Aurora Cannabis (ACB -0.15%) shareholders are thirsty for some good news. The company's shares are trading down around 88% over the last three years. That's not great for current shareholders, but investors on the sidelines might be looking for reasons to buy in hopes of a turnaround. Those reasons are few and far between at the moment as times are hard in the cannabis industry, and Aurora can't seem to catch a break.
Let's take a closer look at one of the new green flags worth knowing about with Aurora Cannabis as well as two relatively new red flags that could soon deepen the company's woes.
Green flag: Medicinal marijuana sales are picking up again
The bright spot in Aurora's latest earnings release on Aug. 10 was its quarterly revenue, which shot up by 48% year over year, hitting $56 million. This brought the company one step closer to revisiting the sales heights of its heyday in 2019.
The strong growth marks the second consecutive quarter in which Aurora experienced snappy revenue growth and supports the idea that the steep downtrend starting in early 2021 is now over. It's a clear green flag that the near-term future might continue to improve and eventually even surpass the past.
Management attributes the revenue rebound to strengthening demand in its global medicinal cannabis segment, which is responsible for 55% of its sales. In particular, Australia and the European Union (E.U.) were the hot spots. Growth in those areas is favorable, as the company might be able to hold onto its market share more effectively than in its home market of Canada, where cannabis prices remain depressed due to oversupply.
Red flag No. 1: Aurora may be delisted from the Nasdaq exchange
Aurora's stock currently trades around $0.81 per share. To be listed on the Nasdaq Composite, a business' shares must consistently meet the minimum bid price requirement of $1. But its stock hasn't been worth that much since before March of this year.
Per an agreement with the Nasdaq, starting from Sept. 19, Aurora has 180 days for its shares to meet the minimum bid requirement, once again, or it will be delisted. It's unclear what it can do differently to pump up its stock price. One option is to do a reverse stock split, but investors aren't going to like that and it would likely result in a further price drop for the (now fewer) shares.
Stiff headwinds remain in play in its primary cannabis market in Canada, with vast amounts of inexpensive marijuana continuing to outweigh demand. The financial markets, where cannabis stocks currently are sharply out of favor, are also unlikely to be much kinder to the company over the next six months.
If Aurora is delisted from the Nasdaq, it'll still be listed on the Toronto Stock Exchange (TSX). But that exchange sees just a tiny fraction of the Nasdaq's daily volume. In other words, getting delisted would be yet another serious headwind that would be an immediate headache for shareholders.
Red flag No. 2: Aurora is running quite short on cash
Aurora's trailing-12-month (TTM) operating expenses are $161 million. It has $60 million in current debt and capital lease obligations due within a year. Despite improving somewhat over the last few years, its operating margin is still nowhere near breakeven. The company's cash, equivalents, and short-term investments total only $119 million.
Management plans to realize cost efficiencies worth around $30 million during its 2024 fiscal year, but that won't be enough. So investors should expect the company to take on more debt.
The savings aren't likely to be enough on their own for the company to reach its goal of reporting positive free cash flow (FCF) in the 2024 calendar year. There's still time for its fortunes to improve on that front. But its near-term finances are a big red flag, nonetheless.
