Aurora Cannabis Shares Smoked by Downgrades, Price-Target Cuts

Aurora shares on Friday are tumbling as analysts cut their ratings and price targets on the medical-cannabis-products company.
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Aurora Cannabis (ACB) - Get Report shares were tumbling on Friday as analysts cut their ratings and price targets on the medical-cannabis-products company.

Bank of America and Piper Sandler cut their ratings on the Edmonton, Alberta, company to the equivalent of sell from neutral.

Piper Sandler analyst Michael Lavery said in a note to investors that Aurora's balance sheet is a risk since its cash from operations is unlikely to turn positive until the fiscal third quarter of 2021.

Lavery, who cut the stock to underweight, added that he expected the company to have to refinance $360 million of debt due in August 2021, an effort he says could be challenging in this environment.

In addition, Lavery said European sales were expected to spark growth, but the government has halted the sales of Aurora products.

Lavery cut his price target to $1 a share from $3 and downgraded the stock to underweight from neutral.

Christopher M. Carey, an analyst at Bank of America, Aurora's stock will have a difficult climb until the company's balance-sheet issues are settled.

Carey said Aurora wasn't positioned "to meet financial covenants on its important C$400 million (US$306 million) credit facility."

In light of the lingering uncertainty about the covenants, Carey said he was struggling "to envision a scenario where shares have sustainable support."

Carey cut the stock's rating to underperform from neutral and cut his price target to C$1.50 (US$1.15) from C$4 ($3.06).

Last month, Aurora's shares sank after the company said that Chief Corporate Officer Cam Battley was stepping down.

At last check Aurora shares traded on the New York Stock Exchanged were off 7% at US$1.73.