Aurora Cannabis stock rally looking overdone after lackluster earnings: Jefferies

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The massive run-up in shares of Canada’s Aurora Cannabis Inc. amid hopes the election of Joe Biden as president will advance cannabis reform is looking overdone after the company’s quarterly earnings released Monday were underwhelming, Jefferies analyst Owen Bennett wrote in a note. “Aurora’s share price as of the time of writing is running up 135% since end of day on Wednesday,” said Bennett. “Some may look at this performance, which also included gains of over 20% at one point intra-day today, and assume a much improved fundamental outlook and strong quarterly numbers. This is not the case, with Q1, for us, not really standing out as anything special or overly encouraging.” Aurora’s revenue was ahead of expectations, but “we would argue in the details there remains reason for caution,” said the analyst. Aurora’s Daily Special discount brand has been a big part of its sales, but the company is now aiming to pivot more to premium flower brands in a re-set of its top line. “For this re-set to be deemed a success we would need to see any lost sales from Daily Special being more than offset (in a growing market) by sales elsewhere. This is not the case,” said Bennett. In flower, Daily Special sales declined by C$5mn ($3.9 million) while the rest of its flower business was roughly flat, while in extracts, ex CBD in the US, it only added sales of $2.2 million, “not overly impressive given the extent of Aurora’s 2.0 portfolio,” he said. Jefferies rates Aurora as hold with a C$6.90 price target. Aurora shares were down 9% premarket and are down 57% in the year to date, while the Cannabis ETF has fallen 9.6% and the S&P 500 has gained 9.9%.
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