Investors who want to buy ACB should scale in. Short-term traders probably look to short this stock soon.
Cannabis equities the past year have taken an absolute beating, and Aurora Cannabis stock in particular — until today.
Things had gotten so bad for Aurora Cannabis Inc. (NYSE: ACB), the company recently went through a 12-for-1 reverse stock split to avoid being delisted from the New York Stock Exchange after falling under $1 a share for several weeks.
What that means simply is Aurora Cannabis stock, which at one point was the most widely traded stock on Robinhood — even more than Apple Inc. (NASDAQ: AAPL) — consolidated every 12 shares into one, boosting its share price well above the $1 listing threshold.
On April 13, just before the reverse split, Aurora Cannabis stock was trading at about $0.75 a share.
Aurora Cannabis Stock Blasts Off
The reverse split pushed ACB over about $6 a share and the company reported quarterly earnings Thursday, a day in which it also reached a 52-week low before skyrocketing with better-than-expected results — though still a big loss — and the promise of profits by the end of the year.
As of 2:30 p.m. EDT today, Aurora Cannabis stock was up a whopping 65% for the day, and 36% for the past week, pushing its share price just under $11.
Aurora reported net revenue, excluding provisions, of $78.4 million, an 18% quarter-over-quarter increase. It also gave a loss of $45.9 million as its adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), which is bad. However, it was a $34.4 million improvement quarter over quarter — more than enough reason for investor optimism, apparently.
So is now the time to invest in a sector that has been battered and beaten for more than a year now?
According to Banyan Hill Publishing’s John Ross, a natural resources options trading expert who also co-hosts Prosperity Research’s weekly Marijuana Market Update, the company is still facing a steep climb.
“Revenues surprised on the upside when Aurora announced earnings Thursday after bell. Still reported a big loss but promised profit by year-end,” Ross, the Editor of Apex Profit Alert, said via email. “Lots of headwinds still for the company (and industry). And their revenue beat (similar to Tilray) may prove to be because of front-loaded demand ahead of the Covid-19 lockdown.
“Investors who want to buy should scale in. Short-term traders should probably look to short this stock soon.”
By “scale in,” Ross is referring to dipping your toe in and buying shares bit by bit as the price dips, which it likely will after this current run-up, rather than going all in at once. There’s a lot of uncertainty surrounding Aurora Cannabis stock and the company’s future, so it would not be wise to buy in big right now, particularly since it’s up so much today.
Basically, you set a target price with a plan to invest in X number of shares, then set a new target price lower. Once it hits that lower target, buy X number of shares again, and so on.
If you’d like to know more about trading options, check out our guide.
Also be sure and subscribe to Prosperity Research’s YouTube page, where Banyan Hill’s Matt Badiali and Ross deliver your weekly Marijuana Market Update, which you can also find here on Money & Markets every Saturday.
Check out this week’s episode, where Ross also discusses Tilray Inc. (NASDAQ: TLRY), which got a bump from ACB’s big week.