Can Aurora Cannabis Inc. Recapture its Autumn Momentum?

Insiders are selling Aurora Cannabis Inc. (TSX:ACB), but the company is well positioned for growth looking ahead to the new year.

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Shares of Aurora Cannabis Inc. (TSX:ACB) have increased 176% over a three-month span as of close on December 8. In late November, I’d discussed cannabis stocks and pinpointed Aurora Cannabis for its quick rise and high valuation, which mirrored a similar phase for the market in 2016. The stock has fallen 18% since reaching an all-time high of $8.66 on November 28.

Aurora Cannabis appeared poised to pick up momentum after it proposed a takeover bid of CanniMed Therapeutics Inc. (TSX:CMED). The offer proposed in November would provide CanniMed shareholders with 4.5 Aurora Cannabis shares for each CanniMed share, representing $24 per CanniMed share. As of close on December 8, CanniMed shares were priced at $19.93.

CanniMed leadership did not have a warm response to the takeover bid. President and CEO Brett Zettl was candid in stating there was “serious concern” regarding possible overvaluation when it came to shares of Aurora. Still, CanniMed will have until March 9, 2018, to respond to the bid. At that time, the target date for recreational legalization will be three months away.

On November 30, CanniMed delivered another shot against Aurora Cannabis. Zettl drew attention to insider selling from top Aurora Cannabis executives. On November 28, Aurora Cannabis CEO Terry Booth sold 700,000 shares, director Jose Del Moral sold 500,000 shares, president Stephen Dobler sold 900,000 shares, and the vice president of business and corporate affairs sold 71,670 shares. In total, this added up to over two million shares with a $17.8 million value.

CanniMed criticized Aurora Cannabis management for taking profits while launching what Zettl described as a “coercive bid.” The critique will likely spill over into 2018 as we draw closer to the deadline for CanniMed to respond to Aurora’s bid. The coming months will either strengthen or weaken Aurora’s hand for this proposed acquisition.

Q4 earnings and international expansion are reasons for optimism

Aurora Cannabis released its fourth-quarter results on September 26 at a time when its stock closed at $2.82. For reference, shares closed at over $7 on December 8. Aurora Cannabis saw revenues jump 14.7% to $5.9 million, and the average selling price per gram rose 12.2% to $7.45. The company posted a 37.5% increase in grams produced and a 15.6% increase in grams sold.

The construction of the massive Aurora Sky facility at the Edmonton International Airport is progressing well, according to leadership. The company expects its first harvest at the facility in early 2018.

On December 4, Aurora Cannabis announced that it had increased its stake in Australia-based Cann Group Ltd. to 22%. The company also announced a $12 million investment in the Canadian biotechnology company Radient Technologies Inc.

After its recent dip, Aurora Cannabis should be a target for those monitoring this hot market. Aphria Inc. (TSX:APH), which also boasts a market cap over $2 billion, recently saw its stock catapult into the double digits. Aurora Cannabis has the opportunity to threaten the position of Canopy Growth Corp. as a top cannabis producer if its acquisition of CanniMed goes through. Aurora Cannabis remains an attractive buy heading into 2018.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Ambrose O'Callaghan has no position in any stocks mentioned.

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