Shares of Aurora Cannabis (ACB 1.80%) continued dropping today, and were down 6% as of noon EST. This brings the total decline since Nov. 30 to more than 20%.
The drop today comes after the company released a business update last week. Aurora is in the midst of a business transformation in an attempt to become profitable.
Aurora also received a downgrade on Friday, when BMO Capital analyst Tamy Chen downgraded the stock and dropped the price target from $7 to $5.45 per share. Shares closed Friday's session at $9.60. Chen said she believes that the current valuation of Aurora's shares is "out of line with fundamentals."
Aurora management has been trying to improve those fundamentals since it launched a business transformation early in 2020. The plan is designed to reduce expenses, better scrutinize capital expenditures, and improve its balance sheet to attain profitability.
In last week's update, the company said its improved balance sheet has allowed it to amend its credit facilities to provide additional financial flexibility. Aurora is also scaling back production to better align with sales, and is "moving to a more variable cost structure in cultivation" by using external suppliers, according to a statement from CEO Miguel Martin.
Martin said the company closed one growing facility, and reduced production at another to 25% of its previous capacity. For investors, an improved balance sheet is a positive, but reducing costs by lowering production is not a good direction. Profitability seems to still be a long way away, and helps explain the recent analyst downgrade.