Aurora’s Quarterly Earnings Report Is A Lesson For The Cannabis Sector

In an unsurprising lesson for the entire cannabis sector, Aurora Cannabis Inc. (NYSE: ACB) announced its second-quarter revenue will fall short of analyst predictions.

The company expects to report second-quarter revenue between $50M and $55M and positive earnings growth. According to Thomson Reuters Eikon, analysts projected Aurora’s revenues to total roughly $67M for the quarter that ended on Dec. 31, 2018.

The results reflect an anticipated revenue growth rate of 327% compared to Q2 2018, and a 68% growth rate compared to Q1 2019.

This deficit can be attributed, at least in part, to the over-zealous expectations analysts placed on the sector as a whole. However, analysts may not be to blame either — measuring and predicting outcomes for the developing cannabis industry is especially difficult.

In fact, because cannabis is such a new market segment, analyst projections are likely to have a higher margin of error. Combine that with the excitement surrounding the cannabis industry, and it’s easy to see how forecasts can become more like fortune telling than solid predictions.

In an effort to assist analysts in making better predictions on earnings reports, Cam Battley, Chief Corporate Officer for Aurora Cannabis, announced the company has issued Q2 revenue guidance for analysts to better measure the market.

“Part of the reason for providing guidance is that we sense it’s been challenging for analysts, institutions and others to project future revenues in this sector with precision,” Battley said in an email Tuesday. “This is evidenced by the very wide range of analysts’ estimates in recent quarters.”

In a statement released Tuesday, Aurora CEO Terry Booth announced he believes the company will achieve a positive earnings before interest, taxes, depreciation and amortization (EBITDA) within the next two quarters.  

Aurora Cannabis is scheduled to release its final quarterly results on Feb. 11, 2019. Following the announcement, shares of Aurora fell 4.37%, losing $0.23, and ended the day trading at $5.03.