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Aurora Cannabis Won't Be Profitable in the Next Three Years, Say Analysts

By Eric Volkman – Updated Oct 7, 2020 at 10:23AM

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Two BMO Capital Markets prognosticators warn that the marijuana company still has to get costs under control.

Impatient Aurora Cannabis (ACB -11.03%) investors tired of waiting for the company to book a meaningful profit are likely in for several more years of pain. That's the view of two analysts from Bank of Montreal's (BMO -3.36%) BMO Capital Markets, at any rate.

In a new research note about the struggling marijuana company, Tamy Chen and Peter Sklar said: "If Aurora does not endeavor further meaningful [selling, general and administrative expense] cuts, we believe the timeline to achieve the sales volumes that would break even at EBITDA is three years away."

Marijuana bud on fire.

Image source: Getty Images.

EBITDA stands for earnings before interest, taxes, depreciation, and amortization, a commonly used profitability metric.

Aurora management is far more optimistic about the company's prospects than Chen and Sklar. It aims to hit positive EBITDA in its current quarter (Q2 of fiscal 2021). 

However, the Canada-based company, beset by the daunting challenges inherent in selling a product that is still against the law in much of the world, has only rarely been profitable.

Its bottom-line problems have also been exacerbated by pricey acquisitions; in its fiscal Q4 2020, Aurora was compelled to book a whopping 1.8 billion Canadian dollar ($1.35 billion) goodwill impairment charge, which sent it deep into the red. Weighed down by the impairment charge, its net loss from continuing operations for the period ballooned to CA$1.9 billion ($1.43 billion), far deeper than its fiscal Q3 2020 net loss of CA$136 million ($102 million).

And by the company's own admission, the report for the just-completed quarter probably won't be chock-full of good news; in September, it predicted that net revenue for its fiscal Q1 would be lower by at least 5.3% on a quarter-over-quarter basis. 

Eric Volkman 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.

Stocks Mentioned

Aurora Cannabis Stock Quote
Aurora Cannabis
$1.21 (-11.03%) $0.15
Bank Of Montreal Stock Quote
Bank Of Montreal
$94.55 (-3.36%) $-3.29

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