Aurora Cannabis in 5 Charts
Aurora Cannabis (NYSE: ACB) has captured investors' imaginations. Due in part to its aggressive acquisition strategy, the Canadian marijuana company has placed itself on track to become the largest producer in the world -- at a time when the global cannabis market is enjoying explosive growth. In turn, Aurora's stock is up more than 1,800% in the past three years, earning fortunes for its shareholders along the way.
If you'd like to learn more about Aurora Cannabis, the following five charts can help you quickly get up to speed on the core aspects of its business.
Image source: Getty Images.
1. A massive addressable market
Image source: Aurora Cannabis investor presentation.
Worldwide cannabis sales will reach $75 billion by 2030, according to investment firm Cowen. Bank of America analysts, meanwhile, believe the marijuana market could eventually reach $166 billion in annual sales. And Canopy Growth (NYSE: CGC) Co-CEO Bruce Linton says cannabis could one day disrupt markets totaling a staggering $500 billion.
Aurora Cannabis, for its part, is targeting a total global cannabis market opportunity of approximately $200 billion. The company believes that cannabis will increasingly be used in place of other products currently produced by industries such as pharmaceuticals, alcohol, and tobacco. As the leading producer of marijuana, Aurora Cannabis stands to benefit more than perhaps any other company from this booming demand for cannabis.
2. Best-in-class production capacity
Image source: Aurora Cannabis.
No other company can match Aurora Cannabis' peak production capacity. Aurora is on track to produce more than 625,000 kilograms of cannabis annually by 2020. Among its rivals, only Canopy Growth can claim even half that amount in peak production potential.
As such, Aurora Cannabis should enjoy scale advantages over its smaller competitors. Perhaps most importantly, the ability to spread its costs over a larger revenue base should help Aurora generate superior profit margins over time.
3. A leading presence in international markets
Image source: Aurora Cannabis.
Aurora's best-in-class production capacity has also allowed it to establish operations in 24 international markets spanning five continents. By comparison, Canopy Growth has operations in roughly a dozen countries.
By getting a jump-start on the competition in key markets such as Germany and Latin America, Aurora has established beachheads from which it can advance its operations in the years ahead. That's important, since the great majority of cannabis sales will take place outside of Aurora's home market of Canada in the coming decade.
4. An aggressive acquisition-based strategy
Image source: Aurora Cannabis.
Aurora Cannabis has used acquisitions to press its advantage. The company has made more than two dozen acquisitions and strategic investments in recent years to boost its production capacity, expand its international presence, and broaden its product lineup. In turn, Aurora has become one of the most powerful players in the global cannabis industry.
Yet unlike some of its competitors, Aurora has not yet sold a significant equity stake to a larger partner. By contrast, Canopy Growth has received $4 billion in investments from alcohol giant Constellation Brands, while Cronos Group has seen its coffers swell thanks to a $1.8 billion investment by tobacco titan Altria. These investments have provided Canopy Growth and Cronos Group with all the capital they need to expand their operations.
Aurora, on the other hand, has needed to use its stock to finance its acquisitions. While these deals could conceivably produce tremendous value for Aurora and its shareholders, the resulting dilution is likely to make it difficult for Aurora to generate meaningful per-share profits in the near term.
5. Turbo-charged growth
Image source: Aurora Cannabis.
Although sustained profitability may be a ways away, Aurora is enjoying torrid production and revenue growth. The company's cannabis production volume surged 99% sequentially and 1,200% year over year to 15,590 kilograms in the third quarter. Aurora's net revenue, meanwhile, soared 305% compared to the year-ago period, to $65 million.
And while Aurora's growth investments will continue to weigh on its earnings, profitability may come sooner than many investors currently expect. Management says rising production volumes and declining per-unit costs will help Aurora generate positive earnings before interest, taxes, depreciation, and amortization (EBITDA) beginning in the fourth quarter.
More From The Motley Fool
- Beginner's Guide to Investing in Marijuana Stocks
- Marijuana Stocks Are Overhyped: 10 Better Buys for You Now
- Your 2019 Guide to Investing in Marijuana Stocks
Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool recommends Constellation Brands. The Motley Fool has a disclosure policy.