Opinions
Brian Madden
Aurora Cannabis
ACB-T
DON'T BUY
Oct 24, 2018
$9.460
Stock price when the opinion was issued
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DON'T BUY
He feels all cannabis stocks are gambling stocks. A maturing debenture is expected to keep downward pressure on the share price. There is no assurance that any existing company will be a survivor -- it is simply too early. No one is making money in this space. Without being able to predict revenues and expenses, it is too risky. He would stay away from these.
BUY
They each have their own strengths. He would pick Canopy (WEED-T) because they are the 800 lb gorilla. Aurora has lots of news about balance sheet challenges but they have low costs that he thinks will still come down further.
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He's wary about all cannabis stocks. He buys stocks with real cash flows and earnings, and that pay dividends, instead. How much success is already reflected in the stock prices? The profit margins likely won't evolve like they do in big tobacco (35-50% operating profit margins) or in liquor. Cannabis may evolve to become agriculture growers like corn or soybeans--capital intesive and low margin. There could be more bloodletting in this sector. One day, the dust will settle and these stocks will have a sensible valuation. Until then, own a producer with a unique strategy like medicinal or one with brand building which he doesn't see yet. Too much risk still.