Daily Stock Market Reports

Why Aurora Cannabis Shares Dropped Today

What happened

Canada-based cannabis producer Aurora Cannabis (ACB -6.56%) reported its fiscal 2022 fourth-quarter and full-year earnings Tuesday evening, and the market was not impressed. Shares of Aurora plunged by 12% in early trading Wednesday, and remained down by 6.8% as of 11:54 a.m. ET. 

So what

Analysts were surprised by the magnitudes of both Aurora’s actual and adjusted losses. For the quarter, which ended June 30, its net loss was approximately $462 million, including a non-cash impairment charge of $377 million. Excluding that charge, the adjusted loss of $85 million was still worse than the $31.8 million loss expected by analysts, according to FactSet Research. The company’s bottom line did improve from a $100 million loss in the prior-year period. 

Now what

The company said the large impairment charges “were triggered by changes in cannabis market conditions, and in the current capital market environment including higher rates of borrowing and lower foreign exchange rates.”

Aurora did have some good news in its report, too, however. Revenue from its international medical cannabis business soared by 35.4% year over year. Management said that strength came from its growing presence in several important emerging cannabis markets. 

Aurora also reiterated its prediction that it will be in a position to be profitable on an adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) basis by the end of calendar 2022. That may help explain why the stock recovered some of its early losses Wednesday morning. If it doesn’t achieve that goal, investors can likely expect Aurora shares to fall further. 

Howard Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends FactSet Research Systems. The Motley Fool has a disclosure policy.

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