Categories Cannabis, Earnings

Earnings preview: Aurora Cannabis (ACB) likely to post a narrower loss in Q2

Aurora Cannabis Inc. (NYSE: ACB) is slated to report its second-quarter 2020 on Thursday before the market opens. The top line will be benefited by the increasing market for medical marijuana products in Canada and worldwide. Despite the bottom line likely to be hurt by asset impairment charges and expenses, the rate of impact will be much lesser than last year.

The management believes that the long-term opportunity remains very compelling, despite a slower-than-anticipated rate of industry growth in the near-term. Also, the third quarter is expected to be impacted by the general industry headwinds and will likely show little to no growth relative to Q2 cannabis revenue.

Photo Courtesy: Rex Medlen from Pixabay

The company continues to be impacted by macroeconomic concerns in the near term due to its weak ability to finance operations. However, the wide variety of cannabis products under its hood could turn the table away. This along with more stores opening and existing stores could leverage each retail outlet stronger-than before.

The consumer market revenue is likely to decline due to changes in customer preferences and challenges in retail and provincial distributors. The wholesale market continues to represent an opportunity for Aurora and will be opportunistic with a greater market share is possible in the coming quarters.

Analysts expect the company to report a loss of CAD0.06 per share on revenue of CAD65.49 million for the second quarter. In comparison, during the previous year quarter, Aurora Cannabis posted a loss of CAD0.25 per share on revenue of CAD54.18 million. The company has surprised investors by beating analysts’ expectations twice in the past four quarters.

For the first quarter, Aurora Cannabis reported a 90% dip in earnings due to higher costs and expenses. However, the top line soared by 154% backed by higher cannabis production and sales. Aurora produced 41,436 kilograms and sold 12,463 kilograms of cannabis during the quarter. The average net selling price of cannabis increased by $0.36 per gram over the prior quarter to $5.68 in Q1 2020.

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For Q2, the company expects cannabis revenue to be in the $62-66 million range. The forecast reflects consistent sequential medical revenues, a decline in international revenue due to short-term German supply interruptions, and much lower bulk sales. Sales and marketing expenses are expected to be $28-32 million and general and administrative expenses are anticipated to be $70-75 million for the second quarter.

The stock opened flat but changed course to the green territory on Tuesday. The shares have fallen over 78% in the past year and over 56% in the past three months.

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