Aurora’s downhill battle
Since March 19th when the cannabis sector reached a peak (Based on the Horizons Medical Marijuana life sciences ETF) for 2019, Aurora Cannabis has been in a steady downtrend. Many long term shareholders are becoming impatient and frustrated with the company, complaining that their capital gains have diminished since March as the stock continues to downtrend. In my opinion, Aurora Cannabis is…
performing like most large caps in the sector and is downtrending not because of poor company performance or dilution but for the simple fact that the entire sector has seen a very harsh spring and summer. Now we can have this debate all day long about company-specific performance versus the index but we need to face a simple fact that the entire sector has carried a highly speculative nature and valuations have seen extreme highs and lows. This is because it’s very hard to put an accurate valuation on a partnership, key hire, acquisition or similar news that is positive for many of these companies.
Since March 19th Aurora Cannabis has announced a lot of positive news but despite everything, the stock could not escape the selloff. Many of us investors are wondering what is next for the sector, how low are we going and what could drive a turnaround in share prices, especially for Aurora Cannabis?
Will M&A Activity heat up the market?
Last week we saw two strategic investments within the cannabis sector starting with Aliment Couche-tard buying up 20% of fire and flower. Then we saw Auxly receive 123 million dollars from big tobacco giant imperial brands. Some say that when M&A activity starts to heat up, it is signaling that the market is coming close to a bottom, making valuations attractive enough for big companies to invest millions of dollars into the sector. We saw the start of a massive bull market back in 2018 when constellation brands invested 4 billion dollars in canopy growth that fuelled speculation across the entire sector. Will this be the catalyst this time as well? So far the sector remains unfazed by the recent news and continues to selloff despite the positive sentiment on wall street, lower interest rates, and markets hovering around all-time highs.
What will it take for a turnaround to happen?
Many investors get caught up in the volatility and assume that since a stock hit a certain point in the past that it will inevitably hit that point again in the future, which is sometimes a bad way to look at things. I don’t…
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