How long would it take for a stock to deliver a 50% gain for you to consider it a winner? Some might say five years. Others would like a three-year big return. But what would you think about a stock that has soared over 50% in just two months and is up more than 730% in less than five years?
Aurora Cannabis (NYSE:ACB) is such a stock. Most investors would readily conclude that the Canadian marijuana grower has been a big winner. But you’ve no doubt heard it plenty of times: Past performance isn’t necessarily indicative of future results. Is Aurora Cannabis a stock to buy now?
All the reasons to hate Aurora Cannabis
There are several reasons to really dislike — perhaps even hate — Aurora Cannabis. My colleague Sean Williams listed Aurora as the No. 1 popular marijuana stock that he wouldn’t buy with free money. One key reason Sean gave is the company’s dizzying pace of dilution of its stock. And his concern is legitimate.
Aurora has issued new shares like it’s going out of style. Just look at the stock’s performance in 2018. Aurora’s share price tanked 35%. Horrible, right? But Aurora’s market cap actually soared by 60%. The big discrepancy came as a result of (drum roll, please)… dilution.
This dilution has stemmed from Aurora Cannabis’ frantic scramble to acquire other companies as fast as it could. That provides yet another reason why some investors might be leery of the stock. Plenty of companies in plenty of industries have gone on shopping sprees only to run into major problems trying to integrate all of them. Aurora Cannabis could easily become another member of that club.
I’ve expressed skepticism about some of Aurora’s deals. My concern is that the company could be too hasty in some of its acquisitions and overpaying for what it’s getting.
But another reason to be negative about Aurora Cannabis is the dealmaking that it hasn’t made. Unlike several of its peers, Aurora has yet to form a tight relationship with a major payer outside the cannabis industry. That could end up haunting the company as its rivals have more money to invest in expansion and partners with the expertise to help them build successful consumer brands globally.
On a related note, Aurora is still thinking about its approach for moving into…
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