Aurora Cannabis (NYSE:ACB) has been a favorite of investors for a while now, and expectations are high that the company will be able to recover from a dismal 2019.

The rate at which Aurora expanded after Canada legalized medical cannabis in October 2018 convinced everyone that it could become the top player in this growing industry. However, some of its own mistakes -- going too fast, too soon; spending money on expansions and acquisitions without paying attention to rising debts -- along with external headwinds brought Aurora's stock down more than 78% from its March 2019 highs. 

So far, 2020 has somehow been lucky for the company, which does seem to be on a path to recovery. Let's shed some light on its efforts this year.

Red bar lines increase in height as arrows point ahead.

Image source: Getty Images.

The cost-cutting measures continue

Aurora expects that what it calls its "facility rationalization plan" will help it reduce expenses and improve margins. In June, it announced the closure of five of its smaller facilities, and it also intends to merge several other facilities into one by the second quarter of 2021, while ramping up operations at its Nordic facility in Europe. These changes will cost Aurora asset impairment charges of up to 60 million Canadian dollars in the fourth quarter of 2020, but will help it achieve its SG&A run-rate target of CA$42 million for the fiscal first quarter of 2021.

What should Aurora's strategies be going forward?

Aurora's move to expand its business internationally in markets that haven't reached their full potential was a big risk. In my opinion, Aurora should instead pay attention to its operations in Canada that could improve this year -- especially with more stores opening in Ontario, which just saw its 100th retail store authorization last month.

It should also look at expanding in U.S. markets that have seen tremendous growth. Currently, 33 states and the District of Columbia allow medical cannabis, and 11 states and D.C. allow recreational cannabis use among adults. A handful of additional states have some form of legalization on the ballot this year, which may expand the markets further. 

A BDS Analytics report predicts that recreational markets in California, Nevada, and Massachusetts could grow at a compound annual growth rate of 20.8% and generate 41% of total U.S. legal cannabis sales in 2024. Furthermore, new markets including Arizona, New York, and Florida, if and when they legalize, could capture 32% of the 2024 market.

Aurora's recent acquisition of Reliva -- the proud owner of 20,000 retail stores -- can help the company widen its footprint in the U.S., where the growth of the marijuana market is evident from Illinois-based Green Thumb Industries (OTC:GTBI.F) and Florida-based Trulieve Cannabis's (OTC:TCNN.F) most recent quarterly performance. These pot companies' strategies of focusing on their local business has proved beneficial. 

In Q1, Green Thumb's revenue soared 268% from the year-ago quarter to $102.6 million, while Trulieve's revenue rose 116% to $96.1 million. Both also reported positive EBITDA of $25.5 million and $49.4 million, respectively.

Aurora should also keep an eye on peer Canopy Growth's strategies in launching cannabis derivatives products in the U.S. Aurora has fallen behind in striking a deal with any of the consumer alcohol or tobacco companies that could help strengthen its position in the U.S., while Canopy Growth has a deal with Constellation Brands and an additional deal to purchase Acreage Holdings once the U.S. federally legalizes marijuana. Meanwhile, HEXO has a partnership deal with Molson Coors Beverage Company, and Cronos Group has a deal with tobacco giant Altria Group

Is it worth the risk?

Management assured investors on Aurora's third-quarter 2019 earnings call that it would hit profitability by the fourth quarter of fiscal 2019, but instead, it reported a loss of CA$36.6 million. Losses kept mounting thereafter, and the company's history of promising and not delivering makes it extra hard to trust.

Then again, the cost-cutting strategies to achieve positive profitability this year look like they could work. So I would at least wait for fourth-quarter results, expected Sept. 25, to learn more about how its strategies have worked out so far and its plans for the future.

Meanwhile, I wouldn't suggest Aurora Cannabis as a buy, but investors who already hold the stock might as well keep it. There are other profitable pot stocks out there, though, inluding Aphria (NASDAQ:APHA) , which has consistently reported positive EBITDA and takes a more conservative approach to its business. I have always liked Aphria's focus on its core operations, which I think is the reason it has maintained profitability. It reported EBITDA profits of about CA$9.3 million with 18% revenue growth to CA$152.2 million for its recent fourth quarter, reported on July 29. The U.S. cannabis companies, as stated above, have proved their potential this year and are also in a much better place than Aurora Cannabis.