Aurora Cannabis adds 16% after Q1 results as Cantor cites ex-US prospects (update)

Canadian Licensed Producer Aurora Cannabis (NASDAQ:ACB) jumped ~16% to lead a group of cannabis stocks on Friday after announcing its Q1 financials for fiscal 2023, while Cantor Fitzgerald underscored its ex-US prospects.

The rivals of Aurora (ACB), GrowGeneration (GRWG), Canopy Growth (CGC), SNDL (SNDL), and Tilray Brands (TLRY) are also among notable gainers in the cannabis space as the market heads to the close.

Cantor analyst Pablo Zuanic reiterated his Overweight recommendation and $3 per share target on Aurora (ACB), arguing that the company is positioned as one of the best in the ex-US market for cannabis.

Meanwhile, Aurora (ACB) Chief Executive Miguel Martin said that the company is quickly reaching its goal to achieve adj. EBITDA profitability by the year-end.

“We are quickly approaching our positive Adjusted EBITDA goal and are on track to achieve up to $170 million in annualized cost savings by December 31, 2022, having already realized $140 million through Q1 2023,” Martin remarked. (All financials are in Canadian dollars).

However, Aurora (ACB) reported a ~2% YoY decline in revenue for Q1 FY23 as total cannabis net revenue fell ~24% YoY to $46.0M driven by ~23% YoY decline in medical cannabis net revenue that stood at $31.6M amid a strategic shift to target higher margin insured patients.

Meanwhile, consumer cannabis net revenue fell ~28% YoY to $13.7M, partly due to a decision to focus on premium, higher-margin brands instead of discounted, low-margin brands sold in high volumes.

However, the company’s overall adjusted gross margin fell to 50% from 54% in the prior year quarter and the net loss more than quadrupled to $51.9M from $11.0M in Q1 FY22 due mainly to a noncash gain in the previous year period.

In Q1 FY23, Aurora (ACB) resolved certain supply chain and distribution issues that impacted the company’s European medical and Canadian consumer business units.

As a result, management expects cannabis revenue and adj. gross margin for the current quarter to align with the results in Q4 FY22 and Q1 FY23, respectively.

Read: Seeking Alpha contributor Stone Fox Capital thinks that fundamentals do not support the company’s target to reach adjusted EBITDA profitability by December 31.