Aurora Cannabis (ACB 12.87%) is one of the most popular marijuana companies in Canada. However, its results in recent years have been lackluster, and the stock has had a hard time attracting investors. But it's not just Aurora that has been struggling, as there is no shortage of Canadian pot stocks that have been awful investments of late.
Below, I'll look at how much a $1,000 investment in Aurora four years ago would be worth today and how the stock's returns compare with some of its peers.
Aurora first traded on the NYSE on Oct. 23, 2018
Today Aurora trades on the Nasdaq, but its first major U.S. exchange listing was on the NYSE. On its first day of trading on the big exchange, the stock closed at $7.70. A $1,000 investment in the business at that price would have allowed you to purchase approximately 130 shares of Aurora. Since then, the company has done a 1:12 reverse stock split, meaning that instead of 130 shares, you would now be down to about 11.
As of Monday's close, the stock was worth $1.24, bringing the value of those 11 shares to just $13.64. That's quite a destruction of value for Aurora investors. But the sobering reality is that these poor returns aren't exclusive to Aurora, as Canopy Growth and Tilray Brands have also incurred significant declines over that same time frame.
Data by YCharts.
What went wrong?
October 2018 was a key time for the marijuana industry because that's when Canada's recreational pot market officially opened for business. Leading up to that, there was significant excitement in the industry, and investors were bullish on the industry's prospects. But over time, the results proved to be underwhelming.
Data by YCharts.
In the early days, when cannabis companies had soft comparables to go up against (since sales from the recreational market would have been zero), Aurora and other cannabis stocks looked like amazing growth businesses. But things have quickly changed since then, and now Aurora struggles to simply generate positive year-over-year growth.
Is Aurora a better buy today?
Aurora has been working toward improving its bottom line and being more of a stable investment moving forward. However, given its track record, it's hard to trust the business as Aurora still reported a net loss of nearly 1.8 billion Canadian dollars over the past 12 months, and its revenue during that time is just CA$210 million.
At this rate, Aurora remains a speculative buy and not much else. The risk that comes with owning the stock is simply too high for it to be a tenable investment. I'm not confident about its future, and the safer option is for investors to simply steer clear of this troubled pot stock.
