Aurora Earnings: Profit Rising, but Continued Dilution Risk Reinforces Extreme Uncertainty Rating

Aurora Cannabis reported decent fiscal third-quarter results, as net revenue grew 2% sequentially and 5% over the prior year to CAD 64 million. Profitability improved, too, with adjusted EBITDA margin expanding to nearly 7%, up 140 basis points sequentially. On earnings alone, we wouldn’t expect to change our fair value estimates of $1.80 and CAD 2.40 per share for no-moat Aurora. In addition, our initial reaction to the acquisition of MedReleaf Australia is that any benefit to intrinsic value is offset by Aurora’s use of shares to fund most of the deal. And although shares look undervalued, we’d reiterate our Extreme Uncertainty Rating as equity dilution remains a risk.