Markets
ACB

Why Aurora Cannabis, Aphria, and Charlotte's Web Stocks Are Wilting Wednesday

What happened

The stock market's meltdown continued Wednesday morning, with the S&P 500 falling close to 3%. And marijuana stocks such as Aurora Cannabis (NYSE: ACB), Aphria (NASDAQ: APHA), and Charlotte's Web (OTC: CWBHF) got hit hard along with the rest of the market, falling 5% and more early.

That's the bad news. The good news is that as the morning wore on, cannabis shares appeared to be recovering somewhat. As of midday trading, Aphria shares shed 3.5%, and Charlotte's Web was down 5% -- but Aurora Cannabis shares recovered to only a 2.6% loss, which is actually a somewhat smaller-than-average loss relative to the market as a whole.

Wilted marijuana plants

Image source: Getty Images.

So what

This is surprising because, of the three marijuana stocks named, Aurora Cannabis is actually the only one that has specific bad news attached to it today.

Yesterday, as you'll recall, Aurora Cannabis shares tanked after the company revealed that it has been burning through cash faster than anticipated -- and will need to raise a further $500 million over the next 25 months. One analyst downgraded the stock in response to the revelation, and this morning, a second analyst, investment bank Stifel Nicolaus, has decided to cut its target price on Aurora shares -- by 66%, to just 3.60 Canadian dollars, or about $2.70.

Now what

Specifically, Stifel warns that there "will be no investor interest or enthusiasm" in Aurora Cannabis stock for the foreseeable future, reports TheFly.com today. Because in addition to announcing some pretty significant stock dilution, the stock is likely to fall short on sales estimates in fiscal Q1 (Stifel projects CA$54 million, down from CA$62 million previously) and report a CA$13 million EBITDA loss to boot.

In short, the fundamentals of Aurora stock are looking increasingly lousy, and Stifel can't recommend buying the shares until they improve. Of course, you could say the same thing about Aphria and Charlotte's Web as well -- they're not currently profitable, either.

And in fact, with all three stocks down today on just one marijuana stock's bad news, it appears that investors are saying the same things about them all.

10 stocks we like better than Aurora Cannabis Inc.
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Aurora Cannabis Inc. wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks

*Stock Advisor returns as of October 20, 2020

Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends Charlotte's Web. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

ACB CWBHF

Latest Markets Videos

    The Motley Fool

    Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

    Learn More