Aurora Cannabis is scheduled to report third-quarter results after the closing bell Thursday.

The company’s earnings season so far has been encouraging, and the pressure on the stock heading into the earnings release presents a trading opportunity, according to Cantor Fitzgerald.

The Aurora Cannabis Analyst

Pablo Zuanic maintained an Overweight rating on Aurora Cannabis with a price target lifted from CA$2.75 ($1.95) to CA$22 ($15.61), noting that it follows a 12-1 reverse split in the stock. 

The Aurora Cannabis Thesis

Aurora Cannabis confirmed its third-quarter sales guidance last month while maintaining its EBITDA and cash flow targets, Zuanic said in a Wednesday note. (See his track record here.)

The analyst said he expects the company to deliver a sales beat for the quarter, with total sales of $68.8 million versus the consensus estimate of $66.7 million.

Aurora Cannabis looks well-positioned to beat the estimate of $33.6 million for recreational revenue, considering the growth reported by peers and estimated mid-teens market growth, he said. 

Domestic medical revenues may come in flat at $25 million, while revenues from bulk and exports are likely to have declined, Zuanic said. 

Gross margin expansion is likely, backed by the rollout of Cannabis 2.0 products, and the company has launched a wide range of edibles, vapes and concentrates, the analyst said. 

Although cash burn may have improved in the quarter, Aurora Cannabis needs to work on this aspect, he said, adding that otherwise "the risk of dilution remains significant."

ACB Price Action

Shares of Aurora Cannabis were down 9.02% at $5.85 at the time of publication Wednesday.

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