Aurora Cannabis: EBITDA targets will be difficult to achieve

After sweeping management, operational, target EBITDA and capital structure changes were detailed by Aurora management last week (see our article here), Aurora Cannabis reported a fiscal second quarter 2020 that implies a need to achieve an incredibly difficult task: to drive massive revenue growth while making deep, structural spending cuts.

Aurora has debt covenants that call for a minimum of CA$5 million of EBITDA in each quarter for fiscal 1Q and 2Q and a minimum total EBITDA of CA$51 million for 2021.

What Aurora has to do in terms of sales and expenses in order to produce that level of EBITDA will be tough given its current cost structure, consumers trending to value brands, the Canadian market’s excess inventory and continued production overcapacity of Canadian licensed producers.  

Simply put, we think there is a very low probability that Aurora will meet its fiscal 2021 EBITDA goals.

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