Marijuana stock investors may be feeling a bit bemused this afternoon because, for a change, their stocks aren't moving all in one direction, like a herd of green-leafed lemmings. Instead, while Charlotte's Web Holdings (OTC:CWBHF), Sundial Growers (NASDAQ:SNDL), and Hexo Corp (NASDAQ:HEXO) are all moving lower -- down 4.3%, 4.9%, and 5.3%, respectively in 12:10 p.m. EDT trading -- one stock is breaking away from the herd today.
Aurora Cannabis (NASDAQ:ACB) stock is up 6.8%.
Aurora Cannabis is moving higher today on mixed news about its fiscal fourth quarter 2021, which the company reported last night.
On the one hand, Aurora's sales declined steeply year over year, with total revenues falling 20% to CA$54.8 million and consumer cannabis sales in particular down a staggering 45%. On the other hand, the company said its "adjusted" earnings before interest, taxes, depreciation, and amortization (EBITDA) for the quarter were less bad than anticipated, with losses (by that metric) shrinking by 42% to CA$19.2 million.
Probably the best news of all is that Aurora tamped down its cash fire, shrinking cash burn from $97 million in fiscal Q4 a year ago to just $1.6 million in negative free cash flow in fiscal Q4 2021.
This news, combined with management's assurance that Aurora now sees a "clear pathway to adjusted EBITDA profitability" at some point in the future, explains why investors in this particular marijuana stock seem pretty happy today. But what about investors in the other marijuana stocks? Why are investors selling off shares of Hexo, Sundial, and Charlotte's Web at the same time that they're piling back into Aurora?
I suspect the 45% decline in Aurora's recreational cannabis business has a lot to do with the pessimism. As Aurora reminds us, there are "ongoing challenges in the Canadian adult recreational market," leading Aurora to emphasize its "#1" positioning "in global medical cannabis by revenue on a trailing twelve-month basis" instead.
That may have broader implications for the cannabis industry at large, seeing as investors up till now have been placing a lot of faith in the prospect of recreational marijuana getting legalized. If the real money is in medical marijuana, however, then the gains to be expected from wholesale legalization of marijuana may be less than anticipated.
In which case, investors in Hexo, Sundial, and Charlotte's Web might have good reason to be selling their stocks.