Please ensure Javascript is enabled for purposes of website accessibility

Why Aurora Cannabis Stock Is Rocketing Higher Today

By Joe Tenebruso - May 21, 2020 at 3:35PM

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 marijuana leader struck a blockbuster deal to enter a massive new market.

What happened

Shares of Aurora Cannabis (ACB 10.67%) soared on Thursday after the marijuana producer said it reached an agreement to acquire a leading U.S.-based CBD brand. 

As of 2:50 p.m. EDT, Aurora's stock was up more than 28%.

So what 

After the market closed on Wednesday, Aurora announced that it struck a deal to acquire Reliva LLC, a popular retail cannabidiol (CBD) brand in the U.S.

Unlike marijuana, CBD doesn't get people high. Yet many people use CBD products for their perceived health benefits. It's a rapidly growing market -- one that could generate $24 billion in retail sales by 2025 in the U.S. alone, according to the Brightfield Group. 

Aurora has had its sights set on the U.S. CBD industry for a long time and is seeking to acquire Reliva to gain a beachhead into this potentially massive market. As a leading seller of hemp-derived CBD products -- its wares can be purchased in over 20,000 U.S. retail locations -- Reliva stands to profit handsomely from the industry's growth.

A U.S. style flag with a cannabis leaf in place of the stars

Shares of Aurora Cannabis surged on Thursday after the marijuana leader made an aggressive move into the U.S. CBD market. Image source: Getty Images.

As part of the agreement, Reliva's members will receive $40 million worth of Aurora's stock -- and potentially an additional $45 million in stock, cash, or a combination thereof if the company can achieve certain financial targets over the coming two years.

Now what

Aurora expects the deal to immediately improve its profitability, as Reliva already produces positive earnings before interest, taxes, depreciation, and amortization (EBITDA), which is a goal Aurora hopes to achieve by fiscal 2021.

Aurora estimates that the transaction will close by June, pending shareholder and regulatory approval.

Joe Tenebruso 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
ACB
$1.66 (10.67%) $0.16

*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
373%
 
S&P 500 Returns
122%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/11/2022.

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.