Aurora Cannabis (TSX: ACB; NYSE: ACB) saw plenty of action when markets opened on Tuesday morning after shares increased 8.65% on Monday.
The firm opened at $8.21 and quickly fell to $7.63 before beginning an upward climb back to $8.07 before 11 a.m. as investors put their weight behind it.
ACB Stock Up as its Partner, Radient, Receives Coveted License
Its strong Monday performance followed news that its extraction technology partner, Radient, received a coveted Standard Processing License from Health Canada. That should allow Radient to produce a better quality of CBD at scale.
Aurora responded to the news by appointing chief operating officer Allen Cleiren to Radient’s board of directors to ensure the opportunity is maximized. “With the upcoming new regulations permitting additional form factors and Radient’s recent receipt of its processor license, we are in a strong position to rapidly expand production of a broad portfolio of extract-based products, tying in well with the significant scale-up of our global cannabis and hemp operations,” said Aurora chief executive Terry Booth.
Since its strategic investment in Radient – which prides itself on creating “disruptive” proprietary cannabis technology – Aurora has further extended its footprint in the hemp industry by purchasing AgroPro, Europe’s largest organic hemp producer, and investing in majority ownership of Hempco. Last month, Aurora and HempCo completed a non-brokered, private placement of a C$5 million non-transferable, secured, convertible debenture, giving HempCo funds to accelerate innovative new product development.
Aurora’s derivative expansion strategy is based on the industrial-scale extraction of CBD and development of the production of high-margin products for the medicinal marijuana and wellness markets.
Aurora Cannabis’ Recent Stock Movements
Shares in the firm enjoyed 42.9% growth during January. That saw it vastly outstrip the 8% return on the S&P 500 including dividends during the month. However, it is worth noting that stocks in Cronos (NASDAQ: CRON), Canopy Growth (NYSE: CGC) and Aphria (NYSE: APHA) all grew at a more rapid pace, rising at 89.4%, 82.3%, and 53.6%, respectively.
Marijuana stocks endured a tough November and December, but a timely slice of festive cheer came when the U.S. legalized hemp just before Christmas. The world’s largest economy is slowly opening up to Canadian licensed producers, but they are still prohibited from selling cannabis-related products across the border. The rally in January was remarkable, with large-caps leading the charge.
Aurora was down at C$6.78 on the TSX on Dec. 31, from a peak of C$15.07 in mid-October, but it finished January back up at C$9.30. It has since continued to climb and it reached C$10.55 by the close of play on Monday, before opening at $10.76 on Tuesday.
It is interesting to see that Aurora has overtaken Apple as the most popular stock among millennial investors on the no-fee stock trading platform Robinhood. Millennials are known as huge proponents of cannabis legalization, so their interest is understandable, but right now they find Aurora more appealing than fellow large caps.
Aphria is still recovering from the Hindenburg reverse pump and dump, while Canopy’s market cap is already massive and it has already received heavy investment from Constellation Brands. Tilray could see insiders flooding the market with shares and smaller caps are riskier due to their potential volatility, so many clearly see Aurora as the best option when seeking to invest in the burgeoning cannabis industry.
There is clear potential for the global cannabis trade to enjoy phenomenal growth in the years ahead, and there is no reason why Aurora cannot be at the forefront of that trend alongside Canopy and Aphria. The short-term outlook appears reasonably healthy too, but it is worth proceeding with caution. Cannabis stocks have always gone through peaks and troughs – we saw two such cycles in 2018 – and overheating could lead to a potential pullback in the not-too-distant future.
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