Please ensure Javascript is enabled for purposes of website accessibility

Why Aurora Cannabis Stock Plunged Today

By Joe Tenebruso – Sep 8, 2020 at 6:40PM

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 producer has a rough road ahead.

What happened 

Shares of Aurora Cannabis (ACB 5.16%) fell 11.8% on Tuesday after its business updates were poorly received by investors.  

So what

Aurora said its fourth-quarter net revenue is likely to be between 70 million and 72 million Canadian dollars ($53 million to $55 million). That's down from CA$78.4 million in the third quarter and below analysts' estimates of CA$77 million. 

A downwardly sloping stock chart.

Aurora Cannabis' stock price fell sharply on Tuesday. Image source: Getty Images.

Worse still, Aurora expects to record an impairment charge of as much as $1.8 billion. The cannabis company is writing down the value of its production facilities and a significant portion of its inventory.

Moreover, Aurora said it and the UFC had mutually agreed to terminate their CBD-focused research partnership. Aurora will pay the popular mixed martial arts league $30 million to terminate their contract in the first quarter of 2021.

Now what

To help right the ship, Aurora named a new chief executive officer. Miguel Martin will replace interim CEO Michael Singer -- who took over the role in February -- effective immediately. Singer will stay on as executive chairman. 

Martin joined Aurora when it acquired Reliva in May. He was the hemp-derived CBD product maker's CEO, and he became Aurora's chief commercial officer in July. 

Martin will face a host of challenges. He'll be tasked with right-sizing Aurora's production network and moving the company toward profitability, at a time when a dearth of retail stores and a persistently strong black market continue to stifle the legalized marijuana industry's growth.

Martin will have an opportunity to share more of his vision for the company's future during Aurora's upcoming earnings conference call, which will take place on Sep. 22 at 5 p.m. EDT. 

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.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.