Aurora Cannabis Will Be The First Profitable Pot Company, Cowen Says
Channel: RICH TV LIVE
Date: 05/03/2019

Aurora Cannabis Will Be The First Profitable Pot Company, Cowen Says
Cowen & Co. analysts on Tuesday said Aurora Cannabis (ACB) will likely be "among the first Canadian cannabis companies to reach profitability" and named the company as its top pick in the marijuana industry, replacing Canopy Growth (CGC). Aurora Cannabis stock jumped, while most other marijuana stocks put up more modest gains.

Cowen analyst Vivien Azer, the first big Wall Street analyst to cover the cannabis industry, said Aurora Cannabis would likely be able to push a key profitability metric into the black before Canopy Growth and other big rivals. She also called out Aurora's early gains in Canada's recreational market and its immense cultivation capability as advantages.

"While establishing 20% market share has been an early success story in Canadian adult use cannabis, the company is uniquely positioned to drive leadership in both share and profitability," she said.

She started coverage on Aurora Cannabis on Tuesday with an outperform rating and a price target of 14 Canadian dollars. Azer also started coverage on rival Cronos Group (CRON) with a market perform rating. She gave Cronos Group stock a price target of 29 Canadian dollars.

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The First Profitable Pot Company?
Cowen's calls on Aurora and Cronos come as weed shortages strain Canada's recreational market. Analysts and executives say those pot shortages could last through at least this year. Executives have also said that Canada's provinces miscalculated demand, and perhaps listened a bit too much to media reports warning of a marijuana oversupply.

As for its prospects for profitability, Azer said that Aurora Cannabis is on pace to reach positive EBITDA — or earnings before interest, taxes, depreciation and amortization — by June. That would make Aurora among the first licensed pot producers to do so, ahead of Canopy Growth, Aphria (APHA) and others.

Azer said Aurora's containment of expenses not related to pot production, as well as higher gross margins, would help it generate positive EBITDA. Higher gross margins will also help, she said.

Aurora Cannabis Stock Jumps, Other Marijuana Stocks Muted
Aurora Cannabis stock rose 6.4% to 7.68 in the stock market today. Among other marijuana stocks, Canopy Growth edged up 0.4%.

Among other marijuana stocks, Tilray (TLRY) crept 1.1% higher. Aphria was off 1.3%. CannTrust (CTST) lost 2.5%.

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