Slow Burn: Is Aurora Cannabis Finally a Good Buy in June?

One of the benefits of choosing from some of the most beaten-down market segments like cannabis is that even a little bit of market positivity can lead to solid profits.

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Pot stocks are a riskier investment

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Rises and falls are natural parts of the stock market, and this “dynamic nature” is part of its appeal. However, in most cases, these rises and falls happen within a reasonable range. Stocks losing a quarter, a third, or even half of their values during a period are far more common than stocks losing over 70% or 80% of their values.

But an unfortunate TSX sector has experienced a much more drastic decline, and it has stayed in that slumped state for years. In their current state, cannabis stocks in Canada are beyond the classification of “beaten down,” some more than others. Aurora Cannabis (TSX:ACB) is among the weakest cannabis stocks in Canada and the most heavily discounted in the sector.

Aurora Cannabis performance

In the golden days of the Canadian legal marijuana sector, Aurora Cannabis experienced one of the most glorious growth phases, not just in the sector but across the entire market. The stock rose by over 22,000% in fewer than six years, a feat rarely seen in the TSX.

But the decline was just as brutal. The stock was trading at over $1,600 per share at its peak. Now, it’s trading at $8.1 per share, representing a decline of about 99.5%.

Even though the entire marijuana sector has been brutalized, Aurora Cannabis’s decline still stands out. Its failure has been far grander for several reasons, including its ambitious growth plans and frequent dilution of its stock. The financials haven’t been impressive as well.

The future

In the last 12 months, the stock has spiked two times. In one instance, it rose beyond 120% and in another, over 200%. One slight benefit of a stock trading at such a low price point is that even minor changes in market sentiment can push the stock up quite a bit.

The most significant source of positive sentiment for this and all other cannabis stocks is the anticipation of American marijuana legalization (Federal), which would open a sizable new market for Canadian Cannabis producers. That’s where Aurora’s residual strengths, including a decent portfolio of brands and a global footprint, might give it a modest edge.

Foolish takeaway

The month of June hasn’t been kind to Aurora Cannabis stock. Its bear market phase continued, and it slipped more than a couple of percentage points since the month started. It may keep going in this direction until there is some tangible good news in the local or international legal marijuana market to shift the market sentiment in Aurora’s favour.

Until then, it’s a good stock to keep in sight, but a decision to buy it should be made after significant consideration.

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 Adam Othman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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