhile, Aurora Cannabis narrowed the adjusted EBITDA loss to C$ 19.3 million in Q4 2021 compared to the adjusted EBITDA loss of C$ 33.3 million in Q4 2020. The company was able to narrow down on this loss as the selling, general and administrative expenses declined from C$ 57.97 million in Q4 2020 to C$ 46.9 million in Q4 2021. 

Why did Aurora Cannabis (TSX:ACB) surge?

A September 27 surge in cannabis stocks could be due to speculations that the House of Representatives in the United State of America could vote to legalize marijuana at the federal level.

As part of the 2022 National Defense Authorization Act last week, the House of Representatives had passed the SAFE Banking Act and this could be another factor why investors are focusing on marijuana stocks, including the ACB stock.

Also Read: Will Tilray (TLRY) become the next big cannabis stock in North America?

The Secure and Fair Enforcement (SAFE) Banking Act allows state-licensed cannabis businesses to engage freely with financial institutions and banks. According to reports, the House Judiciary is expected to make up several pieces of legislation and the Marijuana Opportunity Reinvestment and Expungement (MORE) Act could be one of them and it aims to decriminalize marijuana federally.

Aurora Cannabis stock surged in Canada despite revenue miss

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Over the last few years, cannabis legalization has increased in North America and 18 states and Washington, D.C., have legalized recreational marijuana. The US could legalize cannabis fully as Canada did in October 2018.

Another reason why the Aurora Cannabis stock could have surged is due to its strong balance sheet. Maintaining a strong balance sheet in the fourth quarter of fiscal 2021, Aurora had cash worth C$ 440.9 million as of June 30.

Bottom line

In the last 12 months, the ACB stock had a relative growth of 19 per cent and it outperformed the Toronto Stock Exchange 300 Composite Index that declined by six per cent in the same period.

Also Read: 5 best TSX Cannabis stocks under C$25 to buy

Currently, the stock is available at a lower price as it is 66.47 per cent lower than its 52-week high of C$ 24.1 per share posted on February 10.

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