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Since Canada enacted national legislation in October 2018 to broadly legalize marijuana and cannabis derivatives for general use, and the number of US states with similar laws has continued to climb, North America has become the scene of a new cannabis industry. But marijuana is more than just a social fad or a suddenly trendy business opportunity. For major investors, it’s also big money, and from the investors’ perspective, legalization has simply removed an element of risk.
The risk, remains, however, as in any endeavor into new markets. In recent months, the major players of the cannabis industry have come under scrutiny from some of Wall Street’s best analysts. However, one stock that has been witnessing positive analyst sentiment and handsomely paid its investors is Aurora Cannabis (ACB).
Based in the Canadian province of Alberta, Aurora is a major player in the medical marijuana supply chain. The company produces over 700,000 kilos of cannabis and cannabis derivatives per year. At the same time, this is a company in a fast-growing business whose stock is currently available for less than 10 US dollars per share, and that fact is starting to turn some heads. The same trio of 5-star analysts quoted above, have also weighed in on Aurora.
GMP analyst Martin Landry takes a bullish view here. He is especially impressed by the company’s expanding international position, saying, “Aurora announced recently that it has started to ship cannabis oils to pharmacies in Germany. With two facilities EU Good Manufacturing Practice certified (Mountain and Markham) and a combined production capacity of 12 tonnes, ACB is well positioned to continue to benefit from high international selling prices. Recently, Aurora also expanded into Portugal with the acquisition of 51% in Gaia Pharm Lda, a license applicant in Portugal.” Landry gives ACB a $15 target, suggesting an upside of 66%.
Cowen’s Vivien Azer, an analyst who prefers to look at macro features of the markets, focuses on Aurora’s naming a new strategic advisor. She says the move bodes well for the company to build partnerships for expansion: “We look for ACB to be more methodical and patient in partnership selection than its Canadian peers.” As with Canopy, she did not set a price target but reiterated her bullish stance on ACB shares.
The third analyst to give a bullish review of Aurora is Jefferies analyst Owen Bennett: “To be a global leader then you need to dominate in both medical and rec […] Aurora is already positioned well in rec, with a strong approach to rec branding, encouraging early consumer reviews, and investment in extensive derivative infrastructure, a new facility named Aurora Polaris to be completed late 2019. Given outside expertise or partnerships are arguably required to succeed in derivative verticals such as beverages, vapour and edibles, there may have been question marks as to whether they could create maximum value from the derivative investment. The involvement of Peltz should support in strategic decisions around which of these verticals to enter and help with possible relationships with FMCG partners.”
All in all, most analysts on Wall Streets are out rooting for this cannabis stock to be a winning stock pick, as TipRanks analytics showcase ACB as a Strong Buy. Based on 8 analysts polled in the last 3 months, 6 rate a Buy on Aurora stock while 2 maintain a Hold.
To read more on the nitty gritty of what’s going on in the rising cannabis industry, click here.
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