Cowen: Aurora Is ‘Top Pick In Cannabis’

Several Wall Street analysts have come out bullish on cannabis stocks in recent months, but one analyst said Monday that Aurora Cannabis Inc (NYSE:ACB) is the clear top choice in the sector. 

The Analyst

Cowen analyst Vivien Azer reiterated an Outperform rating on Aurora with a CA$15 ($11.38) price target.

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The Thesis

While a number of Canadian cannabis producers are positioned to take advantage of a global boom in demand, Azer said Aurora is the only one of the top growers that is also on track to become profitable in the near-term. (See her track record here.) 

Aurora is second to Canopy Growth Corp (NYSE:CGC) in terms of size, but the analyst said Canopy’s record CA$98-million loss in the first quarter was telling.

“While a number of peers have communicated a longer pathway to profitability, ACB has the opportunity to be among the few Canadian LPs to reach positive EBITDA as soon as 4Q19 (ending June 30), which is a particular standout as category leader WEED posted an expanded EBITDA loss in calendar 1Q19 (at -C$98 mm)." 

Aurora's profitability and margins should get an additional boost from a mix shift toward extracts and novel form factors, Azer said. 

Cowen first came out bullish on Aurora in March, telling investors the stock deserves to trade at a premium valuation due to its unique path to profitability.

In the long-term, Azer estimates the Candian adult-use cannabis market will be worth about CA$12 billion by 2025 and the international medicinal cannabis market will be worth $31 billion by 2024.

In the near-term, Azer said investors should expect Aurora to focus on vapor, adding that a major strategic partner could be announced in the next couple of quarters.

Price Action

Aurora shares were up 2.47% at $7.48 at the time of publication Monday. 

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Photo courtesy of Aurora Cannabis.