Aurora Cannabis has been labeled the number two when it comes to cannabis over the last few years, even after Aurora made one of the largest cannabis based acquisitions to boost growth. It seems that Aurora is still in the shadow of another cannabis giant, and that is of course Canopy Growth. However Aurora has been at the center of attention more than ever in 2019. Its share price has outperformed all other listed cannabis companies including Canopy in the first half of this year. Cowen analyst Vivien Azer recently updated her top cannabis stock pick which was Canopy and has replaced it with Aurora. There has been talks between analysts that Aurora may be a better cannabis stock than Canopy Growth, and they have some strong arguments that back this up.
1. Lower valuation
Aurora is not even close to taking the crown when it comes to top market cap company in the cannabis industry. But that is also perhaps the best reason why Aurora is currently being viewed as a better position to hold as pot stock right now. In the final financial quarter ending Dec. 31 Aurora has a very lucrative net revenue of $54.2 Million CAD compared to Canopy Growths $83 Million CAD. If you look at those figures in a percentage basis, Aurora’s revenue was over 35% lower than Canopy’s however with a market cap of $9 Billion Aurora has a market cap 45% lower than Canopy. Both of these companies do look rather ridiculously priced compared to their historical sales data, but both Aurora and Canopy will be enjoying strong sales growth as cannabis has a more global legalization.
2. Production capacity
The most obvious reasons for Azer making Aurora her top cannabis stock, is the company’s huge production capacity. The reality in the modern world is that capacity is king in a market where demand is far greater than supply. Aurora has been building up one of the most impressive cannabis production facilities in the sector. The company is already distributing over 120,000 KG of cannabis and by the end of 2020 the company are estimating production to be in the region of 625,000 KG. Canopy growth on the other hand is no exception to large production capabilities, the company already has 4.3 million square feet of space to grow, with a recent purchase of 1.3 million more.
3. International presence
Another area where Aurora out ranks Canopy Growth is their access to the international markets, Aurora has already built a strong foundation from their exportation of medical cannabis. In the last quarter alone, Aurora beat Canopy for the highest international medical sales. Additionally Aurora is a very active member in twenty four countries compared to Canopy’s 14. In Germany, seventy nine companies applied for the approval to cultivate medical cannabis in the country. Only three of the seventy nine applicants were chosen, Aurora was one of these. Canopy Growth did not fill any of the other spots. This will enable Aurora to have a competitive advantage in the German market, and will also give them a strong start in the future, when more European nations join the legalization pattern.
Mary Wang – AMT Associates