Things haven’t been too rosy for the most popular pot stock Aurora cannabis, but now it appears to be coming out of the woods. A few good things have happened recently and investors have cause to celebrate.
Cannabis investors have been having it rough especially in the last three quarters. Marijuana stocks began on massive gains exceeding 70% but later experienced a steep plunge in the subsequent months. Some pot companies even hit rock bottom that forced them out of business completely. Aurora cannabis, which is arguably the most popular pot stock, was not exempted from the turmoil. They’ve had their fair share of upheavals.
Unfavorable Conditions In The Market
When marijuana was officially legalized in Canada, investors rushed in expecting to make a quick buck. It was expected that with the increased demand for cannabis both for medicinal and adult-use, profitability would be realized quickly. Unfortunately, several unexpected challenges thwarted any hopes of a successful rollout. Supply issues in Canada due became an impediment to high sales in the region.
All over the world where pot is legal, the black market poses a significant challenge to the legal market. It’s hard for legal businesses to compete on price with the illegal black market which has no regulations to adhere to or tax to pay. Speaking on tax challenges, cannabis taxation in North America is through the roof!
Amidst the challenges and setbacks, investors have held onto hope that something good will come out of their patience. And sure enough, their patience seems to be paying off, albeit slightly.
Things Are Getting Better For Aurora Cannabis
Just three days ago (Monday, Feb 3rd) Aurora announced that Germany had lifted a ban that had stopped Aurora from selling medicinal cannabis products in the country. With this, the marijuana company may be able to achieve higher sales volumes for their cannabis products.
In November 2018, Germany decided to review Aurora’s processes as relates to the manufacture of medicinal cannabis products. Aurora, however, maintained that all their processes were up-to-par with the country’s requirements for such products. The pertinent issue was the method used by Aurora to prolong the shelf life of their weed flowers. As much as they maintained their innocence, they did their best to cooperate with the investigations. As it now stands, they have been given a “clean bill of health.”
In the whole of the EU, Germany has the largest market for medicinal cannabis. Therefore the two-month suspension was a big blow to Aurora as well as their investors.
More Good News!
Aurora Cannabis has also announced that they have just received the EU Good Manufacturing Practice certification for their new facility- Aurora River Facility. This is an acquisition from MedReleaf.
Why is this important for the company? This will expand the overseas opportunity for the company. For any marijuana company to survive the turbulence in the market they need to establish their presence profitably in the overseas market.
Aurora Cannabis, in particular, has always had a focus on abroad markets. But even with lots of effort, they have not managed to gain a significant market share. International sales for Aurora cannabis had stalled at $5 million per quarter. But with Germany being on board, Aurora cannabis may be able to push better volumes in the international market.
Some Challenges That Need To Be Tackled
Aurora cannabis has had some victories to celebrate, yet the hurdles ahead are admittedly challenging. If this can be overcome the long term potential for this stock will lucrative. However, if this shall remain as is, then the reverse is sadly true.
Recently, Aurora halted the construction of what would have been its largest cultivation greenhouse. This was a blow to the whole industry. It appears that capital constraints led to this event. Has Aurora recovered from this cannabis capital challenge? Not yet, unless something drastic happens this may impede future operations for the most popular cannabis company.
Another issue that may affect the performance of Aurora is the regulatory challenges in Canada. Ontario, which should be one of the most vibrant markets for recreational weed has not been able to open as many weed dispensaries as needed. With the Ontario Cannabis Store running the show, sales are bouncing off a ceiling. It may take a long while before Canada’s most populous province achieves the sales targets that it is expected from it.
Profitability is still a far off dream for Aurora as well as numerous other pot companies. It is projected that if Aurora can get past the current bottlenecks it may be able to realize recurring profits by the fiscal year of 2022. Will investors hold out this long? It’s a wait-and-see situation as we hope for the most popular pot stock Aurora Cannabis to surprise us again.