After trailing the broader markets by a significant margin since 2018, shares of Aurora Cannabis (TSX:ACB) have gained momentum this year. Down 99.5% from all-time highs, ACB stock has surged over 45% year-to-date, valuing the cannabis company at a market cap of $490 million.
So, let’s see if you should own the pot stock at the current valuation.
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Is Aurora Cannabis stock a good buy right now?
Aurora Cannabis produces and sells a variety of cannabis products, including dried cannabis, oils, capsules, and topical treatments, primarily for medical patients. It also manufactures and sells cannabis accessories like vaporizers and grinders.
Aurora Cannabis was trading near record levels when Canada legalized marijuana for recreational use in October 2018. However, over the past five and a half years, it has grappled with multiple structural issues, including an oversupply of products, cannibalization from illegal sales, higher inventory levels, widening losses, and overvalued acquisitions.
Aurora Cannabis increased sales from $18.1 million in fiscal 2017 (ended in March) to $268.7 million in fiscal 2020. While Aurora Cannabis is part of an expanding addressable market, its sales fell to $223.8 million in fiscal 2023. However, the top line grew by 20.8% year over year to $270.3 million in fiscal 2024.
In the fiscal third quarter (Q3) of 2025 (ended in December), Aurora Cannabis reported revenue of $88.2 million, an increase of 37% year over year. Moreover, its sales rose by 29% compared to the September quarter.
Aurora Cannabis stated that sales from its international medical marijuana business more than doubled to $40.9 million in Q3. The company’s focus on international markets is crucial as it wrestles with significant challenges in Canada due to rising competition and strict marketing regulations.
After years of reporting heavy losses, Aurora Cannabis grew its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) to $23.1 million in fiscal Q3, up from $5.5 million last year.
It reported a net income of $31.3 million in the December quarter, compared to a $18.1 million loss last year. However, investors should note that the net income was boosted by a one-time $31.6 million gain from biological assets.
Is ACB stock undervalued?
Two years ago, Aurora Cannabis disclosed plans to focus on the higher-margin medical marijuana business to shore up its profit margins and limit cash burn rates. In fiscal Q3, it reported gross margins of 53.7% before fair value adjustments, compared to 32% last year.
While the company’s net income was positive, it was primarily influenced by one-time non-recurring gains. Additionally, there’s a historical precedent in the cannabis industry where initial growth in new markets often slows dramatically as competition increases. So, several other Canadian cannabis producers may expand into the same profitable international markets, which could impact Aurora’s financials in the near term.
Analysts tracking ACB stock expect sales to rise to $335 million in fiscal 2025. Comparatively, adjusted earnings should expand to $0.6 per share. So, priced at 1.5 times forward sales, ACB stock is not too expensive, given its improving profit margins.
Analysts tracking the TSX stock remain bullish and expect it to gain over 12%, given consensus price target estimates.
