Shares of Aurora Cannabis ACB were lower on Friday after the Canadian cannabis company was upgraded by analysts at Jefferies but the investment firm's price target indicates a downside.
Analyst Owen Bennet upgraded the stock to hold from underperform but also cut his price target to C$8.56, representing 8% downside from the stock's previous closing price.
The firm says that the company's operational weakness continues while a $1 billion shelf offering from March "means some kind of U.S. move is much more likely."
"The company is still losing money - its cash from operations seeing another outflow of C$66 million in the most recent quarter, and we do not see the company being Ebitda positive until fiscal year 2023," Bennet said, according to Seeking Alpha.
The firm sees U.S. multistate operators as being more attractive than Canadian companies, as "the main bull argument for much of the Canadian names in recent times has been U.S. optionality. ACB is no different."
Aurora shares at last check were down 0.5% to $7.41.
The U.S. market for legal recreational cannabis has been showing signs of strength.
Earlier this week, Massachusetts recreational sales surpassed $2 billion just three years after the drug was legalized in the state.
The state passed the $1 billion milestone on Nov. 3, 2020, according to Masslive.com. When the covid-19 pandemic in 2020 began, adult-use retailers were shut down for two months.
And also earlier this week, New York State took steps to move its recreational industry forward with Gov. Kathy Hochul saying that lawmakers in the state were set to confirm her nominees to lead the marijuana legalization rollout.