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Earnings Results: Aurora Cannabis stock gains after first beat on pot sales in more than a year

Aurora Cannabis Inc. shares gained in late trading Thursday, after the Canadian pot producer beat sales expectations for the first time in more than a year.

Aurora
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reported a fiscal second-quarter loss of C$75.1 million ($59 million), improving from a loss of more than C$300 million a year ago, on net revenue of C$60.6 million in the quarter, down from C$67.7 million a year ago.

Analysts on average expected a loss of C$45.4 million on sales of $C59.1 million, according to FactSet; Aurora had missed the sales consensus in four consecutive quarters and eight of the past 10. Aurora’s U.S.-listed shares gained more than 6% in after-hours trading following the release of the results, after closing with a 1.1% loss in the regular session at $4.59.

Aurora’s recent revenue misses were part of a yearslong decline for a popular stock pick in the boomtimes of Canada’s move into legal recreational cannabis, the first major industrialized nation to legalize the drug in such a manner. Aurora has struggled amid an executive shake-upreverse stock split and hefty losses, with shares losing nearly 95% of their value in the past three years, including a 75% decline in the past 12 months.

The current management team is hoping to show an improving bottom line to investors by focusing more on high-margin medical cannabis than the Canadian recreational market, which has trended toward cheaper pot. Aurora disclosed Tuesday that medical cannabis revenue increased 18% year-over-year to C$45.75 million, while recreational sales declined 48% to C$14.8 million, and executives said international medical sales grew 67% from last year and 24% sequentially.

“New international markets are rapidly opening, and with the unique ability to navigate complex regulatory environments, we see a significant revenue opportunity of which we are at the forefront,” Chief Executive Miguel Martin said in a statement. “While the Canadian adult-use market continues to face challenges, we are focused on introducing a new range of products set to launch this spring.”

While Aurora tries to capitalize on its shift toward medical pot, MKM Research analyst Bill Kirk wrote in a preview of Aurora and Canopy Growth Corp.
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results that the Canadian recreational market remains a problem for pot producers.

For more: Canopy Growth and Aurora Cannabis are expected to generate less red ink when they report earnings this week

“Generally speaking, the largest manufacturers are having difficulty meeting Canadian recreational consumer needs either via an inability to grow the right product or a lack of understanding what the consumer wants,” Kirk, who has a neutral rating on Aurora shares with a fair-value estimate of C$6 a share, wrote earlier this week. “In part, Aurora Cannabis has already pivoted away from this consumer problem.”

Canopy Growth seemed to break away from doubts with a stronger-than-expected report Wednesday morning, which boosted pot stocks including Aurora.

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