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May 22, 2020, 6:53 a.m. EDT

Aurora Cannabis downgraded by Jefferies as re-rating 'neither justified nor sustainable'

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By Ciara Linnane

Jefferies downgraded Aurora Cannabis Inc. stock /zigman2/quotes/210559470/composite ACB +3.88% /zigman2/quotes/203734337/delayed CA:ACB +3.45% on Friday to underperform from hold and said the recent re-rating following better-than-expected earnings was neither justified nor sustainable. Aurora shares have gained 110% in the month to date, after rallying hard following last week's earnings report. "We think near-term sales and GM (gross margin) headwinds are not fully appreciated, while celebrating a hiatus on further dilution is short-sighted, it (is) inevitably returning again when the balance sheet is addressed," analyst Owen Bennett wrote in a note to clients. "Still set-up well longer-term but we see give back in the price over the next few quarters as likely." The analyst raised his stock price target to C$14 ($9.99) from C$12, to include estimates for Reliva, the U.S. CBD company that Aurora has acquired this week in an all-stock transaction. "Aurora's ex-COO once described US entry as non-negotiable. We agree, though we do view this particular deal/timing as strange," Bennett wrote. "There is still no permanent CEO to lead this CBD push, the CBD space is experiencing significant headwinds currently, there is further dilution at a questionable multiple which has been a criticism of the past, and the B/S (balance sheet) does not afford investment behind the purchase." Aurora's U.S.-listed shares were down 4% premarket and are down 33% in the year to date, while the Cannabis ETF /zigman2/quotes/213173823/composite THCX +3.92% has fallen 18% and the S&P 500 /zigman2/quotes/210599714/realtime SPX -0.20% has fallen 9%.

/zigman2/quotes/210559470/composite
US : U.S.: NYSE
$ 10.18
+0.38 +3.88%
Volume: 3.33M
Aug. 13, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$1.11 billion
Rev. per Employee
$94,401
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/zigman2/quotes/203734337/delayed
CA : Canada: Toronto
$ 13.50
+0.45 +3.45%
Volume: 1.54M
Aug. 13, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$1.47 billion
Rev. per Employee
$123,163
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/zigman2/quotes/213173823/composite
US : U.S.: NYSE Arca
$ 10.35
+0.39 +3.92%
Volume: 36,948
Aug. 13, 2020 4:00p
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/zigman2/quotes/210599714/realtime
US : S&P US
3,373.43
-6.92 -0.20%
Volume: 1.96B
Aug. 13, 2020 5:10p
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