Please ensure Javascript is enabled for purposes of website accessibility

Why Aurora Cannabis Bounced Back Today

By Keith Speights – Nov 15, 2018 at 4:15PM

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

The Canadian marijuana stock erased most of the previous day's decline.

What happened

Shares of Aurora Cannabis (ACB -3.33%) were 8.4% higher as of 3:14 p.m. EST Thursday after gaining over 10% earlier in the day. The rebound largely offset the marijuana stock's decline experienced on Wednesday.

Aurora's only news was its announcement yesterday about the appointment of Dr. Jonathan Page as the company's chief science officer. Page previously served as CEO of Anandia Labs, which Aurora Cannabis acquired in August.

While Page will no doubt be a positive addition to Aurora's management team, his new position isn't the likely catalyst for the stock's big move today. Instead, we're probably just seeing the natural ebb and flow of a volatile stock that operates in a volatile industry.

Marijuana plant underneath lights

Image source: Getty Images.

So what

For the most part, Aurora Cannabis stock's big drop yesterday and the subsequent nice gain today are much ado about nothing. The fact is that nothing has materially changed for Aurora's business prospects this week.

Sure, Aurora Cannabis reported its fiscal year 2019 first-quarter results on Tuesday. But the seemingly fantastic revenue and earnings growth involved some smoke and mirrors. Aurora's 260% year-over-year revenue increase stemmed primarily from the company's acquisitions. And the 2,862% -- yes, that percentage is correct -- jump in earnings came entirely from investment gains.

Aurora would have had a huge net loss without the positive impact of those gains. However, that's nothing to get worked up about, either. The company cranked up its spending dramatically in Q1. But it did so in preparation for the Canadian recreational marijuana market that opened on Oct. 17, 2018, and for continued expansion in international medical marijuana markets. Both are good reasons to absorb a temporary loss. 

Now what

The key things to watch with Aurora are the developments that truly impact its prospects. Stabilization of supply chains for the Canadian recreational marijuana is one example. Germany's issuance of licensing for domestic medical cannabis production is another. A significant partnership with a major company outside of the cannabis industry would also be tremendously important for Aurora.

As the questions about the growth of the global cannabis industry and Aurora's role in this growth are answered, the stock's volatility will diminish. In the meantime, more major swings both up and down are likely in store for Aurora Cannabis in the weeks and months to come. Some of these gyrations could be warranted, but not necessarily all of them. 

Keith Speights 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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Aurora Cannabis Stock Quote
Aurora Cannabis
$1.16 (-3.33%) $0.04

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/27/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.