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Monday, November 23, 2020

The Bear Trap Springs for Aurora Cannabis Inc (OTCMKTS:ACBFF)

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We called a bottom in Aurora Cannabis Inc (OTCMKTS:ACBFF) when it popped higher on a pattern often called a “bear trap” on August 15 (see “The Bounce is On in Aurora” from that day). The stock has since ripped another 45% in the following 3 weeks. The bear trap pattern sucks in negative sentiment and then exploits that disproportionate lean to the advantage of bulls, often sparking a sharp turnaround, such as we have seen here.

One of the more important recent announcements to hit for the company of late was its confirmation that it, and its wholly-owned subsidiary MedReleaf, entered into supply agreements with the Ontario Cannabis Stores, a key market in the Company’s adult consumer use strategy. According to the release, “When government-run online sales commence on October 17, Aurora and MedReleaf will supply a broad range of dried flower and higher margin products, such as pre-rolls, oils and capsules.”

Aurora Cannabis Inc (OTCMKTS:ACBFF) bills itself as a licensed producer of medical marijuana pursuant to the Marijuana for Medical Purposes Regulations and operates a 55,200 square foot expandable state-of-the-art production facility in Alberta, Canada.

ACBFF’s wholly-owned subsidiary, Australis Capital Inc., seeks to be an active participant in the U.S. Cannabis market. Aurora is trading on the Canadian Securities Exchange under the trading symbol “ACB”. The company is headquartered in Vancouver, Canada.

According to company materials, “Aurora’s wholly-owned subsidiary, Aurora Cannabis Enterprises Inc., is a licensed producer of medical cannabis pursuant to Health Canada’s Access to Cannabis for Medical Purposes Regulations. The Company operates a 55,200 square foot, state-of-the-art facility in Mountain View County, Alberta, is currently constructing a second 800,000 square foot production facility, known as “Aurora Sky”, at the Edmonton International Airport, and has acquired, and is undertaking completion of a third a 40,000 square foot production facility in Pointe-Claire, Quebec, on Montreal’s West Island. In addition, the Company holds approximately 9.6% of the issued shares (12.9% on a fully-diluted basis) in leading extraction technology company Radient Technologies Inc., based in Edmonton, and is in the process of completing an investment in Edmonton-based Hempco Food and Fiber for an ownership stake of up to 50.1%. Furthermore, Aurora is the cornerstone investor with a 19.9% stake in Cann Group Limited, the first Australian company licensed to conduct research on and cultivate medical cannabis. Aurora also owns Pedanios, a leading wholesale importer, exporter, and distributor of medical cannabis in the European Union, based in Germany.”

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As noted above, the company has been marking out an increasing rate of market share dominance, but the shift is coming in the context of very high second-derivative expectations. In all, the chart shows 32% tacked on to share pricing for the listing in the past month, a bounce that has taken root amid largely bearish action over the larger time frame.

Furthermore, the listing has seen a growing influx of trading interest, with the stock’s recent average trading volume running nearly 220% above its longer-run average levels.

“We are proud of the strong relationships we have built with provinces across the country. Our supply agreements with the Ontario Cannabis Stores are evidence of our commitment to working closely with them to deliver the products consumers want to buy, including those under the Aurora brand, San Raphael ’71 and AltaVie.” said Terry Booth, Aurora CEO. “With a population of more than 14 million people, Ontario is the largest adult consumer use market in Canada. Being a supplier to this market through the Aurora and MedReleaf brands provides us with a strong presence that positions us well to generate growth and build further brand recognition. We look forward to making our high-quality products available to the Ontario market, and to initiating a meaningful educational conversation about our products and the appropriate use of them.”

Currently trading at a market capitalization of $6.3B, ACBFF has a significant war chest ($231M) of cash on the books, which is balanced by about $56.1M in total current liabilities. ACBFF is pulling in trailing 12-month revenues of $42M. In addition, the company is seeing major top-line growth, with y/y quarterly revenues growing at 211.1%. As more color becomes clear on the name, we will review the situation and update our take. Sign-up for continuing coverage on shares of $ACBFF stock, as well as other hot stock picks, get our free newsletter today and get our next breakout pick!

Disclosure: we hold no position in $ACBFF, either long or short, and we have not been compensated for this article.

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