Aurora Cannabis (ACB -0.15%) might seem like another humdrum marijuana stock, but there are actually a few nuances and recent developments that mean that there's a bit more than meets the eye. And smart investors appreciate that those tough-to-see complications can make the difference between a profitable position and a money burner.
So let's dive in and learn three tidbits that smart investors know about this stock. This will equip you to make the best investment decision regarding Aurora Cannabis.
1. It doesn't compete in the U.S. anymore
Aurora's home market is in Canada, where it sells medicinal marijuana. It also has significant medicinal marijuana operations in the U.K., Australia, Poland, Germany, Israel, and a few other countries.
But smart investors know that it doesn't have a presence in the U.S. And that means when cannabis stocks rally on talk of cannabis legalization in America, sometimes Aurora's does too, even though it can't make a dollar of revenue from any change in regulations there.
It's easy to see why investors might get confused about its lack of U.S. operations, because Aurora formerly had a U.S.-based subsidiary. In May 2020, it acquired Reliva, a U.S.-based hemp and cannabidiol (CBD) business, for $40 million in stock. But on Aug. 9 of this year, the business opted to shutter Reliva because of discussions it had with regulators at the Food and Drug Administration (FDA) about the timelines and approaches it was investigating for regulating CBD products. So the company eliminated its exposure to the U.S. marijuana industry completely.
2. It's paying back its debt early in big chunks
Witty investors understand that when companies pay back their debt before it's due, it saves them money that'd otherwise be spent on interest. The company can instead use that money to invest in its growth. And that's precisely what Aurora Cannabis has been doing over the course of 2023, including quite recently.
On Sept. 8, it bought back $9 million of its convertible senior notes, which it paid for by issuing new stock. Since the end of 2021, it repurchased around $306 million of its convertible debt, saving roughly $24 million in interest in the process. It now has only $39 million of convertible notes outstanding, and Aurora's cash, equivalents, and short-term investments total just over $119 million. So, it could potentially also buy back its remaining notes sometime this year or early next year, and that'd leave it with plenty of leverage to lean on if it ever needs to borrow to stoke growth.
3. Its revenue experiences seasonality
Wise investors are attuned to the seasonal patterns affecting the sales of their businesses, even when the bulk of revenue isn't affected. Such is the case with Aurora Cannabis, which has multiple drivers of seasonality in its sales. People tend to buy more marijuana in the late spring and summer months, slightly less in the fall, and then more again around the holidays. But there's an even bigger seasonal element for Aurora specifically.
Since it acquired Bevo Farms, an ornamental plant and vegetable propagation company in August 2022, it earns a decent portion of its revenue on a seasonal basis. As much as 75% of Bevo's sales occur before the end of June each year, as outdoor growing conditions become inhospitable in Canada soon thereafter. In Aurora's fiscal first quarter of 2024, which ended in June, Bevo brought in almost $15 million.
That was actually a pretty big slice of the company's haul of $56 million for the three-month period. But smart investors know to expect a much smaller contribution from Bevo through the rest of the calendar year. And that means they won't get rattled when next quarter's revenue data doesn't look as great as the first quarter's as the plant propagation season draws to a close.
