He raised his share-price rating to C$6.50 (US$4.96) from C$3.50 (US$2.67) based on valuation.
“[With] excitement around potential U.S. federal reform driving broad undifferentiated enthusiasm, Aurora Cannabis has meaningfully outperformed (ACB plus 100%, cannabis equities plus 17%, and S&P 500 plus 8%),” Carter wrote in a commentary. He seems to be referring to the period about a month through Tuesday.
Aurora shares recently traded at US$6.62, down 20%. The stock has dropped 75% year to date.
The Edmonton, Alberta, cannabis company’s “third-quarter 2020 results [suggest] a sense of urgency with respect to cash needs, with the company’s announcement of a $125 million overnight offering last evening validating our concerns,” Carter said.
“We do not believe the company has demonstrated an enduring right-to-win for new market opportunities, particularly in the U.S., with the increasing competitiveness of the Canadian market challenging the company’s ability to achieve profitability while contending with liquidity issues.”
He said, “our updated target price of C$6.50 equally weights our valuation, which considers the company’s fundamental prospects (C$9 per share) and our updated sum-of-the-parts analysis (C$4).”
Morningstar analyst Kristoffer Inton offered mixed comments on Aurora after its Nov. 9 earnings report.
“We’ve updated our model with the latest results, but our forecast is largely intact,” he said.
“We’ve raised our fair-value estimate due to time value of money effects to C$26/ C$34 per share from C$25/C$33 for no-moat Aurora.
"We maintain our extreme uncertainty rating, given Aurora’s high dependence on capital markets and lack of a strategic investor.”