Even as the overall cannabis industry has been getting bigger and earning more enthusiasm from investors, Canadian marijuana company Aurora Cannabis (ACB -3.02%) stock has done poorly. Its share price has fallen by 26% over the past year -- undoubtedly frustrating its shareholders -- while the sector benchmark Horizons Marijuana Life Sciences ETF is up by more than 46% over the same period.

And Aurora's shares may not be done declining. Analysts on Wall Street are expecting the pot stock to continue to fall after another uninspiring quarter.

Two people talking and working inside of a greenhouse.

Image source: Getty Images.

Analysts see more than 30% downside

Since May, when Aurora released its earnings report for the first three months of 2021 (its fiscal third quarter), many analysts have been downgrading the stock and cutting their price targets. Aurora reported a year-over-year sales decline of 25% to just 55 million Canadian dollars for fiscal Q3, so it has been difficult to find much reason for bullishness. And while the company is focused on improving its bottom line, it booked an an adjusted EBITDA loss of CA$24 million -- even steeper than the loss of CA$16.8 million it took in fiscal Q2 2021.

Here are some of the price targets the analysts covering Aurora have set:

  • CIBC: CA$9
  • BMO Capital Markets: CA$8
  • Canaccord Genuity: CA$7
  • Desjardin: CA$8
  • Cantor Fitzgerald: CA$9

Last week, the stock closed at $9.82 on the NASDAQ and CA$11.94 on the Toronto Stock Exchange. The five price targets above average out to CA$8.20, suggesting that Aurora's stock could drop by another 31% over the next year. As bearish a forecast as that may be, it still wouldn't put the share price anywhere near the lows it hit in October 2020 when it fell below $4 on the NASDAQ. 

What will make or break the stock this year?

Two factors will determine where Aurora Cannabis goes in 2021 -- its top and bottom lines. The challenges the company has faced in moving the needle to bolster its profits and grow sales have dragged the stock down. Better numbers would help the stock gain some traction, and also lessen the need for management to continually issue new shares to raise cash. 

In the past 12 months, Aurora Cannabis burned through CA$280 million for its operating activities, and raised CA$714 million through stock offerings. Unless the company can stop those trends, it's likely that its share price will descend to the lows that many analysts are projecting.

Is Aurora Cannabis a good contrarian buy?

Aurora has been a chronic underperformer, and as tempting as it might be to roll the dice on the stock and bet that the company will turn things around, that would be a dangerous tactic. Many cannabis companies have been putting up adjusted EBITDA profits of late, including Sundial Growers and HEXO. Aurora isn't generating the impressive growth that multistate operators in the U.S. are posting, and now even companies in Canada are doing better and achieving stronger bottom lines. Until and unless the business improves, there's little reason to expect the stock will rally.

However, it's easy to see why risk-takers might be willing to gamble on the stock. Ahead of its fiscal second-quarter report (for the period that ended Dec. 31), traders bid the stock upward. When Aurora delivered those numbers on Feb. 11, they weren't abysmal, and the company's adjusted EBITDA was moving in the right direction. As a result, the stock spiked even higher to a peak of nearly $19. All of that bullishness faded within days, but it's a reminder of just how quickly some positivity can send Aurora's share price soaring. 

Unless you're the gambling type, I would stay away from Aurora's stock -- it just isn't worth the risk. While the company could surprise investors with positive results next quarter, tougher times are still likely ahead for it and other Canadian cannabis producers.