July 18, 2019 / 3:15 PM / 3 months ago

BUZZ-Aurora Cannabis: Dips on BofA downgrade

(Changes sourcing, updates shares, adds details from note)

** Cannabis cultivator and retailer’s Toronto-listed shares down 6.4%

** BofA Merrill Lynch cuts Aurora to “neutral”, citing cash burn

** Brokerage estimates Aurora could be cash negative by Q1 2020 if co doesn’t get financing, especially with C$230 mln obligation coming due

** ACB would need funding in the next few quarters as capex has trended higher to fund facility expansions

** Thinks ACB’s U.S. expansion could, if debt is added and no partner found, require other uses of financing like equity (capital raises or deals)

** Still, Aurora has emerged as one of the best operators in the cannabis sector, with industry leading scale and margins even vs other large peers, and global optionality, brokerage says

** BofA cuts PT on TSX-listed shares to C$11 from C$13; median target price is C$15

** Also reduces PT on NYSE-listed to $8 from $10; median PT is $9

** 9 of 14 brokerages rate the stock “buy” or higher, 4 “hold” and 1 “sell”

** The second-largest cannabis company’s Canadian shares had risen 33.4% this year, compared with a 18.5% increase in shares of leader Canopy Growth Corp (Reporting by Arathy S Nair in Bengaluru)

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