Aurora Cannabis Just Made an Unusual Move -- but Is It a Buy?
Aurora Cannabis (NASDAQ: ACB) rocked the boat on Aug. 25 when it announced that it had acquired a 50.1% stake in Bevo Agtech, a provider of vegetables, flowers, and houseplants. The unusual deal cost the Canadian cannabis cultivator 45 million Canadian dollars up front, and it's also on the hook for up to CA$12 million in milestone payments over the next three years, assuming Bevo continues to grow as planned.
Now investors are debating whether the transaction changes much of anything for Aurora's stock over the next few years. Can Bevo help to transform Aurora into the more profitable version of itself that it envisions, or is this a case of "diworsification" rather than fruitful diversification?
To set the stage for the deal, let's take a moment to recap Aurora's recent history. The last three years have been brutal for the cannabis grower, with its shares falling by more than 97%, quarterly revenue crashing by 28.6%, and its gross margin sharply deteriorating. The biggest cause of this abysmal performance was building too much manufacturing and cultivation capacity, relative to demand, in the Canadian recreational cannabis market.
Source Fool.com
