Aurora Cannabis Inc. shares plunged Monday after Stifel Nicolaus analyst Andrew Carter told customers it was time to sell, noting that headlines for the Canada-based cannabis company's latest quarterly report were bad the details of the results are even worse.
Carter downgraded Aurora's shares to sell, a little more than three months after initiating coverage with a hold rating. He reduced the price target of the listed stock to $ 5, which is 32% below today's level of $ 7.
The Canada-listed shares
cast 6.2%, while US listed shares
fell 5.8% in active morning trading. The volume topped 15 million shares around 11 a.m. East, compared to the full-day average of about 13.3 million shares, according to FactSet data.
Last week, Aurora reported a larger tax loss than revenue in the fourth quarter lowered expectations, sending the stock falling above 9% last Thursday. See Cannabis Watch.
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Stifels Carter helped weigh in on the stock immediately after the results by saying he believed the stock would remain under pressure given expectations that it would need access to the capital markets for a "significant issue" to fund the aggressive growth plans.
But Carter said Monday that Aurora's efforts to capitalize on the capital markets will be "challenged" given the "overwhelmingly negative investor sentiment" against the cannabis sector, damaged credibility and limited catalysts in the near term to drive investor enthusiasm.
Also read : Cannabis companies have a terrible summer when scandals rise and shares slip.
& # 39; The headlines were bad, the details were worse & # 39;
In a note titled "Headlines were bad, details were worse: Downgrade to sell" on Monday, Carter said fourth-quarter results point to "less robust market performance" and difficulties in continuing to position for the larger global opportunity.
potential for Aurora's shares in the short term, given that it will be difficult for the company to continue to position itself for the greater global opportunity in the context of significant financing risk that may challenge the company's ability to fully embrace the level of investment needed by Carter wrote not only in the global cannabis category but also in Canada.
He said he believes the company will remain challenged until it can attract investment from a consumer partner.
Carter's call for a consumer partner comes after Corona beer parent Constellation Brands Inc
made a $ 4 billion investment last year in Canopy Growth Corp.
CGC, + 1.97%
WEED, + 2.14%
which led to the ousting of high profile co-Chief Executive Bruce Linton and after cigarette salesman Altria Group Inc .
said it would pay the equivalent of $ 1.8 billion for a 45% stake in Cronos Corp.
See related : Canopy Growth's remaining CEO talks about pot roasting , and searched for his replacement.
Carter said Aurora is likely to have trouble competing with rivals Canopy Growth and Cronos in the global cannabis market until it can establish a partnership with a well-established and vested consumer partner. While these partnerships helped bring significant "risk" capital to Canopy Growth and Cronos, the risk has increased for Aurora given the recent stock market volatility and uncertainty about Aurora's willingness and ability to attract a partner.
"Aurora has made mixed comments about pursuing partnerships, but we believe the company will be required to continue following an independent path with global consumer companies that are likely to take a wait-and-see approach to the sector with less incentive to cooperate with a Canadian LP, "Carter wrote.
Aurora's stock has fallen 26% over the past three months, while ETFMG Alternative Harvest's listed funds
has dropped 20% and the S&P 500 index
has received 3.9%.