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Aurora Cannabis Inc. (ACB.TO) (ACBFF) continues to execute and advance its business model as Canada prepares to legalize recreational cannabis and the market has taken notice of this.
For the second time in ten days, Canaccord Genuity raised its price target on the Canadian medical marijuana producer. Today, Canaccord raised its price target on Aurora to $4.45 from $3.65 (on November 2nd, Canaccord raised it to $3.65 from $3.25).
Today, Aurora announced that Hempco Food and Fiber (HEMP.V) (HMPPF) shareholders approved the proposed investment by Aurora as well as approved the option that provides Aurora the right to acquire more than 50% Hempco on a fully diluted basis.
This approval will be beneficial to both companies. It provides Hempco with the funds needed to complete its facility and pursue growth initiatives. For Aurora, the partnership brings product diversification, as well as a low-cost source of raw CBD material for extraction through the partnership with Radient Technologies (RTI.V).
Aurora Crushes Earnings Due to Cannabis Oil and Germany
Yesterday, the licensed medical marijuana producer reported strong earnings and revenue increased by approx. 170% when compared to the same period last year. During the quarter, Aurora produced over 1 million grams and sold 889,965 grams. The average price per gram sold was $8.22 while the cash cost per gram produced was $1.92
During the quarter, Aurora generated $4.7 million in net income on $8.2 million in revenue. If you were to include the company’s unrealized gains on marketable securities, Aurora recorded $14.5 million in comprehensive net income for the quarter.
Over the last year, Aurora has focused on increasing production capacity, expanding into new markets (Germany and Australia), entering strategic partnerships (Radient), and making accretive investments.
These strategic growth initiatives have been paying off and Aurora attributed the revenue growth to cannabis oils, Germany, and a higher average price per gram. The average price of product sold increased by 10.3% from $7.45 to $8.22 per gram, attributable mainly to cannabis oils and sales in Germany (accounted for $1.2 million in revenue).
Radient to Accelerate and Grow Aurora’s Cannabis Oil Business
Cannabis oil has become big business in Canada and licensed producers are very focused on this opportunity since cannabis oils have a higher price point and better margins. Canadian cannabis consumers have also shown a major preference for smokeless products and Aurora is focused on capitalizing on this opportunity.
Earlier this week, Aurora and Radient finalized a master services agreement, pursuant to which Radient has agreed to perform certain services for Aurora using its proprietary MAP technology, as well as other technologies, as an independent contractor in relation to the development, commercialization and supply of standardized cannabis extracts.
Under the terms of the agreement, Radient will provide processing services to Aurora to produce extracts. The agreement initially covers services delivered in Canada, Australia, and the European Union, including Germany where Aurora’s wholly owned subsidiary Pedanios is the largest distributor of medical cannabis on the continent.
This agreement is significant as it will enable Aurora to accelerate the production of high-margin cannabis derivatives. The market for non-smoked derivative cannabis products is growing at a remarkable pace, and this agreement provides a cost-effective and scalable method to meet demand.
Positioned to be a Long-Term Cannabis Leader
Over the next year, Aurora is focused on ramping up the production of cannabis concentrates through the collaboration with Radient and on delivering further product differentiation through the strategic investment in Hempco.
We are bullish on Aurora Cannabis and believe that the company possesses numerous growth catalysts. From the company’s German subsidiary, Pedanios, receiving the results of the licensing tender process in March to the completion of Aurora Sky, there are a lot of exciting catalysts on the horizon.
Aurora has one of the strongest balance sheets when compared to its peers and is levered to several emerging growth trends throughout the world. Aurora has more than 20,000 registered patients in Canada and is well positioned to capitalize on Canada’s recreational cannabis market when it opens. This is a stock investor need to watch.
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