Buy This 1 Weed Stock Instead of Aurora Cannabis (TSX:ACB)

While Aurora Cannabis (TSX:ACB)(NYSE:ACB) stock is struggling with liquidity issues and mounting looses, this medical marijuana giant is well poised to outperform pot stocks.

| More on:
Marijuana plant and cannabis oil bottles isolated

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

Shares of cannabis giant Aurora Cannabis (TSX:ACB)(NYSE:ACB) have taken investors on a whirlwind journey. Aurora stock rose from $0.72 a share in July 2012 to a record high of $164.5 in October 2018. This means it generated monumental returns of 22,750% in six years. So, $500 invested in Aurora stock back in July 2012 would have ballooned to a staggering $113,500 by October 2018.

Now, Aurora stock is trading at $14, which is 92% below its record high. However, early Aurora Cannabis investors would have still returned close to 2,000%, despite the massive pullback.

Aurora Cannabis, like most other pot stocks, has been grappling with structural issues, including mounting losses, high inventory levels, lower-than-expected demand, and rising competition.

Aurora, in fact, has raised capital several times in the last few years to keep operations running. This diluted investor wealth significantly, driving its stock price to multi-year lows in early 2020. Aurora even had to resort to a reverse stock split to continue trading on the NYSE.

Aurora Cannabis reports solid Q3 results

Aurora stock reported better-than-expected fiscal third-quarter results with revenue of $78.4 million, above analyst estimates of $66.7 million. Sales were up 18% on a sequential basis, and the stock gained close to 200% in the following week.

Aurora’s consumer cannabis sales were up 24% sequentially at $41.5 million, while medical cannabis sales were up 6% at $27 million. International sales rose a stellar 125% to $4 million.

Another interesting aspect of the pot giant’s Q3 results were its narrowing losses. It used $154.5 million of cash in Q3, down from $273 million in the previous quarter. However, it also added $22 million in debt in Q3 taking its total debt to a hefty $246 million.

Aurora continues to focus on optimizing costs and reducing cash burn in its race to reach a positive EBITDA in early fiscal 2021. In Q3, its EBITDA loss was $45.9 million down from $80.3 million in Q2.

While Aurora Cannabis looks like it is staging a recovery, there are other marijuana companies that can be considered right now.

A medical marijuana giant

Shares of GW Pharmaceuticals (NASDAQ:GWPH) are trading at US$126.17 and have gained over 20% in 2020. The stock went public back in January 2012 and has returned over 1,000% since then.

GW Pharma is the largest holding in the Horizons Marijuana Life Sciences ETF and is a top stock for marijuana investors. GWPH has the only cannabis-based drug that’s approved by the FDA. The drug, Epidiolex, is an effective treatment for patients with Dravet syndrome and Lennox-Gastaut syndrome.

Analysts expect GWPH to increase sales by 67.4% to US$521 million in 2020 and 55% to US$807.7 million in 2021. While adjusted earnings are forecast at -US$2.35 in 2020, it might drastically improve to US$2.19 in 2021.

This means GWPH stock is trading at a price-to-2021-earnings multiple of 57.5. It’s valued at US$4.05 billion and might be the first medical marijuana company to touch US$1 billion in sales in 2022.

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 Aditya Raghunath has no position in any of the stocks mentioned.

More on Cannabis Stocks

edit Cannabis leaves of a plant on a dark background
Cannabis Stocks

Canopy Growth Stock: The Only Cannabis Stock to Consider Long Term

The cannabis stock industry remains an incredibly high risk one, but Canopy Growth (TSX:WEED)(NYSE:CGC) stock provides the best opportunity for…

Read more »

edit Cannabis leaves of a plant on a dark background
Cannabis Stocks

Should You Stay Away From HEXO Stock?

HEXO (TSX:HEXO)(NASDAQ:HEXO) stock is on a downward spiral, and there is little hope it is going to recover soon.

Read more »

edit Cannabis leaves of a plant on a dark background
Cannabis Stocks

Why Did Aurora Cannabis (TSX:ACB) Stock Plunge 75% in 2022?

A prominent cannabis stock has plunged by 75% in 2022, as the company’s losses continue to mount in the face…

Read more »

Pot stocks are a riskier investment
Cannabis Stocks

Fire & Flower: A Small Pot Stock Poised for Strong Growth

Fire & Flower is a cannabis retailer well-positioned for growth thanks to its digital and delivery initiatives.

Read more »

edit Jars of marijuana
Cannabis Stocks

Why Aurora Cannabis (TSX:ACB) Stock Is Sinking This Week

Starting another round of capital raising has hurt investor sentiments, and the Canadian cannabis giant’s performance on the stock market…

Read more »

edit Jars of marijuana
Cannabis Stocks

Why Canopy Growth (TSX:WEED) Stock Plunged 19% Last Week

Canopy Growth Corp. (TSX:WEED)(NASDAQ:CGC) stock has plunged after the release of its final fiscal 2022 results.

Read more »

Cannabis stocks have fallen.
Cannabis Stocks

Why Aurora Cannabis (TSX:ACB) Stock Tanked 45% Last Week

There's no respite for Aurora Cannabis investors!

Read more »

Money growing in soil , Business success concept.
Cannabis Stocks

TFSA Investors: This Undervalued Gem Could Turn $6,000 Into $25,000

Here's why TFSA investors can hold undervalued growth stocks such as Verano in their portfolios right now.

Read more »