In terms of popularity, few marijuana companies can beat Aurora Cannabis (NASDAQ:ACB). The Edmonton-based pot grower ranked as the most widely held stock on the trading app Robinhood.

However, Aurora hasn't always delivered financial performances on par with investors' expectations, and the company's first-quarter earnings report, released on Nov. 14, was arguably the very worst of the bunch. Let's see just how bad things went for Aurora during the last quarter, and whether the company can turn things around next year.

Horrible results

It's difficult to find anything to like in Aurora's Q1 earnings report. The company did claim to boast "leading" gross margins, and its medical cannabis revenue increased by a measly 3% quarter over quarter, but the good news probably stops there. Aurora's total net revenue of 75.2 million Canadian dollars ($56.5 million) was a 24% sequential decrease, and its recreational segment was hit particularly hard. Aurora's consumer cannabis revenue decreased 33% sequentially, although to be fair, the average selling price for this segment increased slightly (3%) compared with the previous quarter.

cannabis plant

Image source: Getty Images.

But Aurora's average selling price for the medical segment decreased by 6%. To add insult to injury, the one metric that might have calmed investors' fears -- Aurora's net income in the amount of CA$10.7 million -- didn't have anything to do with the company's core operations. Instead, it benefited from noncash unrealized gains on derivative liabilities of CA$143.8 million. Given Aurora's lackluster performance, it isn't surprising that the company experienced a sell-off after its earnings release. 

Are better days ahead? 

While it is important, following a company's poor financial performance, to focus on its long-term prospects, Aurora still faces several issues that warrant serious skepticism about its future. Here are just three of them.

First, the Canadian cannabis market is a mess. With the regulatory authorities taking their sweet time approving requests for retail licenses, the legal cannabis market is developing slower than expected. This is particularly true in the Province of Ontario, which is the largest by population. To make matters worse, illicit sales of marijuana products are still alive and well.

Second, unlike some of its peers, Aurora has yet to find a partner with deep pockets. The company's decision to bring in billionaire Nelson Peltz as a strategic adviser was motivated by the desire to land a deal with a mature company. But so far, Aurora still hasn't made such a deal.

Third, Aurora implemented an aggressive growth strategy in its early days that may come back to haunt it. The company's acquisition spree led to it having more goodwill on its balance sheet -- over $3.1 billion at the end of its latest reported quarter -- than almost any of its peers. 

Fortunately, there's some good news for Aurora. The process to obtain retail licenses should ease up, and there will likely be an increasing number of cannabis retail stores, which is good news for the entire cannabis industry. Furthermore, Aurora is gearing up for the much-hyped cannabis derivatives market. Here's what the company said about the launch of derivative products in Canada:

Aurora is extremely well positioned and has prioritized its resources to prepare for a successful initial launch and supported an ongoing replenishment strategy to ensure consumers across Canada will have access to a diverse portfolio of high-quality derivative products they want to buy. Aurora expects to begin shipping these new product formats to provincial regulators starting late December 2019. 

It is also looking to make waves in the U.S. market, but the company gave few details on how it plans to do so. 

It would be difficult for Aurora to perform worse than it did during the last quarter, so things will probably get better for the company. But whether the pot grower can be a winner in the long term is, at this point, anyone's guess. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.