Weekly Cannabis Stock News: Aurora Cannabis Returns in the Acquisition Video game

Not long ago, formerly acquisition-happy cannabis companies put the brakes on costs. Jointly, they lost cash far more often than they made it– so snapping up brand-new possessions to develop scale ended up being a less hot idea than it had been a few years ago.

That was then, and this is now. Last week’s big cannabis company news was a throwback to the good old days of 2018 or two, with Aurora Cannabis( NYSE: ACB) signing on the dotted line for a buyout. Another key pot industry occasion taking place recently came when a major dispensary operator reporting its most current set of earnings. Here’s more on both advancements.

Aurora purchases Reliva

Canada-based Aurora is reaching across the border for that acquisition. It announced it has accepted buy U.S. hemp-derived cannabidiol (CBD) items maker Reliva in a deal for roughly $40 million in Aurora common stock, plus as much as $45 million over the next 2 years in cash, stock, or a mix of the 2 if Reliva meets specific monetary objectives.

Aurora said it anticipates Reliva to be “instantly accretive” in regards to every cannabis business’s preferred functional metric– adjusted EBITDA. This would help Aurora, as it’s required by financial obligation covenants to be changed EBITDA-profitable total in Q1 of next year.

Aurora didn’t state whether Reliva is profitable on the bottom line; I’m presuming it’s not if adjusted EBITDA is mentioned in place of net profit/loss. Its yearly profits is $13 million to $14 million, according to a report in MarketWatch; for scale, Aurora’s top line in 2019 hit almost $248 million Canadian ($177 million).

This buy is somewhat surprising, considered that Aurora has been in retreat mode because late in 2015. It suspended building and expansion activities at 2 of its facilities, hung a “for sale” sign on among its greenhouses, and in the wake of the SARS-CoV-2 coronavirus furloughed around 500 of its employees.

While investors can be guardedly favorable about some recent news with Aurora, such as its newest set of quarterly results, I do not believe they ought to jump for joy here.

Yes, CBD products are fashionable among particular consumers recently. However they aren’t the big and fast-growing cash spinner that would make an acquisition like this have a significant impact.

The business’s balance sheet isn’t especially strong, and it tends to provide and invest its own stock a bit excessive for comfort, in my view. The Reliva acquisition doesn’t move the needle on my normally bearish position on Aurora– in spite of some motivating numbers in its Q3, it was well at a loss for the quarter. Meanwhile, it continues to struggle with much of the exact same troubles afflicting its Canadian marijuana peers

Curaleaf’s mixed Q1

Speaking of U.S. cannabis business, recently saw the release of Curaleaf‘s ( OTC: CURLF) Q1 financial 2020 numbers They weren’t half bad as far as recent weed stock earnings go.

The cannabis producer and merchant didn’t strike the typical analyst price quote for profits, but it wasn’t too far from it. Plus that line product increased by almost 30%quarter over quarter to nearly $965 million. Net loss, meanwhile, was narrower than anticipated and a significant enhancement over the preceding quarter’s outcome.

Curaleaf’s retail focus seems to be serving it well; dispensary openings and acquisitions were the relocations that helped raise that top-line figure. And in the majority of states– although not always the company’s house of Massachusetts, a minimum of initially– cannabis stores have been categorized as “necessary” services permitted to operate through the coronavirus pandemic. This need to assist keep the business afloat in the coming months.

It’s sounding a bullish note about the rest of 2020, forecasting that both earnings and the bottom line will continue to improve. The company appears to have sufficient money for now, so maybe it will not be tapping the financial obligation or equity markets for brand-new financing quickly, as it has in the recent past.