IB Net Payout Yields Model

Aurora Cannabis: Up In Smoke?

Aurora Cannabis is now down 55% from the highs around $12.50.
The market cap remains a large $5 billion despite the company only reporting pro-forma quarterly revenues of $35.6 million.
The stock is oversold and back to strong support at $5.40.
Any further weakness in the face of surging demand and reports of beverage and tobacco industry interest would a huge negative signal.
The best time to get into a market like the previously hot cannabis sector is after the related stocks are beaten down. Such is the case for Aurora Cannabis (ACB) now down over 55% from the double top at $12.50. As more and more areas legalize medical or recreational cannabis use, the market opportunity will only grow exponentially. The market dynamics of the cannabis sector are complex and the stock valuations are still stretched so the best way to derive the right valuation for Aurora Cannabis is the strong support at the current price.
Read the full article on Seeking Alpha. 

12/6 4PM est Update
The stock closed trading on 12/6 at $5.28. The stock is below the recent support around $5.40. The easy trade is to wait for a rally back above that level or to let the stock trade lower. 
The market doesn't like the current value and clearly the prospects for a large beverage/tobacco company to make a large investment or buyout aren't high.

12/7 4PM est Update
The stock closed the week back above $5.40 due to the Cronos Group (CRON) deal. The buy point was as the stock gave up some initial gains, but held above the key support level. Still not positive on a big investment as the valuation is too stretched to guarantee a suitor. Not to mention, any dilution to the 45% level like the Cronos deal limits the upside potential of the stock.

Regardless, investors now have another reference point on the next sell off.

Disclosure: No position mentioned. Please review the disclaimer page for more details. 


Erik Maurer said…
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