ACB Stock Forecast: Is the Worst Behind Us?

This ACB stock forecast article was written by Maria Grishaev, Analyst at I Know First.

Executive Summary

  • Aurora Cannabis Inc had a mixed year in 2020 with the stock losing 72.49% YTD.
  • With new management, a recent public offering, and legalization of cannabis in five new states in the US, the company’s future is looking better.
  • Based on the Multiples Valuation model, my price target for ACB is 16$, indicating a cautious buy recommendation.
cannabis rainbow


Aurora Cannabis is one of the largest companies in the world in the cannabis industry serving both the medical and consumer markets. It operates eight licensed production facilities, with five sales licenses and operations in 18 countries. The company has a funded production capacity of over 500,000 kilograms. 2020 is a mixed year for the company. The announcements of two of its co-founders’ retirement, a 1:12 reverse share split of its shares in mid-May, and aggressive acquisition strategy caused the stock to plunge by 72.49% YTD while the S&P 500 had risen by 10.11%.

Some of the blame can be placed on Canadian regulatory agencies, which delayed the launch of high-margin derivatives and were slow to approve cultivation and sales licenses. Lackluster demand from consumers forced the company to close down cultivation facilities it invested in and write down the value of cannabis subsidiaries it had acquired, resulting in huge losses.

acb stock forecast performance
(Source: Yahoo Finance)

Successful Public Offering Gives Signs of Trust in Company

Just last week ACB announced the closing of its previously announced public offering of units of the Company for total gross proceeds of US$172.5M. 23M units at a price of US$7.50 per unit were sold, including 3M units sold pursuant to the exercise in full of the underwriters’ over-allotment option. Each unit is comprised of one common share and one half of one common share purchase warrant. Each warrant is exercisable to acquire one common share for a period of 40 months at an exercise price of US$9.00 per warrant share. BMO Capital Markets and ATB Capital Markets acted as the book-runners for the offering.

Possible Growth Opportunities Ahead

The company announced at the beginning of the year a comprehensive transformation plan to significantly reduce the expenses base, rationalize capital expenditures, and better align its balance sheet with market conditions. To do this, the company’s plan is to focus the business on its core areas: Canadian consumer market; Canadian medical market; established international medical markets and U.S. market initiatives. In addition, the net proceeds of the recent public offering will fund growth opportunities, working capital, and other general corporate purposes. There are additional events that we need to factor in as well.

First, the COVID-19 pandemic did not disrupt the company’s business or financial condition. The production and sale of medical and consumer cannabis have been recognized as essential services across Canada and Europe. Given many companies did get hurt by the pandemic, that a good signal.

Second, the 2020 election results are a positive sign too. The addition of five new states in the US with some legalized form of cannabis use along with the belief that president-elect Biden would be more willing to legalize marijuana on a federal level represent the high potential for growth in sales. Investors also see this potential as well as the stock rose by 51.87% since elections day. The recent acquisition of Reliva LLC is one of the company’s ways to expand further in the US with its online store and more than 20,000 retail locations nationwide.

Competition Analysis

Most of the companies in the Cannabis industry have a market cap under $500M, with a few companies that have a market cap over 1B$. We can see the high volatility in the industry in the below chart of stock price movements this year.

acb stock forecast vs competition
(Source: Yahoo Finance)

In terms of production capacity, there is a little competition in Aurora’s scale of production. Aside from Aurora, only Canopy Growth (Nasdaq: CGC) can produce over 500,000 kilograms while Aphria (Nasdaq: APHA) can produce only about half of that. Even they, as Aurora’s biggest competitors, are having a hard time to break even and become profitable and report net losses each quarter.

Aurora and its Canadian licensed peers share some of the same challenges. The competition with low-priced illicit cannabis from the black market is a major one. In addition, the combination of having to delay the launch of higher-margin derivatives due to regulation, coupled with the need to fight for regional markets in North America, means everyone’s profit margins are sinking. That makes the ability to distribute and sell cannabis a key point. Aphria opened new shops and managed to grow its same-store sales and Canopy opened a new e-commerce website and launched a new line of products with Martha Stewart. Aurora understands its need to improve the ability to sell, and it does take steps to do that.

Multiples Valuation Analysis Results in Higher Target Price

I estimated my own target stock price by using the Multiples Valuation model. I looked for Aurora’s peer companies’ P/B ratios (the P/E ratios and EV/EBITDA are irrelevant as some companies’ ratios are negative or zero) and calculated the average P/B ratio for the cannabis industry. I got that the P/B average ratio is 1.89.

Next, I checked in the latest financial report the total assets and liabilities of the company. I made a few assumptions about the future of the company based on what I wrote above. I assumed that the total assets will grow at a rate of 2%, while the liabilities will go down by 8% in the next year. It’s reasonable numbers given the already discussed business plan. I also assumed that the warrants from the public offering are going to be executed and rise the number of shares by 6.5%. That in total brings us to a future book value per share of 8.72.

Overall, I received a price target of 16$. This target price is higher than the 9$ price of the recently sold warrant shares.


I take the cautious buy-side on ACB stock. It is reasonable to expect further growth in the stock price in the long term as the company utilizes its new business plan and improves its performance and balance sheet.

acb stock forecast I Know First

Please note that the updated forecast has a very high signal in the one year forecast. The predictability in every time horizon improved from 0.22-0.28 of older forecasts as can be seen below to 0.38-0.68, resulting in higher confidence in the forecast by the I Know First algorithm. Also, the light green in the short time horizons is a mildly bullish signal while the dark green in the one year time horizon is a strong bullish signal.

Past Success with ACB Stock Forecast

On October 25th, 2020 the I Know First algorithm recommended ACB as one of the Stocks Under $5. The AI-driven stock forecast was successful on the 14 days horizon resulting in a 139.53% gain since the forecast date.

acb past prediction

Moreover, on November 1st, 2020 the I Know First algorithm also recommended ACB as one of the Stocks Under $5. The AI-driven stock forecast was successful on the 7 days horizon resulting in a 176.79% gain since the forecast date.

acb past prediction

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Please note – for trading decisions use the most recent forecast.