Shares of marijuana giant Aurora Cannabis (TSX:ACB)(NYSE:ACB) continues to remain volatile this month. ACB stock gained 153% between November 4 and November 9. However, it has since declined 38% to close trading at $9.18 yesterday.
Pot stocks, including Aurora, gained momentum on the back of a Joe Biden win. The president-elect is likely to decriminalize or even legalize marijuana in the U.S. in the near future. This will increase the total addressable market for Canadian cannabis companies that are grappling with lower-than-expected sales.
However, Aurora continues to be impacted by a slew of structural issues that include a bloated balance sheet, negative profit margins, and high inventory levels. It continues to raise equity capital in order to boost liquidity, but this has also diluted shareholder wealth significantly.
In the September quarter, Aurora reported a 10% year-over-year decline in sales, while its net loss stood at $107 million. It burned $93 million in cash in the fiscal first quarter of 2021 and announced plans to raise US$150 million by selling 20 million new shares.
Aurora stock is down 71% in 2020
Aurora stock continues to disappoint investors and is down 71% year to date. Though the revenue decline in Q1 can be attributed to its divesture of non-core assets, the company’s net cannabis sales were down 4% year over year. This indicates Aurora Cannabis is losing market share to other players, which will make investors wary.
Aurora aims to generate a positive EBITDA in Q2, but even if it achieves this goal, the company will rely on cost optimization rather than top-line growth. Further, ACB also needs to deliver a positive free cash flow in fiscal 2021 or it will continue to issue equity shares impacting its stock price negatively.
This multi-state operator in the U.S. is a top cannabis bet