Perhaps you have heard that one of the best analysts covering the cannabis industry has chosen Aurora Cannabis (NYSE: ACB) for the best stock of marijuana on the market in right now. You may also have noticed that Aurora's stock price has risen by more than 90% so far in 2019.
With the praise of the analyst and power plant performance, you might wonder if it's time to buy Aurora Cannabis. The answer is … maybe. Here are five things you should first know before purchasing hot marijuana stocks.
1. It's about to have the highest capacity in the industry
Here's a key fact for the marijuana industry: A company can only sell what it can produce. Of course, this is true for almost every industry. But here's another fact for the marijuana industry that does not apply to most industries: Companies can sell everything they can produce. This happens when demand is greater than supply.
If you put these two together, it makes sense that the most successful companies in the marijuana industry will have the greatest capacity. The good news for Aurora Cannabis is that it is about to have the highest capacity in the industry.
Aurora expects annual production growth of 150,000 kilograms by the end of this month. But its annual funded capacity for the mid-2020 reaches 500,000 kilograms. And this figure does not include the increase in capacity that will acquire the acquisition of Aurora by ICC Labs.
2. This is No. 2 on the Canadian Leisure Market
The Canadian Mall for Adult Recreation is still in its early days. However, we now know that two companies have emerged as clear leaders on the basis of their latest quarterly updates. (NYSE: CGC) claims the highest market share in the Canadian leisure market. However, Aurora Cannabis is not too far behind with a market share of 20% in the quarter ending December 31, 2018. There may be some movement down the road, but it seems that Aurora will remain close to the top above
3. This is perhaps the leader in international markets
This is a close call. Aurora reported international sales of $ 2.9 million in Canadian dollars (about $ 2.2 million). In the last quarter, compared with total international sales of Canopy Growth of 2.7 million US dollars. (about 2 million US dollars). This is a small difference, especially considering how early it is for the global medical markets of marijuana.
But Aurora has recently begun supplying cannabis oil to Germany, which will almost certainly cause growth in international sales. The company is active in 24 countries covering five continents. This is even more than Canopy Growth, which has operations in 16 countries.
The biggest drawback of Aurora from an international perspective is in the United States. Aurora can not enter the US marijuana market and keep its list of major stock exchanges while marijuana remains illegal at the federal level. Canopy has already announced plans to enter the US hemp market, but Aurora has not yet done so.
4. It's Fishing For Strategic Partnership Deals
Another area in which Aurora is undoubtedly behind Canopy Growth is in strategic partnerships. Constellation Brands has invested over $ 4 billion in Canopy and holds a 38% stake in the company. So far, only Aurora has rumored potential deals with big companies outside the cannabis industry.
This may change soon. Recently, Aurora led investors of billionaire Nelson Pelts as strategic advisor. Peltz's role will be to help the company find partners in what he calls "mature players in consumer and other market segments." If these efforts are successful, Aurora may have some important catalysts ahead
5. It's diluted the value of existing shares like mad
Perhaps you think I painted too pink a picture for Aurora Cannabis so far. Well, here is the thorn in the rose: Aurora has opened the value of its existing shares like mad, by issuing new shares as part of the deals to buy deals. As the chart below shows, these transactions have had a major impact on the performance of the shares. ACB Chart ” src=”https://media.ycharts.com/charts/7ada61f26173324fa112aa132100bed5.png”/>
The growth of market capitalization reflects what would have been the performance of Aurora's stock if it was not for dilution. However, Aurora executives will tell you that this dilution from issuing new shares is a necessary evil that expands quickly to position the company in the long run.
However, this may still be a problem for investors. Although Aurora tracks profitability, it may still need to raise additional capital for expansion by financing purchased deals in the future. In addition, the company has nearly $ 500 million in convertible banknotes that can be converted into shares over the next few years, resulting in even greater dilution. you need to know how big the global marijuana market would be. Some point to a global market of 150 billion dollars. This figure comes from the UN assessment, but it includes illegal marijuana sales as well as legitimate sales.
Others highlight the potential of cannabis to break several multi-billion dollar industries. Canopy Growth Director-General Bruce Linton even said cannabis could break the combined $ 500 billion global market, including the impact on alcohol, tobacco, and pharmaceuticals. However, the reality is that the global legal market for marijuana will undoubtedly be much greater in the future. I think the market size of over $ 100 billion over the next 15 years is entirely possible.
The market capitalization of Aurora Cannabis is currently about 9 billion dollars. All that the company has to do is capture a small share of the world market to have plenty of room for performance.