Aurora Cannabis has reported a stronger-than-anticipated fourth quarter for fiscal 2024, according to Roth Capital analyst Bill Kirk. The company’s Adjusted EBITDA for the quarter exceeded expectations, although the stock market response was less favorable due to concerns over slowing sequential growth.
In a note dated June 19, Kirk reiterated a ‘Neutral’ rating for Aurora Cannabis and adjusted his 12-month price target from $8 to $7. He highlighted the company’s impressive margin expansion and debt-free status, alongside its leadership in international medical cannabis markets. Despite this, Kirk expressed worries about a deceleration in profitability.
Aurora Cannabis achieved fourth-quarter net sales of $90.5 million, surpassing the consensus estimate of $88.8 million and the previous quarter’s sales of $88.2 million. The company also reported an Adjusted EBITDA of $16.7 million, exceeding the consensus of $15.2 million. Notably, the Adjusted EBITDA from the previous quarter was restated to $19.4 million, down from $23.1 million. While this marks a decline from the record third quarter, Aurora’s performance still outshines that of many peers in the industry.
The gross margin improved to 62% from 61%, even as selling costs rose to $15.5 million from $13.1 million and general and administrative (G&A) expenses increased to $28.6 million from $23.7 million. Kirk anticipated that one-time costs associated with Australian operations would decrease, but noted that Bevo-related expenses and labor costs might continue to impact G&A.
Looking ahead, Aurora expects lower net sales and EBITDA in the first quarter of fiscal 2025, primarily due to a weaker international sales mix influenced by policy changes in Poland. Medical cannabis sales increased by 49% year-over-year but saw a slight decline of 1% from the previous quarter. The significant international growth of 114% year-over-year in markets such as Germany, Australia, Poland, and the UK was a driving force, with Canadian sales up 1%.
The company’s Adjusted medical gross margin rose to 70% from 69% in the third quarter. Aurora continues to focus on supplying the Canadian market to capitalize on higher-margin international medical opportunities. In contrast, consumer cannabis sales dropped by 20% year-over-year and 18% quarter-over-quarter, while plant propagation sales rose by 28% year-over-year during a seasonally small quarter.
Medical products constituted 75% of total revenue and 88% of gross profit, marking a slight decrease from the previous quarter. Kirk noted that Aurora’s ability to leverage Good Manufacturing Practices (GMP) in international markets offers future growth opportunities, particularly in Australia, Germany, Poland, and New Zealand. He emphasized that the Canadian market, led by Aurora, is effectively capturing high-quality international demand.
For fiscal 2025, Aurora generated $51.1 million in Adjusted EBITDA from total revenue of $343.3 million. Kirk projects an increase in these figures for fiscal 2026 to $69.3 million in EBITDA on $395.2 million in revenue. While he finds the current EBITDA profitability and valuation at under 2x enterprise value to sales appealing, he cautioned that future growth remains contingent on legislative changes beyond Aurora’s influence.
Despite challenges in the adult-use market in Canada, Aurora is currently benefiting from the stability of the Canadian medical market while exploring profitable international medical ventures. Kirk concluded that although the Canadian market may not provide long-term growth, recent price stabilization and Aurora’s solid market share in the medical sector create a reliable foundation for the company.
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