Aurora Cannabis (ACB): will Nelson Peltz save 2020?

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<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Aurora Cannabis (ACB) ended in 2019 with an executive shuffle that may have just started. The Canadian cannabis LP needs a tighter cost structure to survive and thrive until the catalysts kick-start the Canadian market in mid-2020. Until then, investors will have to wonder if the promise to work with Nelson Peltz on CPG partnerships will ever bear fruit. "Data-reactid =" 11 "> Aurora cannabis (ACB) ended in 2019 with an executive shuffle that may have just started. The Canadian cannabis LP needs a tighter cost structure to survive and thrive until the catalysts kick-start the Canadian market in mid-2020. Until then, investors will have to wonder if the promise to work with Nelson Peltz on CPG partnerships will ever bear fruit.

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On December 20, the Chief Corporate Office Cam Battley resigned from the company. Mr. Battley has long been the face of Aurora Cannabis even though he wasn't a CEO or CFO.

The move is an interesting step for a company that is struggling to achieve positive EBITDA. On November 20, the company promoted individuals to chief product officer and chief integration officer.

One has to wonder if Aurora Cannabis has too many bosses and the additional cost of a company whose earnings are well below $ 500 million. In addition, CEO Terry Booth and CFO Glen Ibbott must take on more active roles in promoting the company. At the last call, Mr. Battley was the primary company spokesman, followed by the CFO. Both the CEO and the Executive Chairman spoke only in the Q&A section.

The company has $ 67 million in quarterly operating costs and analyst forecasts that gross profit will be only $ 50 million well into 2021 years.

Aurora Cannabis will have to accept this executive exit as part of a cost reduction.

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The company entered into a partnership with Mr. Peltz in March. The investment activist has worked with many CPG companies to improve their business, but Mr. Peltz was usually an activist investor rather than a consultant.

Another problem is that Peltz signed up for the job through stock options that are well above current market prices. You even have to wonder if he has the motivation to find Aurora Cannabis worthwhile deals when his 20 million stock options have strike prices near $ 8 a share.

You have to imagine that his company has the incentive to buy shares on the open market or revise the original deal before starting a partnership for Aurora Cannabis. However, holding potential inside information could preclude an investment.

Aurora Cannabis is in a financial situation where a strategic investment of several hundred million dollars would help remove much of the financial pressure on the company. The biggest problem is the dilution of the stock to $ 2 and the question of whether a highly respected CPG company would even invest down here.

The best solution could be to partner with a large CPG company that wants to expand from Canada in the cannabis sector. With the advancement of 2020 and the launch of Cannabis 2.0 products, it should be attractive for someone to work with an industry leader. If not, you have to wonder why Aurora Cannabis attracted Nelson Peltz, although almost every other great Canadian cannabis player already has big partnerships.

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The key lesson for investors is that Aurora Cannabis will have a lot of positive catalysts in 2020, but the company needs to reorganize the company to cut operating costs after Cam Battley left. Once the company aligns the business better with market conditions, investors can own the stock and know that the catalysts will benefit shareholders.

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<p class = "Canvas-Atom-Canvas-Text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "This troubled cannabis giant has certainly shared the street , According to TipRanks analyzes, ACB is a hold. Based on 10 analysts interviewed in the last 3 months, 3 Aurora stocks rate a buy, 4 say hold and 3 recommend a sell. The average target price is $ 3.49 over 70% above the closing price on Friday. (See Aurora's stock research on TipRanks) "data-reactid =" 39 "> This troubled cannabis giant must have split the road, as TipRanks analysis shows that ACB is a hold. Based on 10 analysts interviewed in the last 3 months, 3 Aurora stocks have one Buy rated, 4 say hold sell is recommended by 3, but the bulls are still broadly winning as the average price target of $ 3.49 is over 70% higher than Friday's closing price (see Aurora's stock analysis at TipRanks).