Marijuana stock Aurora Cannabis (ACB 1.45%) is trading down by more than 10% on Friday, following a highly critical analysis from an investment bank.
Late Thursday, Piper Sandler published a note saying it downgraded its recommendation to underweight (sell, in plain English) from the previous neutral rating (hold). The investment bank also took an ax to the price target, slicing it from $3 to $1.
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In its note, Piper Sandler expressed concern about the poor state of Aurora's balance sheet, and its cash flow issues. Of the latter, it does not expect cash from operations to land in the black until the company's Q3 of fiscal 2021. It is currently in Q3 of 2020.
Another negative is weak sales in Europe, due in no small part to a recent suspension to Aurora's activities in Germany.
One positive note in Piper Sandler's note is that the company remains a powerhouse on the Canadian market. However, Canada has significant issues that must be overcome, including an acute cannabis supply problem.
Aurora has not yet commented on this latest withering analysis.
The company is hardly an analyst darling these days. Less than a month ago, another investment bank analysis determined that the stock's value was exactly $0. In launching coverage of Aurora in December, GLJ Research cited concerns similar to those of Piper Sandler, while highlighting the company's significant cash burn and its high indebtedness.
The company's list of internal and external challenges is long, meanwhile it continues to cope with fresh challenges. Recently, for example, Aurora lost two high-ranking executives.
