Aurora (ACB) is a Canadian vertically integrated Cannabis company. Although under regular scrutiny from investors and regulators, the company still remains a market leader in the ever-evolving Cannabis space. I am bullish on the stock.
C$10 Million Dollar Shipment to Israel
Aurora reportedly completed the largest-ever Cannabis shipment to Israel this week, with revenue to be recognized in the second quarter of 2022. This deal expands on Aurora’s footprint and global market share, adding sustainability to topline earnings by quenching seasonal sales volatility.
According to the company’s CEO, Miguel Martin, “It’s an exciting time for the global cannabis industry, as we’re seeing growing acceptance and thoughtful regulation of both medical and adult-use cannabis across Europe and in key markets like Israel.”
Martin added the following when commenting on Aurora’s corporate strategy, “With strong local relationships, as well as support from our patients and consumers, we look forward to continuing to expand our international business to complement our total cannabis portfolio.”
How the Market Will Play into This
Aurora can’t be considered as a cyclical play at the moment because the Cannabis industry is still in its early stages. That’s because legislation still divided and demand is still difficult to predict.
I think widespread legalization of Cannabis for recreational use is inevitable, considering the overwhelming support for it among citizens in democratic nations. Furthermore, the commodity’s demand in medicinal and non-medicinal form is likely to sustain its exponential growth curve, as product development and marketing remain in their early stages.
Based on this narrative, I’d conclude that Aurora stock won’t be part of any asset class or intra-asset class rotation trades, and it will rather be a case of investors looking at company-specific events to justify their investment decisions.
The broader market could sustain its growth this year, with GDP growth estimated at 3.8%, which is above the upper bounds of normal growth. In addition, companies’ earnings are still largely beating estimates, leading to stocks outperforming other asset classes.
Aurora stock remains undervalued after underperforming last year, after an annual loss of more than 40%. The stock’s price is trading at a price-sales discount worth 14.27%, relative to the sector. Aurora also saved up additional working capital over the past year, with a 164.42% increase in the balance sheet line item; this could result in excessive investments this year, with synergies being the likely outcome.
Wall Street’s Take
Turning to Wall Street, Aurora has a Moderate Sell consensus rating, based on 0 Buys, 2 Holds, and 2 Sells assigned in the past eleven months. The average Aurora price target of $6.13 implies 11.3% upside potential.
Aurora is showing immense progress after delivering its largest ever shipment to Israel, in an attempt to increase the company’s global footprint. The stock is also significantly undervalued after a disappointing drawdown in 2021.
Disclosure: At the time of publication, Steve Gray Booyens did not have a position in any of the securities mentioned in this article.
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