According to Piper Sandler analyst Michael Lavery, Aurora Cannabis Inc. shares are set to go to $1.
Lavery has downgraded the Canadian marijuana producer to the equivalent of a sell and has put a $1 price target on the stock. Previously the analyst had a $3 price target.
According to Lavery, risks related to the balance sheet and weak European Union sales are significant factors for the downgrade and new price target.
Lavery wrote that his team does not expect Aurora to achieve positive cash flow from operations until the third quarter of fiscal 2021.
He also projects a cash deficit of C$200 million ($152.9 million) in the interim and believes the company will have to refinance C$360 million worth of debt due in August 2021, which would leave it C$800 million in debt and with C$30 million in cash in the second quarter of fiscal 2022.
The analyst wrote that Aurora could decide to take “more significant austerity measures” and consider “asset sales” to improve its cash position.
“Aurora built its large capacity in Canada with expectations to export a significant amount internationally, but these sales have been very slow to materialize,” Lavery wrote. “German sales have been its highest priced and highest margin products, so the suspension of sales there hurts its revenue and margin mix.”
Aurora stock has dropped 65.9% over the last year.