With Aurora Cannabis (ACB) ready to report first quarter results after the closing bell on Thursday, November 14th, the question arises as to whether or not the company will show signs of strength in the near term, or it’ll report numbers that aren’t inspiring at this season of time in its progress.
In this article we’ll look at why investors and/or shareholders need to temper their expectations for Aurora in the near term, and why the long-term outlook remains strong.
In the short term I don’t see any significant positive catalysts that will drive the share price of the company up. The two major factors that are out of the company’s control, which will be major growth engines for the company in the months and years ahead, are outside of its control; I’m talking about the slow retail licensing process in Canada and the legalization of derivatives in the country.
Even though derivatives have now been legalized in Canada, they won’t be able to be sold until the end of December, meaning it won’t have any significant impact on the performance of Aurora until after the first full calendar quarter of 2020. Even then it’s probable Aurora could take until the second full quarter before it has enough products released to consumers in order to generate revenue that enhances its revenue and earnings performance.
The good news here over the longer term is when its higher margin derivative products are rolled out, it should generate better numbers from recreational pot, while its healthy and growing medical cannabis business continues to grow.
While this is happening, the number of retail outlets in Canada will continue to grow, allowing it to scale further in conjunction with that pace of growth.
I’m expecting the number of retail outlets in Canada to consistently growth, but it remains to be seen how rapidly the pace will pick up. Either way, derivatives and the growing number of retail stores will be positive growth catalysts for Aurora in the months and years ahead.
Also important to consider is most, if not all of this, is already priced into its share price, so even incremental improvements will boost its share price going forward.
The problem with Aurora Cannabis, as with other cannabis companies that enjoyed soaring growth over the last couple of years, is it wildly raised investors’ expectations concerning the company, and