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Jelena Martinovic

Aurora Shares Plunge On Q4 Earnings Report But This Analyst Sees Better Days Ahead, Here's Why

Aurora Cannabis Inc. (NASDAQ:ACB) reported its financial and operational results for the fourth quarter and fiscal year ending June 30, 2022, on Tuesday, revealing a net revenue of $50.2 million compared to the previous quarter's total cannabis net revenue of $50.4 million.

Medical cannabis net revenue totaled $36.6 million, representing a 4% increase from the prior year period and accounting for 72.8% of Aurora's quarterly consolidated net revenue.

The Canadian cannabis giant attributed the increase in revenue to the international medical business, which was up 35.4% compared to last year, as Aurora continues to strengthen its presence in key emerging international medical cannabis markets.

Cantor Fitzgerald's analyst Pablo Zuanic said in his recent note that Aurora is "arguably among the best-positioned companies" to seize the opportunity in Germany as it paves the way toward legalizing marijuana use.

The analyst had said earlier that in a scenario where imports would be allowed, recreational sales could kick off in 2024 in Germany.

"There could be a scenario of an earlier start to rec sales (without imports) if the current domestic producers are allowed to begin supplying the rec market, as per a scenario outlined by Demecan," which is the only domestic production licensee in addition to Aurora Cannabis and Tilray Brands Inc. (NASDAQ:TLRY).

The Analyst

Zuanic retained an Overweight rating on the company's stock, while reducing his price target to CA$3.80 ($3) from CA$4.05 ($3.12) on slightly reduced estimates. 

The Thesis

The company reported a negative adjusted EBITDA of $12.9 million for the period versus $11.4 million in the prior quarter and $21.8 million in the prior year period.

Despite a sequential increase in adjusted EBITDA loss, Zuanic said that Aurora is expected to reach positive EBITDA in the quarters to come.

"While we do not expect significant changes in top-line trends in the Sep qtr, the company is on track to deliver positive EBITDA as it exits the Dec qtr," the analyst said.

In addition to anticipating steady sales in Aurora's first quarter of the new fiscal year, Zuanic also expects an "exciting year on the international front," with Germany potentially kicking off recreational sales and France launching commercial sales of medical marijuana.

Price Action

Aurora's stock traded 10.7071% lower at $.2501 per share at the time of writing on Wednesday morning.

Photo: Courtesy of Stefan Balaz by Shutterstock and Peter Pike by Pixabay

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