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Why Aurora Cannabis Stock Is Soaring Today

By George Budwell - May 18, 2020 at 11:52AM

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The marijuana specialist's better-than-expected third-quarter 2020 earnings report has investors excited.

What happened

Aurora Cannabis (ACB -9.09%), a small-cap Canadian pot company, is starting the week off on the right foot. The company's shares are up 72% on sky-high volume as of 10:43 a.m. EDT Monday morning.

The spark? Last Friday, Aurora's stock lit up after the company released a better-than-expected third-quarter 2020 earnings report. Investors appear to be bidding up this popular pot stock for the same reason today.   

An adult marijuana plant.

Image Source: Getty Images.

So what

Aurora's Q3 report has been a big hit with investors for two fundamental reasons. First off, the company handily beat Wall Street's consensus revenue estimate for the three-month period. Investors, for their part, seem to be taking this quarterly revenue beat as a sign that Aurora's business may finally be nearing an inflection point.

Second, Aurora significantly curtailed its cash burn rate during the most recent quarter, thanks to its newly instituted restructuring plan. That's a big deal because one of the company's core problems over the past several quarters has been its astronomical burn rate.  

Now what

Can Aurora's shares keep up their newfound momentum? It's hard to say for sure, but Aurora's stock may be close to a top after today's double-digit move higher. The core issues that weighed on Aurora over the prior 12-month period haven't exactly evaporated, and the company will more than likely take advantage of this huge spike in its share price to raise capital. In other words, it might not be a particularly great idea to chase this red-hot marijuana stock right now.

George Budwell 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.

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Stocks Mentioned

Aurora Cannabis Stock Quote
Aurora Cannabis
ACB
$1.50 (-9.09%) $0.15

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