Aurora Earnings: Ekes Out Modicum of EBITDA; Placing Shares Under Review

No-moat Aurora Cannabis reported fiscal fourth-quarter results highlighted by top-line growth but lower profits. Revenue was up 5% sequentially to CAD 67 million, but adjusted EBITDA declined 63% to CAD 1.9 million. The profit drop largely stemmed from the closing of the acquisition of MedReleaf Australia during the quarter, and the company’s small scale and razor-thin margins are driving large changes in profitability. Inventory destocking in its channels hampered sales, while expenses from the new business hit results immediately. Longer term, we’re concerned about the company’s growth, as Aurora’s small scale also limits its ability to invest in the business. We are placing shares under review and plan to make a sizable cut to our fair value estimates of $16.50 and CAD 22.50.