Aurora Cannabis Earnings: Continued Dilution of Existing Equity Dampens Improving Profitability

We’re likely to lower no-moat Aurora’s per-share fair value estimates of $2/CAD 2.60 by high-single-digit to low-double-digit percentages as its share count grew by a higher-than-expected 9% in its second fiscal quarter. As we’ve stated before, the continued issuance of equity below intrinsic value destroys value for existing shareholders. We reemphasize our Extreme Uncertainty Rating amid the continued threat of material value destruction. So, while shares trade well below our fair value estimates, investors should understand the material risk in the stock. We think Aurora should be able to survive the much-needed rationalization in the Canadian market, but there’s a lot of factors that could affect our prediction.