- On Thursday Aurora Cannabis announced CEO Terry Booth is retiring and that the company will slash 500 jobs to reduce costs.
- Shares fell as much as 19% Friday.
- Here’s what four Wall Street analysts are saying about the Canadian cannabis company.
- Watch Aurora Cannabis trade live on Markets Insider.
- Read more on Business Insider.
Shares of Aurora Cannabis tumbled as much as 19% Friday after the company announced Thursday that its CEO Terry Booth is retiring and stepping down, and that it will cut 500 jobs to lower spending.
The decision to cut the full-time roles, including 25% of corporate positions, was an “incredibly difficult” one that was “not taken lightly,” said Glen Ibbott, Aurora’s chief financial officer, on a Thursday call with analysts and investors.
Aurora’s executive chairman, Michael Singer, will take over as the interim CEO while the company board searches for a full-time replacement. Aurora’s banking syndicate cut its credit facility, and the company will take a goodwill writedown of C$740 million to C$775 million related to assets the company acquired in Denmark and South America.
The company also announced preliminary results for the quarter that ended December 31 that fell short of Wall Street’s expectations. The company said it expects cannabis revenue between C$50 million and C$54 million, where analysts were expecting $79 million, according to Bloomberg.
The slump is the latest setback for the beleaguered stock, which has struggled to gain in 2020 as turmoil continues to hit the cannabis industry. Shares of other cannabis companies also took a hit – Tilray sank 5%, Canopy Growth fell 7%, and Aphria traded 4% lower Friday afternoon in New York.
Aurora Cannabis has a consensus price target of $2.52 and six “buy” ratings, 11 “hold” ratings, and five “sell” ratings, according to Bloomberg data.
Here’s what four analysts are saying about Aurora Cannabis, ranked in order of highest to lowest price target:
1. Cowen: “A telling sign that the industry has matured some”
Price target: C$6.00
“Industry-wide management changes are a telling sign that the industry has matured some (though not fast enough), and gotten competitive enough, that founder-led strategies aren’t going to cut it in a capital constrained backdrop,” wrote Vivien Azer of Cowen in a Thursday note.
She continued: “Management reiterated they are trying to be extremely conservative, which we appreciate, as the revenue outlook will clearly inform the cost and profitability targets that the company laid out.”
2. Canaccord Genuity: “A number of red flags”
Rating: Hold, from speculative buy
Price target: C$3.00 from C$6.00
Analysts at Canaccord Genuity downgraded shares of ACB to “hold” and reduced their price target on Thursday following the announcement that CEO Terry Booth would retire.
“More concerning, Aurora also provided colour with respect to is expectations over the next few quarters, with a number of red flags,” wrote Canaccord Genuity analysts led by Matt Bottomley.
He continued: “Although we don’t view the departure of Mr. Booth in isolation to be a concern, after disappointing FQ1 results, increasing industry headwinds and now surprisingly muted expectations for Aurora’s remaining FY20, we have made substantial downward revisions to our model.”
3. Jefferies: Aurora is “rangebound for a good period now”
Price Target: $1.90 from $3.00
“The company say they have been losing share in the mid-priced to a growing value segment and have launched a new value brand. We expect this to weigh on gross margins,” wrote Ryan Tomkins of Jefferies in a Friday note.
“We see Aurora as rangebound for a good period now, as sentiment and balance sheet will depend on Q1 performance, and with that, the possibility of amending their credit facility rather than raising more cash.”
4. Stifel: “We struggle to find value for current equity holders”
Price target: C$1.00 from C$1.75
Sweeping business changes suggest a “more precarious position than we had contemplated,” wrote W. Andrew Carter of Stifel in a Friday note.
He continued: “We do not believe the company will be able to keep pace with the demands of a dynamic market, with an outlook leaving little room for error, driving our 46% reduction in our FY22 revenue estimate.”
“We struggle to find value for current equity holders, and we are reducing our target price to C$1, continuing with our Sell rating.”