It’s been a rough year for cannabis stocks and even though Aurora Cannabis (NYSE: ACB) is one of the most notable companies in the sector, it had its fair share of struggles in 2019.
Following that yearlong downtrend, here are a few reasons to consider buying Aurora’s stock in 2020.
The Market’s Reaction To Cam Battley’s Perceived Resignation Was Misplaced
“Yes, he was quite visible with investors and spoke with retail and institutional investors, but the three key people at ACB in terms of setting strategy are Chairman Michael Singer, CEO Terry Booth, and CFO Glen Ibbott,” Cantor Fitzgerald’s Pablo Zuanic wrote in a Jan. 13 note.
The Company Could Bring In A Klein-Type CEO
In a note issued on Jan. 2, Zuanic said activist investor Nelson Peltz should help orchestrate the search for a new CEO instead of negotiating a deal to bring consumer packaged goods to the company. A new CEO should be one that “could help bring greater financial discipline to the company.”
Peltz, CEO of Trian Fund Management, was named a strategic adviser in early 2019. David Klein was named CEO of Canopy Growth (NYSE: CGC) in December.
The Selling Of Its Greenhouse Should Be Seen As Good News
“It had been planned to be a 100-ton greenhouse, but the facility was never developed and will not be necessary as the company scales back capital expenditure plans,” Zuanic said. “Net, bigger picture, the move is consistent with the company reining-in capacity expansion plans. We see this as good and not bad news.”
The Trend Hasn’t Worsened
“Management has reconfirmed December quarter guidance, is confident of a sales ramp-up in 2H (on 2.0), is bringing down capital expenditures, and we estimate the company will deliver positive EBITDA by the June quarter.”
Zuanic has a Buy rating and $3.80 (CA$5) price target on Aurora Cannabis. At time of writing, the stock traded at $1.93 per share.
