Shares of leading marijuana stock Aurora Cannabis (ACB -1.40%) jumped in afternoon trading Friday, after the company beat analyst targets for fiscal second-quarter 2022 revenue and predicted it will achieve "adjusted EBITDA profitability" in the first half of next year. Aurora's good news is even lifting the shares of its fellow travelers in cannabis, Tilray (TLRY 7.46%) and Canopy Growth (CGC 10.37%).
As of 12:05 p.m. ET, Aurora Cannabis shares are up 3.5% -- but Tilray is up a respectable 2.9%, too, and Canopy Growth is actually surging most of all, up 7%!
What did Aurora Cannabis say last night that has investors feeling so optimistic today? Actually, the news was quite mixed.
On the one hand, yes, sales exceeded estimates slightly. On the other hand, total revenue for fiscal Q2 2022 declined 10% year over year to just 60.6 million Canadian dollars ($47.78 million). Despite medical marijuana sales rising 18% year over year, Aurora suffered a steep decline in recreational cannabis sales -- which were down 48% year over year. Management blamed this decline on "industrywide pricing pressures across our portfolio" and an 18% decrease in the volume of product sold.
Similarly, the company managed to dramatically lower the rate at which it lost money in Q2 2022 -- with net losses falling 75% in comparison to Q2 2021, to just CA$75.1 million. But it still lost money.
Nevertheless, hope springs eternal for Aurora Cannabis and its compatriots. Downplaying the loss calculated according to generally accepted accounting principles (GAAP), the company noted that its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) loss in Q2 was only CA$9 million. Furthermore, the company plans to cut another CA$20 million in operating costs through the end of fiscal first half of 2023, and it says it thinks these additional cost cuts -- on top of the CA$60 million in costs it has already cut -- should be enough to lift it over the edge and into adjusted EBITDA profitability at that point.
To be clear, this week's report covered the end of fiscal H1 2022, which coincided with the end of calendar year 2021. So what Aurora Cannabis is predicting is that by the end of calendar year 2022 -- the end of this year, that is to say -- it will finally be profitable.
Will it happen? Perhaps. Aurora does seem to have made significant progress at cutting costs. That being said, the continued declines in the price of marijuana -- down 10% year over year, according to the company -- are going to make achieving profitability increasingly hard for all players involved, be they named Aurora Cannabis or Canopy Growth or Tilray. Investors also need to bear in mind that the goal Aurora set for itself is only adjusted EBITDA profitability -- not true GAAP profitability.
By that latter and more commonly accepted definition, most marijuana stocks look as far away from profitability as ever.