I’m going to be blunt straight off the bat. Although the topic of the day is Aurora Cannabis (NYSE:ACB), we can essentially lump all the major marijuana players together. That’s what the markets are doing and for good reason. At the end of the day, ACB stock is a race against time.
What do I mean by this? Simply, we know that virtually all marijuana-based investments, even top-shelf names like Aurora Cannabis stock, have challenged fundamentals. Most financial institutions won’t touch the sector because technically and legally, it could all go belly up without much warning.
Further, even though some weed firms have forged lucrative partnerships — look at Cronos Group (NASDAQ:CRON) and Altria Group (NYSE:MO) — it’s not enough to garner widespread credibility. One of the main criticisms of ACB stock and its ilk is that the underlying company is expanding aggressively.
That’s resulted in a cash burn problem that has weighed on Aurora Cannabis stock.
On the other hand, we know about the paradigm-shattering potential for this “agricultural” industry. For instance, I’ve routinely used the phrase — to annoyance perhaps — that marijuana represents a transformative investment. Primarily, I keep saying this because this industry made the hardest of shifts, from non-existence (legally speaking) to existence; in other words, from zero to something.
And that’s why I’m using the racing analogy for ACB stock. Aurora Cannabis and its big brethren are hoping that their flawed financials buy them enough time to actualize marijuana’s potential. I believe that the top players and some smaller, promising outfits can. Here are three reasons why:
Harvard Research Offers Groundbreaking Medical Potential for ACB Stock
Pancreatic cancer is among the nastiest of all cancers, imposing a very low survival rate. Infamously and tragically, it took the life of Apple’s (NASDAQ:AAPL) Steve Jobs. But now, new hope for a cannabis-related breakthrough should immediately intrigue anyone holding Aurora Cannabis stock.
Researchers at Harvard University’s Dana-Farber Cancer Institute released a report indicating that a cannabis compound offers “significant therapy potential” for treating pancreatic cancer. Specifically, the researchers isolated and extracted this compound, known as a flavonoid. Through genetic engineering, they ramped up production of this flavonoid, and applied it against malignant tumors.
The study noted that the application resulted in metastatic tumor cell kills. Based on the researchers’ enthusiasm for the outcome, this news has incredibly positive implications for ACB stock.
I’m not suggesting that Aurora Cannabis stock will suddenly rise on this development. What I am saying is that mainstream interest toward at least medical-cannabis legalization will spike. And this really has the potential for sparking full federal legalization.
It’s also a political no-brainer. What dimwit would stand in the way of promising cancer therapies because they have moral or religious reservations? If many lives can be saved, the obviously ethical choice is full or otherwise unhindered federal legalization.
A Prolonged Recession May Benefit Aurora Cannabis Stock
Very few companies or sectors have performed well in recent weeks, and that goes for marijuana companies. When you have the Dow Jones dropping 800 points in a single session, you know investors have serious concerns. Under such an environment, most stocks simply plummet in a panicked reaction.
Unfortunately, many if not most of the names that recently experienced volatility will probably suffer more along the road. In this brave new world of globalization, our economy doesn’t operate in a vacuum. Increasingly, we are more dependent on each other.
And that’s really the underlying pain of the U.S.-China trade war. Of course, when you’re talking about China, you must engage delicately. As you know, President Trump hardly adopts tactful diplomacy.
But when one of the reasons why I like Aurora Cannabis stock in this environment is that China is not in the picture. Indeed, it’s never been in the picture. For instance, China has draconian drug laws, and that probably won’t change in our lifetimes.
Put another way, marijuana is one of those rare industries that is both vibrant and doesn’t have a care in the world about China. This dynamic also incentivizes federal legalization, especially if people get laid off from trade-impacted industries.
Technicals Support a Comeback
Admittedly, the volatility in the weed market is nothing short of scary. Even a top-shelf name like ACB stock isn’t immune from extreme hemorrhaging. Since mid-March of this year, shares have lost a staggering 38%.
However, I also feel that the sector is either at or approaching a bottom. Right now, we have no shortage of downright terrible news weighing on weed. Off the top of my head, we’ve had a slew of disappointing earnings results. We also witnessed credibility-damaging controversies, such as CannTrust’s (NYSE:CTST) illegal growing.
If that weren’t bad enough, the FBI is actively courting whistleblowers for bad marijuana players.
Yet despite the overwhelming negativity, ACB stock has slowed its descent. This, along with the other tailwinds I mentioned, gives me confidence that Aurora Cannabis can buy itself the required time.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.
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