Please ensure Javascript is enabled for purposes of website accessibility

Why Aurora Cannabis Stock Soared 59% in May

By Joe Tenebruso – Jun 4, 2020 at 7:12AM

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

Strong marijuana sales and a game-changing acquisition ignited investor enthusiasm for the popular marijuana stock.

What happened

Shares of Aurora Cannabis (ACB -1.20%) surged 59% last month, according to data provided by S&P Global Market Intelligence. The marijuana producer delivered better-than-expected third-quarter results and entered a major new market.

So what

Aurora's shares rocketed higher on May 15, following the release of its fiscal third-quarter financial report. Its net revenue, excluding provisions, jumped 18% sequentially to CA$78.4 million, driven by strong growth in recreational and medical cannabis sales. That was well above the CA$66.7 analysts expected. The news is believed to have ignited a short squeeze; many short sellers who bet against Aurora's stock were likely forced to buy shares in order to close their positions, thereby helping to drive the price higher.

A rising stock chart superimposed on some cannabis plants.

Aurora Cannabis stock rose sharply in May. Image source: Getty Images.

The gains continued later in the month when Aurora struck a deal to enter the potentially massive U.S. cannabidiol (CBD) market. On May 20, the cannabis leader announced it would acquire Reliva, a top-selling CBD brand. Aurora said the deal would help to improve its profitability shortly after its expected closing in June, and investors cheered the news.

Now what 

Despite its strong recent performance, Aurora Cannabis remains a high-risk stock. It's still unprofitable, and due to its dwindling cash reserves, Aurora will likely need to further dilute shareholders by selling more shares.

However, should it be able to achieve profitability sooner than expected, Aurora's positioning within the rapidly growing global cannabis market could make it an intriguing long-term investment.

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
$1.24 (-1.20%) $0.01

*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
332%
 
S&P 500 Returns
104%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/30/2022.

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.