Down 58% in 2020, Is Aurora Cannabis Now a Buy?

Despite a rough year for the stock market, the green flag has been waving in full force for most North American cannabis stocks. An election night sweep in five U.S. states, coupled with Ontario finally getting its act together on the dispensary licensing front, has rolled out the green carpet for pot stocks…

Well, most pot stocks, anyway.

Aurora Cannabis (NYSE:ACB), the most popular marijuana stock in the world, has been nothing short of a train wreck in 2020. Shares of the company are off 58% year-to-date, yet have nearly tripled over the past five weeks. After a volatile and disappointing 2020 campaign, investors are left to wonder if it’s finally time to buy into Aurora Cannabis.

Before casting my verdict, let’s take a closer look at some of the key reasons Aurora would and wouldn’t be worth buying right now.

Here’s why 2021 could be a much greener year for Aurora Cannabis

Arguably the biggest catalyst for Aurora is its executive turnover. As I’ll describe a bit later, the company’s previous management team put it in a serious bind. Since longtime CEO Terry Booth resigned, Aurora has made tangible financial progress by slashing expenses and reducing its cash burn. This included closing five of its smaller production facilities to take advantage of economies of scale at its larger cultivation farms, as well as halting construction at its two biggest projects to conserve cash.

The company is also likely to benefit from Canadian regulators continuing to work out a number of kinks. For example, Ontario abandoned its lottery system for dispensary licenses at the end of 2019, and went with a more traditional application vetting process. Between October 2019 and September 2020, the number of open retail locations in Canada’s most-populous province catapulted from 24 to 150. More open locations in key provinces means more opportunity for Aurora to get its products in front of consumers.

Additionally, don’t overlook the slow but steady growth of Cannabis 2.0 products. “Cannabis 2.0” describes the alternative consumption options that launched roughly a year ago, such as edibles, vapes, infused beverages, concentrates, and topicals. In the fiscal first quarter, ended Sept. 30, Aurora notes that consumer cannabis extract net revenue jumped by $3.6 million Canadian from the sequential fourth quarter. This likely played a key role in helping to boost its adult-use cannabis adjusted gross margin (before fair-value adjustments) by 3 percentage points to 38%.

A final positive catalyst to consider is…

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