Aurora Cannabis Needs Industry Help
The Canadian cannabis industry forecasts cutting cultivation capacity by up to 800,000 kg, but the top 10 producers are still expanding existing production.
Aurora Cannabis still expects to more than double production from FQ1 levels while the top 10 producers are still on path to swamp legal demand.
Revenue estimates are getting to levels where the company would need to see further material price cuts to not exceed targets.
The stock price target is $2 without further Canadian cannabis industry rationalization.
The major problems facing Aurora Cannabis (ACB) is that too much of the Canadian cannabis industry hasn't followed their moves with cutting cultivation capacity for 2020 and beyond. A few companies had already cut production targets for various reasons, but the bigger players in the industry still appear full speed ahead with expansion while the industry is already over supplied. For this reason, my investment thesis thinks Aurora Cannabis made smart decisions to cut production in half, but the stock isn't a buy even with the dip towards $2. A few altered production plans from top competitors could quickly change this view.
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