Shares of cannabis retailer Aurora Cannabis (ACB) (TSE: ACB) are trending upwards today after it acquired a majority stake in Bevo Agtech, which provides propagated vegetables and ornamental plants. The company has a distribution network in Canada and the U.S. In sync with this transaction, Bevo is acquiring ACB’s Aurora Sky unit in Alberta. Over the year ended June, Bevo generated $39 million in revenue and adjusted EBITDA of $9 million. This can help ACB reach profitability.
The CEO of Aurora Cannabis, Miguel Martin, commented, “We expect this investment and collaboration between industry leaders will drive significant shareholder value and synergies for both parties. We are also excited about Bevo repurposing Aurora Sky and the potential to expand the scale and scope of their business and saving significant costs previously expected in connection with the wind-down and sale of the facility.”
Importantly, with this move, Aurora gets a growing and profitable business that can drive shareholder value in the long term. In turn, Bevo expands its addressable market with entry into Alberta. Further, this also boosts Bevo’s production capacity, shipping range, and access to regional demand.
Aurora paid a consideration of $45 million for the transaction with further financial milestone payments of $12 million to selling investors of Bevo. In turn, Aurora could receive milestone payments of up to $25 million from Bevo.
Is Aurora Cannabis Stock a Buy, Sell, or Hold?
Turning to Wall Street, analysts see another 31.5% potential upside in the stock based on a Moderate Buy consensus rating and an average price target of $2.11. There have been one Buy and two Holds assigned in the past three months.
Concurrently, hedge funds, too, have increased their ACB holdings by 30,100 shares in the last quarter. Particularly, Joel Greenblatt’s Gotham Asset Management has upped its Aurora holdings by 153.9% recently.
Conclusion: ACB is Focused on Achieving Profitability
Despite yesterday’s price gain, Aurora shares are down over 70% so far this year and aren’t too far from their 52-week low of $1.21. Additionally, a short interest of nearly 10% means the stock could drop further. In such a scenario, its Bevo move points to a focus on achieving profitability in the coming periods.
