Any way you look at it, the last five years have been atrocious for Aurora Cannabis (ACB -0.15%). Shares of the Canadian cannabis company plunged nearly 99.7% below the high set in the first half of 2019.
Believe it or not, though, things appear to be getting better for Aurora. The company reported its fiscal 2024 second-quarter results after the market closed on Thursday. Investors liked the Q2 update so much that the marijuana stock soared as much as 13% in early trading on Friday. Could Aurora Cannabis stock actually be a screaming buy right now?
Mounting momentum
Even a skeptic will be forced to admit that Aurora Cannabis seems to be experiencing mounting momentum. The cannabis company's net revenue jumped 30% year over year, to 63.4 million in Canadian dollars. Aurora delivered positive adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of CA$3.4 million -- a record high for the company and its fourth consecutive quarter of positive adjusted EBITDA.
CEO Miguel Martin proclaimed: "This is our strongest fiscal year to date." Aurora reaffirmed its previous goal to achieve positive free cash flow in calendar year 2024. Martin said that the company is "moving closer to reaching our target."
Aurora Cannabis is especially booming in international medical cannabis markets. The company's largest European market is Germany, where it's one of only three licensees approved to produce medical cannabis in the country.
Martin stated in the quarterly conference call that "the German medical market could expand significantly" in the near future. He added that Aurora's management is "optimistic about the planned legislation to deschedule cannabis in Germany."
Germany's move could also affect Aurora's second-largest European market, Poland. Martin noted that Germany "has a lot of influence on Poland."
Aurora Cannabis could have an even bigger opportunity in Australia. Martin believes that Australia could become the world's largest medical cannabis market outside of the U.S. Aurora already exports medical cannabis to the country using a distribution partner.
Continued challenges
To be sure, Aurora continues to face challenges. That's especially evident in the Canadian adult-use recreational cannabis market.
Martin acknowledged that "rec is a challenge in Canada right now, particularly in certain geographies." However, he said that Aurora hasn't "given up on rec." He even said that the company sees "opportunities for our Canadian adult use business to move to profitability as other market participants exit."
There's also the reality that Aurora Cannabis' financial position constrains how much it can invest in growth. The company exited the medical cannabis market in the Netherlands for this very reason. While Aurora reported a net cash position of over CA$200 million in its fiscal 2024 Q2 update, it will be forced to tap into that reserve until it's generating positive free cash flow.
Don't look for sequential sales momentum in Aurora's next quarter. The company stated that it "expects cannabis net revenue to be largely similar to fiscal Q2 2024."
A screaming buy or another false signal?
Aurora Cannabis stock has rebounded before with the gains quickly evaporating. We only have to look to September of this year for an example of this happening. Is the stock really a screaming buy now, or is the positive fiscal Q2 update just another false signal?
I'll address the second question first. Aurora Cannabis does seem to be turning the corner. The company's EBITDA is definitely moving in the right direction. Its international medical cannabis business continues to pick up momentum. I'll wait and see if Aurora actually achieves positive free cash flow next year, but the goal at least appears to be within reach.
Now for the first part of the question. Despite the improving conditions, I wouldn't say that Aurora Cannabis is a screaming buy. Yes, some aggressive investors might be interested in nibbling at the stock in hopes that good news in Germany could provide a major catalyst in the near future. However, Aurora remains a highly speculative stock that is by no means a shoo-in to be successful anytime soon. Investors have better alternatives, in my view.
