Aurora Cannabis (ACB) just jumped 250% in two days after reporting third-quarter earnings that crushed expectations.
Not many people saw that huge jump coming. If you missed it – don’t worry.
I see a high probability that the same pattern will repeat itself on Friday morning when the largest cannabis company in the world reports highly anticipated fourth-quarter earnings.
Here’s what you need to know and how to play Friday’s big event.
Aurora Cannabis (ACB) is one of the largest cannabis companies in the world. Shares of ACB jumped 250% in two days last week after reporting third-quarter results that crushed expectations.
Here are some more details from Aurora.
- Net revenue, excluding provisions, of $78.4 million in Q3 2020 was up 18% quarter over quarter. Cannabis net revenue, excluding provisions, was $72.6 million, up 15% over Q2 2020.
- Consumer cannabis net revenue, excluding provisions, was up 24% from the prior quarter to $41.5 million, demonstrating the impact of the launch of Daily Special, Aurora’s value brand, and a full quarter of Cannabis 2.0 products. Medical cannabis net revenue, both Canadian and international, showed healthy growth of 13.5% overall.
These results send an important and encouraging message to investors – cannabis stocks are shifting into a bullish phase.
In 2019, pot stocks fell short of lofty expectations. Today, the sector is crushing more realistic expectations.
Canopy Growth Corp (CGC) is the largest cannabis company in the world with a market cap of $7 billion and operations on four continents.
Canopy is scheduled to report fourth-quarter results on Friday, May 29, 2020, before the opening bell. Aurora’s impressive results tell me that Canopy is also going to crush expectations.
Canopy’s New CEO Has Been Slashing Costs and Restructuring Operations
Canopy installed new CEO, David Klein, in early 2020. Klein’s goal was and is to slash spending, sell unprofitable assets, and streamline operations to make Canopy profitable. Klein has been on a roll.
In the last few months, Canopy has made huge moves to hit these goals.
For example, Canopy closed two of its largest cultivation facilities in Canada, totaling more than 800,000 square feet of annual production capacity. Those are tough losses to absorb in the short run, but making hard moves will pay off in the long run. I expect to see that pay off in Friday’s earnings report.
Canada Legalization 2.0 Is Driving Better Sales Growth
Cannabis extracts became legal in Canada in 2020, and Canopy has been the category leader. Canopy has the best portfolio of extracts in the industry, including edibles, drinkables, and vapes.
These new products should give Canopy’s year-over-year sales a big boost.
The combination of cost-cutting and surging new-product sales is the perfect combination for a great quarter.
In the meantime, shares of Canopy are trading at a huge discount to the 52-week high. This chart formation reminds me of the way Aurora looked before the big jump.
The Big Picture on Canopy and Friday’s Earnings Report
Canopy reports fourth-quarter earnings on Friday morning before the bell.
After Aurora reported a great quarter, I expect an excellent report from Canopy. With shares trading sharply below the 52-week high, this looks like a great opportunity to take a new look at Canopy Growth Corp (GCG).
About the Author & Cannabis Stock Trades
Michael Vodicka is an equity analyst with more than 20 years of experience trading and investing. His research has been featured in some of the industry’s most respected publications. He has been investing and leading investors in the cannabis sector since 2013.