Marijuana stocks are high-risk, high-reward investments. The industry is rapidly growing but highly volatile. You can make millions, however, without investing in multiple companies. Taking positions in several promising cannabis companies is not always the best strategy. Sometimes, all you need is one marijuana stock to get wealthy.
Aurora Cannabis (TSX: ACB)(NYSE:ACB) should be your only exposure in the cannabis space. The company has yet to show strong fundamentals or profits, for that matter. But this cannabis company has what it takes to deliver your desired riches. Its future success could be the way to wealth for you.
The winning edge
Aurora Cannabis knows that the total opportunity in the global, medical, and recreational marijuana markets combined is around $200 billion. The company is also aiming to disrupt other markets that include cannabis-infused beverages, edibles, and other derivatives.
This new market segment could potentially amount to $500 billion in yearly sales. If Aurora could capture at least 25% of the total global opportunity, shareholders can expect tremendous rewards.
Is the target ambitious? After the legalization of recreational marijuana, Aurora was able to garner a 30% share in the Ontario market, which is the largest province in Canada. The company could claim a higher market share down the road.
The bigger objective is capturing a significant market share in the international markets. Production capacity and distribution channels are the key components to secure the win on the global stage. Aurora has the winning edge in this aspect.
By the end of June 2020, Aurora’s run-rate production would be 625,000 kilos, which are industry-leading thus far in 2019. The company also has the biggest international presence of any marijuana stock. Its distribution network in 24 countries is expected to grow some more.
Latest quarterly earnings
Aurora’s fiscal 2019 fourth-quarter results reported a few days ago elicited mixed reactions. The company was able to book $98.9 million in net revenue, which is 52% better than the preceding quarter. It’s also 415% higher on a year-over-year basis.
The reported quarterly net loss of $2.3 million is a vast improvement from the $160.2 million posted in the previous quarter but $77.6 million worse compared with the net profit in Q4 2018.
With the gross margin improving to 58% in Q4 as against the 55% in Q3, the company’s production costs per gram are declining. On the whole, the latest quarterly results are not damning to discourage you from investing.
The feeling of shock in some quarters is understandable because of the very high expectations. But most of the challenges the company is facing are beyond its control.
Industry bellwether
Despite missing the beat on consensus estimates, Aurora is approaching the corner of profitability. The ups and downs are general characteristics of the industry that’s slowly finding its way. You can sit tight and watch Aurora capitalize on multiple growth opportunities.
The industry’s bellwether stock will not disappoint. Keep in mind that investing in Aurora is a long game. Your future riches won’t come in a flash, but they will come. You might regret not buying the only marijuana stock that could make you wealthy.
