Cannabis Corner: Aurora Is Embarrassed

At least Apple still has brand cachet and loyal fans to cushion ‘s

Aurora Cannabis Inc. (NYSE:ACB) plunged this week on what would have nominally been a great quarter. Revenue quintupled as the company’s dried agricultural product sales went into overdrive.

A few investors expected a little better, but any debate over whether this stock deserves a 33X revenue multiple and not 34X is really just fighting over right of way in a gold rush. Aurora and its peers are capturing massive market opportunities in real time.

The problem is that in order to get that 400 percent revenue growth, Aurora needed to grow 10 times as much cannabis. Prices per gram have cratered from nearly $9 to under $6.

That’s the tyranny of too many growers crowding into the market faster than demand is rising. Demand is carefully regulated. Anyone with a license and shareholder capital can build a greenhouse.

And until the cultivators figure out how to differentiate their product, every gram they grow looks more or less the same as every other gram. When supply expands faster than demand, prices go down.

Some people factored that into their growth models on these stocks. Other investors are only finding out now that while a cultivation license is still an excuse to print money, crop yields don’t stretch as far as they hoped.

I’m eager to add true differentiated companies to my Turbo Trader Marijuana Millionaire Portfolio. Aurora isn’t in there for a very good reason.

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Hilary Kramer

Hilary Kramer is an investment analyst and portfolio manager with 30 years of experience on Wall Street. The Financial Times describes Ms. Kramer as “A one-woman financial investment powerhouse” and The Economist distinguishes her as “one of the best-known investors in America”. Ms. Kramer is often quoted in publications such as the Wall Street Journal, New York Post, Bloomberg, and Reuters. She is a frequent guest commentator on CNBC, CBS, Fox News and Bloomberg, providing investment insight and economic analysis. Ms. Kramer was an analyst and investment banker at Morgan Stanley and Lehman Brothers. Ms. Kramer founded and ran a long-short hedge fund and has been chief investment officer overseeing debt and equity portfolios. Since 2010, Ms. Kramer’s financial publications have provided stock analysis and investment advice to her subscribers. Her products include GameChangers, Value Authority, High Octane Trader, Triple-Digit Trader, 2-Day Trader, IPO Edge and Inner Circle. Ms. Kramer, a Certified Fraud Examiner, has also testified as an expert in investment suitability, risk management, compliance, executive compensation, and corporate governance. Ms. Kramer received her MBA from the Wharton School at the University of Pennsylvania and her BA with honors from Wellesley College. Ms. Kramer has provided testimony regarding investment policy to the U.S. Senate and is a frequent speaker on the markets, portfolio management and securities fraud and compliance. Ms. Kramer is also the author of “Ahead of the Curve” (Simon & Schuster 2007) and “The Little Book of Big Profits from Small Stocks” (Wiley 2012).