Aurora Posts CAD$53.7 Million Gross Profit, Share Price Falls

Aurora Posts CAD$53.7 Million Gross Profit, Share Price Falls
Aurora Posts CAD$53.7 Million Gross Profit, Share Price Falls

Aurora Cannabis (US:ACB / CAN:ACB) delivered to its shareholders on profit. The Company announced a gross profit of CAD$53.7 million in its Q1 fiscal 2020 results.

However, Aurora disappointed the market on its revenues. Revenues dropped from CAD$94.6 million to CAD$70.8 million on reduced provincial purchases last quarter. That said, Aurora still posted some impressive numbers along with the large gross profit.
 
  • Gross margins of 58%
  • Cannabis cultivation cash costs of CAD$0.85 per gram

Aurora is trading down 4.7% (at the moment) to $3.13, in a market reaction that makes no sense. The fall in revenues, due to a temporary reduction in provincial buying, had already been telegraphed to the market by several other Canadian cultivators. No surprise here.

It’s clear that the reduction in provincial buying will be a very short-term factor.

New cannabis stores in Canada are opening now on practically a daily basis. Monthly cannabis sales are consistently growing at a double-digit rate. Cannabis 2.0 is guaranteed to provide a strong, additional surge in cannabis demand.

The reduction in cultivation cash costs (and strong gross margins) sets up Aurora for much stronger results going forward.

The big “surprise” in Aurora’s November 14th quarterly results was the gross profit. Still, the share price has gone down.

We’ve heard (endlessly) from the chorus of knuckle-draggers in the mainstream media that the relentless decline in cannabis stock valuations over the past year has been because of the lack of profitability.

Now, however, that excuse no longer exists.

We’ve seen a string of Canadian companies posting profitable results. Aurora, MediPharm Labs (CAN:LABS / US:MEDIF), Aleafia Health (CAN:ALEF / US:ALEAF), and Delta 9 Cannabis (CAN:DN / US:VRNDF) have all posted profitable quarterly results just in the last week.

A few weeks earlier, major LP Aphria Inc (US:APHA / CAN:APHA) reported its second consecutive profitable quarter.

Several of these companies are reporting consecutive profitable quarters. Yet none of these companies are trading higher on those results.

Aleafia actually jumped nearly 30% on news that it’s first outdoor harvest produced cannabis at CAD$0.08 per gram. An industry game-changer. Then the market clawed back the entire gain after Aleafia also reported a profitable quarter the next day.

A responsible free press would already be asking an obvious question. Why are we seeing the share prices of high-growth cannabis companies continuing to fall, even as these companies become profitable?



Instead, we have a vacuous propaganda machine.

Clueless mainstream mouthpieces continue to bash cannabis stocks (or the cannabis industry). They cherry-pick the most negative numbers they can find and completely ignore anything/everything positive.

This comes in the context of the S&P 500 setting yet another bubble-high. If the broader markets were trending lower, then, perhaps, a rational explanation could be attached to falling cannabis stock valuations.

Instead, we are seeing well-run companies in an emerging, high-growth sector plummeting lower as they transition to profitability. It’s not impossible, but it’s also not legitimate.
 
What is REALLY Happening in Cannabis? Part 1: Blood in the Streets

… Today, computer programs generate prices. Roughly 75% of all trading volume today is algorithm-generated trading: price-fixing computer programs interacting with each other.

“Sentiment” is generated from humans trading with other humans. Such trading is now steamrolled by (so-called) “HFT trading”. And computer programs have no sentiment.

These computer programs are also inherently manipulative.
 
Fast money: the battle against the high frequency traders

HFT Stock Manipulation Caught On Tape

"It's Not A Market, It's An HFT 'Crop Circle' Crime Scene" - Further Evidence Of Quote Stuffing Manipulation By HFT

“Quote-stuffing” is merely one way of manipulating stocks prices using computer trading algorithms. It’s a mechanical, brute-force means of (illegally) manipulating markets.

The capacity of automated trading algorithms to manipulate stock prices is only limited by the imagination of the person writing the algorithm. And unlike (brute-force) quote-stuffing, the nefarious programming written inside these price-fixing algorithms is virtually invisible.

… Cannabis stocks have been going down throughout 2019 for only one reason: because the bankers’ trading algorithms are pushing them down.

In legitimate markets, becoming profitable does not cause share prices to drop like a rock.

Canada’s leading cannabis retailer, National Access Cannabis (CAN:META / US:NACNF) generated over CAD$60 million in revenues in Year 1 of cannabis legalization. It is already generating positive EBITDA.

Now Cannabis 2.0 is here: 3 million new consumers (a 50% increase in consumers) and a plethora of new cannabis derivative products are about to go on sale.

National Access has lost roughly one-third of its market cap in the last week and is currently trading at little more than half its revenues.

That’s not “improbable”. It’s totally perverse.

Cannabis stocks go down when companies report bad news. They go down when companies report good news.

The fix is in.

But it can’t last. As these companies report steadily increasing profitability, value investors (yes, they still exist) will flood into the cannabis space.

Warren Buffett currently has $128 BILLION of Berkshire Hathaway capital sitting on the sidelines. It’s three times as idle cash as Buffett has ever had, at any time in his 50-year investing career.

That’s because Warren Buffett can’t spot any value in the U.S. markets. But Buffett (and Berkshire Hathaway) is an ultra-conservative investor. He is only considering the bubble-stocks of the S&P 500 (and NASDAQ). He’s not even looking at the cannabis industry.

Other investors have a far less restrictive investment outlook. Should they buy mature, S&P bubble-stocks, trading at more than 20:1 forward 12-month earnings?

Or, should they buy emerging high-growth cannabis stocks that are trading at pennies on the dollar?

It’s an easy question to answer. And as more cannabis companies become profitable and more mainstream investors notice these companies, more and more investors will reach the same conclusion.