Aurora Cannabis' (ACB -1.12%) stock had ratcheted upward by more than 8.1% on Friday at 10:11 a.m. ET after a Cantor Fitzgerald analyst, Pablo Zuanic, adjusted his outlook on the company from neutral to overweight, citing its favorable positioning within the rapidly growing European cannabis market.
The upgrade is a welcome reprieve for shareholders, as analysts have overwhelmingly rated Aurora as a hold rather than a buy this year, with a few recommending to sell.
The analyst's new outlook is surprising, considering that over the last year, Aurora's quarterly revenue has fallen by more than 10.8%, its total quarterly expenses have risen by above 13.1%, and its quarterly revenue as a proportion of expenses has risen sharply.
Still, as Zuanic specified, its strong and expanding medicinal marijuana market shares in Germany, Poland, and France could potentially solve the problem of flagging revenues over the next couple of years, especially if those countries opt to legalize cannabis for recreational use.
Even if the business can continue to gain traction in the EU, its unprofitability is likely to keep investors somewhat leery of piling into the stock regardless of what individual analysts say. Though its recent bought deal offering, which raised gross proceeds of $172.5 million, means that it isn't in any danger of going bankrupt, it still hasn't proven that it can consistently deliver on either top-line revenue growth or margin improvements over the last three years.
So be on the lookout for the next quarterly earnings report, which might shed some more light on how this company plans to become viable for the long term.