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Aurora Cannabis, in particular, has been unprofitable for quite a while now with declining revenue and ineffective cost management strategies.
Let’s take a look at this in more detail and determine whether this acquisition will be good for Aurora or if it is just digging its grave deeper.
31, 2021, Aurora has managed to realize annualized run-rate cost savings of $60 million and expects to hit its original target of $80 million by the first half of fiscal 2023.
Aurora’s cost savings have helped the company reduce its earnings before interest, tax, depreciation and amortization losses from $80 million Canadian dollars in the second quarter of fiscal 2020 to CA$9 million in fiscal Q2 2022.
It is a “margin accretive transaction,” meaning the transaction of CA$38 million in cash, Aurora’s common shares, and two earnout amounts, will be based on if Thrive achieves certain revenue targets within two years of the closing.
Even though Aurora’s cost-cutting strategies seem to be working for now, until the company manages to grow revenue, profitability is still a long shot.
These efficiencies usually include high-class production facilities, competitive innovative products, growth strategies, the scale of operations, and more to generate higher sales.
Lack of capital didn’t allow the company to develop any new recreational products — high-margin derivatives in particular.
Until Aurora shows some robust growth numbers, it might be wise to steer clear of this stock and consider other outstanding marijuana stocks.