Is it time to stock up on Aurora cannabis?

The global cannabis market is on the verge of a remarkable period of growth. Industry projections suggest it could grow from $57 billion in 2023 to $444 billion by 2030. This potential growth of 7.7 times over seven years translates to a compound annual growth rate of 34 %, reducing the growth rates of many traditional industries.

Against this backdrop of industry-wide potential, the Canadian marijuana titan Aurora Cannabis (ACB 0.94%) emerged as an unexpected bright spot in 2024. While most of its Canadian peers have wilted this year, Aurora shares have flourished with a 13% year-to-date gain. This performance contrasts sharply with industry peers Canopy Growth Corp. and Tilray Brandswhich saw their shares wilt by 18.5% and 28.2% respectively.

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Aurora’s resilience in a challenging market for marijuana stocks raises an intriguing question for speculative growth investors: Is Aurora Cannabis stock still ripe for the picking after its strong performance through the first three quarters of 2024? Let’s dig deeper to discover the answer.

Medical Cannabis: A High Margin Focus

Aurora Cannabis has carved its niche primarily in the medical cannabis market. This strategic focus appears to be paying off. In the first quarter of fiscal 2025, Aurora reported record global medical cannabis net revenue of C$47.2 million, a 13% increase over the same period last year.

The medical cannabis segment offers higher margins compared to its recreational counterpart. In other words, Aurora’s medical cannabis adjusted gross margins have consistently met or exceeded the company’s 60% target in recent quarters, reaching a healthy 69% in Q1. This focus on high-margin medical sales could be a solid foundation for Aurora’s future growth and profitability.

Improving financial health

Aurora Cannabis has made significant progress in improving its financial position. The company achieved positive free cash flow of $6.5 million in Q1 FY 2025, a milestone that Wall Street did not expect until at least calendar year 2026. This achievement is particularly remarkable given the history the company’s cash burn and shareholder dilution.

Aurora also worked to strengthen its balance sheet. At the end of Q1 2025, Aurora had approximately $182 million in cash and cash equivalents. This cash position gives the company financial flexibility as it navigates the evolving cannabis market.

Global expansion and market potential

Aurora Cannabis has established a presence in key international markets including Germany, Australia and the United Kingdom. Germany recently became the largest country in the European Union (EU) to legalize cannabis for recreational use. However, the initial phase of this legalization focuses on personal possession and cultivation, along with non-profit “cannabis clubs” for distribution rather than commercial sales.

This structure limits the immediate opportunities for large-scale commercial operators like Aurora. Despite these current restrictions in Germany, Aurora’s strong position in the country’s medical cannabis market can provide significant advantages as regulations evolve. This international footprint could prove valuable as the global cannabis market continues to develop and grow.

Challenges remain

Aurora Cannabis still faces significant challenges despite these positive developments. The Company operates in a highly regulated industry with ongoing legal uncertainties in several key geographies. Competition from both legal and illicit sources remains fierce. The Canadian market continues to be burdened by high excise taxes and costly regulations.

Perhaps most important to equity investors, Aurora has a history of diluting shareholders to raise capital. The company has doubled its number of outstanding shares in the past three years. Recent positive news on free cash flow is encouraging, but investors should be aware of the potential for future dilution.

Is it time to buy?

Aurora Cannabis has made some impressive moves lately. Its turnaround strategy is starting to pay off, with a smart focus on high-margin medical cannabis and a push for better efficiency. The company even managed to achieve positive free cash flow — no small feat in this industry. In addition, their strong international presence and bright prospects for global cannabis growth are points in favor of the marijuana titan.

But let’s not get ahead of ourselves. The cannabis industry is still in its early stages, with regulations that can change at a moment’s notice. While Aurora stock has posted some nice gains in 2024, it’s worth remembering that it’s been pretty beat up over the past few years (see chart below). The growing pains in the industry were real, and Aurora was not immune.

ACB data by YCharts.

What is the bottom line? If you’re considering investing in Aurora Cannabis, you need to go in with your eyes wide open. This is not a stock for the faint of heart — it’s for those who can handle stomach-churning volatility in search of unusual growth opportunities.