The investors in Aurora Cannabis Inc.'s (TSE:ACB) will be rubbing their hands together with glee today, after the share price leapt 85% to CA$10.78 in the week following its first-quarter results. The results don't look great, especially considering that statutory losses grew 111% toCA$0.92 per share. Revenues of CA$68m did beat expectations by 6.4%, but it looks like a bit of a cold comfort. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
Taking into account the latest results, the consensus forecast from Aurora Cannabis' 15 analysts is for revenues of CA$309.4m in 2021, which would reflect a meaningful 13% improvement in sales compared to the last 12 months. Losses are predicted to fall substantially, shrinking 97% to CA$1.17. Before this earnings announcement, the analysts had been modelling revenues of CA$313.9m and losses of CA$1.15 per share in 2021.
The consensus price target rose 6.9% to CA$12.20, with the analysts increasing their valuations as the business executes in line with forecasts. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values Aurora Cannabis at CA$33.00 per share, while the most bearish prices it at CA$3.60. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely different views on what kind of performance this business can generate. With this in mind, we wouldn't rely too heavily the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. We would highlight that Aurora Cannabis' revenue growth is expected to slow, with forecast 13% increase next year well below the historical 66%p.a. growth over the last three years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 31% next year. Factoring in the forecast slowdown in growth, it seems obvious that Aurora Cannabis is also expected to grow slower than other industry participants.
The Bottom Line
The most obvious conclusion is that the analysts made no changes to their forecasts for a loss next year. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will perform worse than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.
With that in mind, we wouldn't be too quick to come to a conclusion on Aurora Cannabis. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Aurora Cannabis going out to 2025, and you can see them free on our platform here..
That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 4 warning signs with Aurora Cannabis (at least 1 which is a bit concerning) , and understanding them should be part of your investment process.
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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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