Why Aurora Cannabis Inc Remains a Top Marijuana Stock
When it comes to finding multibagger opportunities—investments that can provide a return of 100% or more—the cannabis industry is a good place to start. In recent years, quite a few marijuana stocks, such as Aurora Cannabis Inc (NYSE:ACB), have delivered triple-digit returns to investors.
And while past performance is no guarantee of future results, Aurora Cannabis stock is well positioned to continue its rally.
Aurora Cannabis is a cannabis producer with 14 production facilities. While the company is headquartered in Edmonton, Alberta, Canada, its shares trade on the New York Stock Exchange. Therefore, it’s very easy for U.S. investors to get a piece of the action.
And like I said, Aurora Cannabis stock is a multibagger. Over the past two years, ACB stock has surged a staggering 374%.
Aurora Cannabis Inc Stock Chart
Chart courtesy of StockCharts.com
Aurora Cannabis Inc Runs a Fast-Growing Business
Today, the top reason to consider ACB stock is the growth potential of its business. Right now, Aurora’s 14 production facilities (based on Health Canada-approved planted rooms) have an annualized production rate of around 120,000 kilograms (264,555 pounds). (Source: “Investor Presentation April 2019,” Aurora Cannabis Inc, last accessed April 26, 2019.)
By mid-2020, the company’s annualized production rate is expected to grow by more than fivefold to over 625,000 kilograms (1,377,890 pounds).
As a matter of fact, Aurora’s business is already firing on all cylinders. In the December quarter (the second quarter of ACB’s fiscal-year 2019), the company produced 7,822 kilograms (17,244 pounds) of cannabis, representing a 550% increase year-over-year. (Source: “Aurora Cannabis Announces Financial Results for the Second Quarter of Fiscal 2019,” Cision, February 11, 2019.)
During the same quarter, Aurora Cannabis sold 6,999 kilograms (15,430 pounds) of cannabis, up 502% from the year-ago period.
Unsurprisingly, selling a lot more pot allowed the company to make a lot more money. In the December quarter, Aurora Cannabis Inc generated CA$51.2 million in net revenue, marking a 363% increase year-over-year.
What’s more interesting is that, during that quarter, Aurora Cannabis achieved an average net selling price of dried cannabis of CA$6.23 per gram and an average net selling price of cannabis extracts of CA$10.00 per gram. And yet, its cash cost of sales per gram produced was only CA$1.92 for the quarter.
That’s a very lucrative business.
And things are about to get even better. Once the company’s “Aurora Sky” facility operates at full capacity, it will improve operating efficiency to the point that Aurora’s cash cost to produce cannabis will be even lower. Management expects that “the sustainable long-term operating cost at its Sky Class facilities will be well below $1 per gram.” (Source: Ibid.)
A Leading Player in the Global Cannabis Industry
Of course, Aurora Cannabis Inc is not the only player in the global cannabis industry. In particular, there are several fast-growing U.S.-based operators in the business, and their share prices have also gained momentum lately.
But Aurora doesn’t seem to be too concerned about competition down South.
“In terms of scale, in terms of production, in terms of revenues, in terms of innovation, we are leagues ahead of anybody currently in the U.S.,” said Chief Corporate Officer Cam Battley. (Source: “‘We are leagues ahead of anybody currently in the U.S.’: Aurora Cannabis CCO,” Yahoo! Finance, April 26, 2019.)
“There are some great companies doing some amazing things in the U.S., but once constraints are lifted, and the NYSE allows both U.S. companies to list there, and allows Canadian companies to operate in the U.S. and touch the plant, we are going to be there in a very, very big way.”
Put it all together and you’ll see that this $9.00 pot stock is something special. The low-cost producer already has a strong presence in the cannabis industry and it has the ability to further expand that presence and solidify its market position.
Given investors’ enthusiasm toward pot stocks, it’s not impossible for Aurora Cannabis Inc shares to make another triple-digit move to the upside.