After years of disappointing performance since legalization in 2018, Canadian cannabis stocks are once again showing signs of revival, ignited by strong international sales and renewed investor optimism.
Shares of Calgary-based Aurora Cannabis surged more than 50% on Wednesday after the company reported record-breaking earnings, signalling new growth opportunities in the global medical cannabis market.
They were up another 17% on the Toronto Stock Exchange on Thursday, reaching almost $10 in morning trade.
They were up another 17% on the Toronto Stock Exchange on Thursday, at $8.88 in morning trade.
That’s because Aurora’s financial results exceeded analyst expectations, with net revenue reaching $88.1 million for the quarter ending December 31 — a 37% year-over-year increase. Adjusted earnings jumped 316%, driven by strong medical cannabis sales in Europe, Australia, Poland and the UK.
“This quarter was record-breaking for Aurora, driven by all-time highs in global medical net revenue, net income, adjusted EBITDA, and free cash flow,” said CEO Miguel Martin.
Aurora’s strong earnings sparked a rally across the struggling Canadian cannabis sector, with Canopy Growth (CGC) gaining 11%, Cronos Group (CRON) rising 2%, and SNDL Inc (SNDL) up 4%. Investors are betting that Aurora’s success could be replicated by other Canadian cannabis firms looking beyond their home market for growth.
Analysts pointed to outright legalization in the US and wider medical adoption overseas in the EU and Asia Pacific.
Aurora’s strategy of focusing on higher-margin medical cannabis rather than the saturated Canadian recreational market appears to be paying off, they added.
Canaccord Genuity’s Matt Bottomley called the results “well above consensus expectations,” highlighting Aurora’s ability to improve operating margins while expanding internationally.
European countries like Germany, which recently passed legislation easing restrictions on medical cannabis, present significant growth opportunities for Canadian producers. Australia, another key market, has also seen rising demand for prescription cannabis products.
Canopy, which is set to report earnings on Friday, saw a spike in options activity — a sign of traders betting on further upside. Meanwhile, Tilray (TLRY), which has diversified into the alcohol industry, announced that its Montauk beer brand will soon be available on JetBlue domestic and international flights — a sign that cannabis companies are exploring new revenue streams.
Since Canada legalized recreational cannabis in 2018, the industry has faced numerous challenges, including oversupply, high excise taxes, a persistent illicit market, and sluggish retail expansion. Many cannabis stocks that soared in the early days of legalization have since lost more than 90% of their value.
However, the latest earnings suggest that international markets could provide the growth Canadian producers have struggled to find at home.
Key will be the priority attached to cannabis banking reform and US Justice Department rescheduling it to a category III drug on the part of US president Donald Trump, although observers said his cabinet picks suggest it isn’t a high priority.
