Investors interested in the marijuana industry will be familiar with Aurora Cannabis (ACB 1.39%). This pot grower has been one of the bigger names in the market at least since the end of the last decade. Unfortunately, like most of its peers, Aurora Cannabis has performed terribly in recent years -- its shares have lost 96% of their value since 2021. But with notable regulatory movements in the cannabis market in the U.S., some might think that Aurora Cannabis is ready to bounce back and soar if it can capitalize on these opportunities. Should investors bet on the pot grower to do so?
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A challenging market to navigate
While recreational use of cannabis has been legal in Canada since 2018, Aurora Cannabis has been unable to find significant success in its home market. It has faced the same problems as most of its peers: stiff competition, oversupply, strict regulatory oversight, and more. The U.S. has a far larger population and could present a larger market opportunity. And with President Donald Trump recently signing an executive order to reclassify cannabis from a Schedule I to a Schedule III substance -- which makes research into the substance easier and grants pot growers access to more banking services -- some investors are hoping for a brand-new pot boom.
However, cannabis remains illegal at the federal level. Even with the perks that reclassification comes with, it will still be illegal to cross state lines with the substance, for instance. Further, Aurora Cannabis has no presence in the U.S. market to speak of. It acquired Reliva, a company focused on selling hemp-based CBD products in the U.S., in 2020. But Aurora Cannabis effectively shut down its Reliva operations back in 2023 due to significant challenges in the CBD market.
NASDAQ: ACB
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The future is bleak
Will Aurora Cannabis seek to reenter the U.S. following the recent regulatory progress in the country? For a company that is generating weak revenue growth and consistent net losses, it would be a challenging move -- not that these factors have stopped Aurora Cannabis before. If it does opt for an acquisition in the U.S., it will likely do so through dilutive means of financing. That's how it was able to fund acquisition sprees (which amounted to very little) years ago.
That's not good for investors, unless we can be reasonably sure that its strategy will pay off -- and given the challenges in the industry and Aurora Cannabis' own mediocre track record, we have no such guarantee. Where does that leave the company? There might or might not be a pot boom on the horizon. But even if there is, Aurora Cannabis certainly isn't the best pick to capitalize on it. The stock is more likely to be a wealth destroyer than to 10x in the next decade.
