Yahoo Finance Need To Know: The Consensus Just Cut Its Aurora Cannabis Inc. (TSE:ACB) Estimates For 2022
The analysts covering Aurora Cannabis Inc. (TSE:ACB) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for next year. Revenue estimates were cut sharply as the analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well.
After the downgrade, the 16 analysts covering Aurora Cannabis are now predicting revenues of CA$320m in 2022. If met, this would reflect a decent 12% improvement in sales compared to the last 12 months. Losses are predicted to fall substantially, shrinking 96% to CA$0.72. Yet prior to the latest estimates, the analysts had been forecasting revenues of CA$394m and losses of CA$0.60 per share in 2022. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to next year's revenue estimates, while at the same time increasing their loss per share forecasts.
See our latest analysis for Aurora Cannabis
The consensus price target fell 25% to CA$10.73, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Aurora Cannabis at CA$31.00 per share, while the most bearish prices it at CA$7.80. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how think this business will perform. 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.
Of course, another way to look at these forecasts is to place them into context against the industry itself. It's pretty clear that there is an expectation that Aurora Cannabis' revenue growth will slow down substantially, with revenues to the end of 2022 expected to display 9.6% growth on an annualised basis. This is compared to a historical growth rate of 62% over the past five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 35% annually. Factoring in the forecast slowdown in growth, it seems obvious that Aurora Cannabis is also expected to grow slower than other industry participants.
The Bottom Line
The most important thing to note from this downgrade is that the consensus increased its forecast losses next year, suggesting all may not be well at Aurora Cannabis. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by recent business developments, leading to a lower estimate of Aurora Cannabis' future valuation. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on Aurora Cannabis after today.
After a downgrade like this, it's pretty clear that previous forecasts were too optimistic. What's more, we've spotted several possible issues with Aurora Cannabis' business, like major dilution from new stock issuance in the past year. Learn more, and discover the 3 other warning signs we've identified, for free on our platform here.
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This article by Simply Wall St is general in nature. 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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