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Aurora Cannabis Stock Price Plunge to Two-Year Low Amid Oversupply

Aurora Cannabis (NYSE: ACB) stock price has been extending the bearish trend amid increasing supplies. Its shares are currently trading around $3.5, the lowest level in the past two years.

ACB shares are down close to 60% from 52-weeks high of $10 a share. The selloff is also supported by traders’ concerns over lower than expected revenue in the latest quarter.

In addition, the majority of analysts are expecting cannabis companies to miss their revenue estimates in the upcoming quarters.

ACB Aurora Cannabis Inc. daily Stock Chart

Analysts believe Hexo’s lower than expected results for the third quarter and lower guidance for the fourth quarter indicates the downtrend in cannabis markets.

Oversupply Impacts Aurora Cannabis Stock Price

Aurora Cannabis along with other major cannabis compaies have lost billions of dollars of market capitalization in the past couple of months. This is only due to traders’ concerns over the oversupply situation.

The majority of cannabis producers have been investing significantly to enhance their production potential. Moreover, cannabis coming from black markets is adding to oversupply concerns.

For instance, BNN Bloomberg reported that 86% of cannabis in Canada is coming from the black market. Meanwhile, the annualized legal production stood around 750 thousand kilograms in July compared to consumption of 924 thousand kilos per year. This means that legal consumption accounts for only 130 thousand kilos.

On Top, the majority of producers are seeking to increase production up to 100% in the next fiscal year.

Lower Than Expected Financial Growth

Revenue and earnings miss in the latest quarter added to the bearish trend in Aurora Cannabis stock price.

Aurora Cannabis Stock Price...

Its fourth-quarter revenue of C$98.94M missed analysts estimate by C$4.57M. Its revenue increased by 52% in the latest quarter, driven by growth in medical and recreational cannabis.

Overall, the sentiments related to cannabis markets are likely to remain dim. The investors are suggested to keep an eye on the upcoming earnings reports of cannabis producers before initiating a position.

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Based in Saudi Arabia, Siraj has a strong understanding of and passion for accounting and finance. He has worked for international clients for many years on several projects related to the stock market, equity research and other business, accounting and finance related projects. Siraj is a published financial analyst on the world's leading websites including SeekingAlpha, TheStreet, MSN, and others.