Aurora Cannabis Going to Much Higher Levels
The escalating trade rift with China is driving stock traders to the exits and capping any upside moves.
Regardless of what happens, one area that is surely going to go higher is the legal marijuana segment.
The high potential for the marijuana sector was helped by news that behemoth alcohol maker Constellation Brands, Inc. (NYSE:STZ) would invest another $3.8 billion in shares of Canopy Growth Corp (NYSE:CGC), following an initial $191.0-million investment in 2017.
The equity investment is significant for investors’ perception of marijuana stocks; the price was a whopping 51.2% premium over the prior close price.
The surprise is partly the size of the investment, but what’s really impressive is the premium paid.
The Canopy/Constellation announcement led to a concerted rally in marijuana stocks, including one of my favorites, mid-cap grower Aurora Cannabis Inc (OTCMKTS:ACBFF, TSE:ACB). ACBFF stock jumped 15% on August 15 after the deal was announced.
Even with the recent price increase, Aurora Cannabis stock is still well down from its January 24 high of $12.30, so the risk-to-reward ratio looks intriguing for traders.
The following ACBFF stock chart shows the dismal situation and the possibility of a rally back to the target area.
Chart courtesy of StockCharts.com
Consider that the North American legal marijuana market may reach $47.3 billion by 2027 and you’ll understand why I’m bullish. (Source: “Legal Cannabis Industry Poised For Big Growth, In North America And Around The World,” Forbes, March 1, 2018.)
Canada will see recreational marijuana legalized on October 17, and I’m betting there will be a massive influx of tourists to the country.
Why the Bull Story Is Intact for ACBFF Stock
Aurora Cannabis will benefit from the legalization of pot, and I expect that the company’s eventual two-million-plus-square-foot growing facility will be busy.
The company recently added MedReleaf Corp. (OTCMKTS:MEDFF, TSE:LEAF) to its arsenal and, at full capacity, it will produce over 630,000 pounds of high-grade marijuana.
Aurora Cannabis is not only a North American grower; the company also has a presence in Germany, Denmark, Italy, and Australia.
While the Canadian market will be a good indication of the potential of legal marijuana producers, the key will be the massive untapped market in the United States.
There are currently nine U.S. states and the District of Columbia where marijuana is legal, and more states are looking to join in. The legal recreational marijuana market could jump to $16.0 billion by 2020 in the nine states and DC, according to Euromonitor International. (Source: “Report: Legal marijuana boosts government revenue – a little,” Associated Press, May 8, 2018.)
For top marijuana companies like Aurora Cannabis, the future looks bright. This will likely translate into a much higher price for ACBFF stock on the horizon.
In my view, Aurora Cannabis stock has tremendous potential for price appreciation.
At the stock’s current price, risk-seeking traders might want to allocate some capital for a possible good opportunity.