Need To Know: Analysts Just Made A Substantial Cut To Their Aurora Cannabis Inc. (TSE:ACB) Estimates

One thing we could say about the analysts on Aurora Cannabis Inc. (TSE:ACB) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting analysts have soured majorly on the business. Investors however, have been notably more optimistic about Aurora Cannabis recently, with the stock price up an impressive 18% to CA$2.05 in the past week. With such a sharp increase, it seems brokers may have seen something that is not yet being priced in by the wider market.

Following this downgrade, Aurora Cannabis' five analysts are forecasting 2023 revenues to be CA$208m, approximately in line with the last 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 92% to CA$0.43. However, before this estimates update, the consensus had been expecting revenues of CA$243m and CA$0.38 per share in losses. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.

See our latest analysis for Aurora Cannabis

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There was no major change to the consensus price target of CA$2.42, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values Aurora Cannabis at CA$5.00 per share, while the most bearish prices it at CA$1.75. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely differing views on what kind of performance this business can generate. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would highlight that sales are expected to reverse, with a forecast 1.3% annualised revenue decline to the end of 2023. That is a notable change from historical growth of 22% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 19% per year. It's pretty clear that Aurora Cannabis' revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The most important thing to take away is that analysts increased their loss per share estimates for this year. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected this year, we wouldn't be surprised if investors were a bit wary of Aurora Cannabis.

So things certainly aren't looking great, and you should also know that we've spotted some potential warning signs with Aurora Cannabis, including major dilution from new stock issuance in the past year. Learn more, and discover the 2 other risks we've identified, for free on our platform here.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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