To investors, the cannabis industry represents the greatest growth opportunity since the rise of the internet a quarter of a century ago. We already know that tens of billions of dollars in illicit cannabis is being purchased yearly through black-market channels, which means strong demand exists. It's simply a matter of moving these behind-the-scenes consumers into legal channels.

No matter which investment firm guesses closest, the common denominator on Wall Street is that the marijuana industry can average a double-digit annual growth rate through 2029/2030.

Topping the list of the most intriguing marijuana stocks is none other than Aurora Cannabis (NYSE:ACB). Aurora is the most-held stock on online investment app Robinhood, beating out more traditional names like Apple and Amazon. But popularity isn't a guarantor of success, as evidenced by Aurora's more than 35% share price decline since mid-March.

An up-close view of a flowering cannabis plant growing in an indoor farm.

Image source: Getty Images.

Five reasons Aurora Cannabis has lost more than a third of its value since mid-March

This raises the question: If Aurora is so popular, why does its share price continue to decline? The answer looks to be tied to a combination of five factors.

To begin with, Aurora has found itself a victim of Health Canada's arduous application review process. Health Canada began the year with more than 800 licensing applications on its desk for review, often leading to cultivation, processing, and sales license application waits of many months, if not more than a year. This, accompanied by provincial dispensary licensing delays, and compliant packaging solution shortages, has led to supply-side issues throughout Canada. Aurora has not been immune to these supply issues.

Secondly, but tied into the first point, Aurora Cannabis is banking on success in international markets. No other cannabis grower has a presence in more countries than Aurora's 25, which includes Canada. Unfortunately, the benefits of having a geographically diverse revenue stream won't be realized until domestic supply has been satiated in Canada. That could still take years, which has Wall Street souring on the company's near-term international prospects.

Scissors cutting a one hundred dollar bill in half.

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Third -- once again, building on the previous point -- Aurora Cannabis has seen its earnings estimates declining, according to Wall Street forecasts. To be fair, Aurora isn't the only pot stock to see its profit projections fall. This has been a pretty common theme throughout much of North America over the past three months. According to Wall Street, Aurora's fiscal 2020 forecast (ended June 30, 2020), which called for breakeven results as recently as 90 days ago, now calls for a loss of CA$0.08 (that's 0.08 Canadian dollars) per share.

Fourth, Aurora Cannabis' aggressive expansion plans and acquisition strategy has been financed with its common stock. Although this is a common practice among marijuana stocks, Aurora's share-based dilution has seen its outstanding share count rise by more than 1 billion in five years. That's a lot of dilution for investors to absorb.

Fifth and finally, blame Aurora's lack of a brand-name partner. With both Canopy Growth and Cronos Group netting major investments, and Tilray snagging two major partnerships in December, Aurora is the only truly major grower left that's yet to find its perfect pairing. Couple this with Aurora failing to disclose, in detail, its U.S. expansion strategy, and you have all of the negatives needed to weigh on the company's share price.

A dollar sign shadow being cast atop a pile of cannabis leaves.

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Five catalysts that could send Aurora Cannabis higher

I haven't been a fan of Aurora Cannabis for quite some time due to this abundance of negative catalysts. However, I'm not opposed to changing my tune on the most popular pot stock if the rewards begin to outweigh the company's risk profile, described above. After all, Aurora Cannabis does have competitive advantages and catalysts that could add value over time. Here's a look at the other side of the aisle -- i.e., why Aurora Cannabis could be an intriguing investment opportunity.

For starters, Aurora Cannabis is forecast to the leading producer out of all marijuana growers. It's already yielding 150,000 kilos on an annual run-rate basis, and projects to have a minimum of 625,000 kilos on a yearly run-rate basis by the end of June 2020. If the company were to even modestly surpass its conservative growth estimates, 700,000 kilos a year of peak annual output is very possible by fiscal 2021. This makes Aurora a logical partner for Canada's provinces, as well as for numerous overseas markets.

Second, and to add on to the previous point, as Aurora's larger campuses come on line -- Aurora Sky, Aurora Sun, Aurora Nordic 2, and Exeter -- economies of scale should begin to take shape. In other words, as the company's operations expand, its cost to grow marijuana should decline, thereby providing a boost to its margins. Having up to 700,000 kilos of annual output could make Aurora one of the lowest-cost producers in Canada.

A person holding cannabis leaves in front of a globe of the Earth.

Image source: Getty Images.

Although its international presence is a near-term drag, it should turn out to be a long-term positive. If and when oversupply and commoditization strikes the Canadian market -- my best guess would be 2022 -- we should see growers really turn to international markets to offload their dried flower and derivative products. With a presence in two dozen markets outside of Canada, Aurora already has the infrastructure in place to succeed on this front and protect its margins from Canadian price-based pressure.

A fourth catalyst is Aurora's focus on medical cannabis patients. Whereas many of its peers have chosen to dive headfirst into the recreational market, Aurora's management has maintained its focus on medical marijuana. Even though the patient pool for medical weed is considerably smaller than adult-use cannabis, medical patients tend to buy more frequently, use the product more often, and are more likely to purchase higher-margin derivative products (i.e., anything other than dried flower). This means Aurora is choosing quality over quantity with its customer base.

The fifth catalyst is Aurora's eventual partnership opportunity. Having hired billionaire activist investor Nelson Peltz as a strategic advisor, and with Peltz having keen knowledge of the food and beverage industry, it seems to be just a matter of time before Aurora lands a big fish, so to speak.

A hand writing with a pen and circling the word buy underneath a dip in a stock chart.

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Here's the price where Aurora Cannabis becomes attractive

So, we know Aurora Cannabis has a mountain of near-term challenges, but that its long-term outlook remains relatively green. The question then becomes: At what price point does the risk-versus-reward profile begin to shift more favorably toward these long-term investors?

For me, that price point is in the mid-$4 range (in the U.S.), which isn't too far from its recent intraday low of about $6, relative to where it had been trading in mid-March.

I arrived at this price point by using a combination of metrics, as well as intangibles, because let's face it, it's hard to "value" supply side problems in Canada, or future partnership opportunities.

My thinking is this: Aurora Cannabis should have little trouble growing sales from an expected CA$266 million in fiscal 2019 to at least CA$2 billion by fiscal 2024, if not higher. That would represent a compound annual growth rate of about 50%. Assuming the company can generate roughly CA$110 million in net income per year by 2024, leading to an annual EPS of about CA$0.09-CA$0.10 (which shouldn't be too much of a stretch), and grow earnings at roughly the same pace as sales, which should be no problem if economies of scale are coming into play, Aurora would be valued at a PEG ratio of around 1. And a PEG ratio of 1 typically means an undervalued stock.

Mind you, Wall Street hasn't looked that far into the future on most cannabis stocks, so PEG ratios are pure conjecture at this point for the industry. Nevertheless, this exercise helps explain my thinking as to why the mid-$4s are where I feel Aurora Cannabis may represent an attractive opportunity, even with its host of challenges.