What happened

Aurora Cannabis (NYSE:ACB) shares were tanking 8.8% lower as of 10:03 a.m. EST on Friday after falling as much as 17.3% earlier in the morning. This marks the second consecutive day of double-digit declines for the Canadian marijuana stock. Thursday's drop came as investors anticipated bad news with the company's fiscal 2020 first-quarter results. Those results, announced after the market closed yesterday, were even worse than feared, prompting the continued sell-off today.

So what

Were Aurora's Q1 results bad enough to warrant such a big sell-off? The extent of how low the stock should go is debatable, but the results were really bad.

Cannabis growing in a greenhouse.

Image source: Getty Images.

Aurora posted Q1 total net revenue of 75.2 million in Canadian dollars. This was a 24% decline from fiscal 2019 Q4 and a lot less than analysts expected. The company saw net revenue in the Canadian adult-use recreational cannabis market plunge 33% from the previous quarter.

After predicting earlier this year that positive adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) was on the way this year, Aurora took a big step backward on its path to profitability in Q1. The company reported an adjusted EBITDA loss of CA$39.7 million, reflecting marked deterioration from the adjusted EBITDA loss of CA$26.6 million in the prior quarter.

Now what

Aurora is suspending efforts to finish construction on its Aurora Nordic 2 facility and on its Aurora Sun facility. The company expects these moves to cut capital expenditures by close to CA$190 million. It also has put forward an alternative deal for owners of its convertible debentures maturing in March 2020 that avoids having to raise CA$230 million in cash.

The current situation for Canadian marijuana stocks looks dismal. However, the cannabis derivatives market and opening of new retail stores, particularly in Ontario, should fuel growth next year. It was a rough quarter for Aurora, but the company is taking some prudent steps to right its ship. In the meantime, though, expect high levels of volatility for Aurora and its peers.