Aurora Cannabis stock spiked nearly 40% on Friday and other marijuana stocks rallied after the Canadian cannabis producer reported fiscal third-quarter sales that beat expectations and touted its efforts to cut costs — even as analysts expressed reservations.

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The company reported results as the coronavirus pandemic lands atop the industry’s enduring struggles with cash. And they follow a mixed diagnosis of the pandemic’s impact from rivals Cronos Group (CRON) and Tilray (TLRY) — companies that, unlike Aurora, plan to do less growing on their own and churn out more cannabis products through partnerships.

Aurora said the pandemic would likely have a greater effect on its business in the fourth quarter. But it said the virus did not “materially disrupt” business in the the third quarter. Over that period, it said, customers stocked up in March, a trend that cooled off in April. Its facilities in Canada and abroad were still running, it said.

But it did say that its medical business, which has already been cannibalized due to recreational legalization, faced difficulties with renewals, as “many patient aggregators move to an online model during the pandemic.”

Aurora Cannabis Earnings

The company is still losing money. Aurora put up a net loss of 137 million Canadian during the fiscal third quarter. But that wasn’t as bad as the 1.3 billion loss it ran up in the prior quarter.

Aurora reported net sales of 75.5 million Canadian dollars, up 35% from the prior quarter. Cannabis net sales rose 32% to 69.637 million Canadian.

Recreational cannabis sales rose 24% to 41.5 million. The company said those gains demonstrated “the impact of the launch of Daily Special,” its cheap weed brand, as well as newer products like vapes and edibles. As with its rivals, Aurora released cheaper cannabis brands in an effort to compete with the illegal market.

The company on Thursday said it was “on track” to reach positive EBITDA by the first quarter of its fiscal 2021. In February, when the company announced a shakeup of its leadership, said a new reworking of its debt arrangements required the company to “achieve positive EBITDA thresholds beginning in fiscal Q1 2021.”

Cash Use

The company on Thursday said its cash use had fallen 43% from the second quarter. Aurora said its cash position had improved to 230.2 million Canadian.

Aurora last month said it had 205 million Canadian in cash as of March 31. That amount, included money raised via an at-the-market offering that had been completed, meaning that the $200 million raised during the third quarter had been used up, Cowen analyst Vivien Azer noted in a research report before the earnings. Aurora’s cash burn, she said, “remains a significant obstacle.”

The company in April said it planned to file for a new at-the-market stock offering of up to $350 million.

In an at-the-market offering, or ATM, a company sells new stock at market prices incrementally to the open market, potentially giving that company more flexibility over when and how much they raise.

Aurora Cannabis Stock, Marijuana Stocks

Aurora Cannabis stock rocketed 38% higher in the stock market today. However, its Composite and EPS ratings both stand at a dismal 2 on a 1-99 scale, with 99 tops. IBD advises investors to focus on stocks with Composite Ratings in the 90s.

Other marijuana stocks also made gains on Friday. Canopy Growth stock added 4.5%. Cronos Group stock rose 6.4%. Aphria (APHA) moved 4.6% higher. Tilray stock was up 3.4%.

Analysts, however, weren’t convinced.

“Nice revenue beat, but profitability remains elusive,” Azer said in a note.

Stifel analyst Andrew Carter noted that the company did not offer a near-term sales outlook.

“The cash demands remain significant,” he said, “and we believe answering these demands while contending with outstanding debt covenants will require continued equity issuances with the outstanding ATM.”

Aurora this week rolled up its stock to hand investors one share for every 12. The New York Stock Exchange told Aurora that it had fallen short of its listing standards, after the average price of Aurora Cannabis stock slipped below one dollar for 30 consecutive trading days.

‘Fullest’ 2.0 Suite?

Aurora, as with other big marijuana stocks, has laid off staff, changed leadership, and stopped or delayed construction at big facilities as losses and concerns surrounding cash and debt mounted. The company’s new leadership has signaled it will be more disciplined with finances, after an earlier rush to expand worldwide.

Stifel analyst Andrew Carter said that analysis of Headset data suggested Aurora had taken the lead in Canada’s retail market share.

Carter credited that push for Aurora Cannabis to its having the “fullest suite” of vapes, cartridges, chocolates and gummies compared to rivals. Those products began appearing at pot shops over the past several months, after regulations for them went into effect in October, potentially offering a lift for marijuana stocks.

Coronavirus And Marijuana Stocks

When the coronavirus crisis first descended on North America, people lined up at pot shops to load up on supply. Tilray, when it reported earnings this week, said it got a sales lift in March. Trends eased last month, it said. But they were still higher than in January and February.

Cronos Group, when it reported earnings last week, said it had begun to see a “contraction” in demand, as pot shops close or move toward online ordering, pickup or delivery. Some provinces, it said, had cut on-site staff and limited delivery time slots, adding to logistical hurdles and leading to a “reduction in purchase order fulfillment.”

Tilray said it hadn’t had any major distribution difficulties in April and so far in May. But it did note a few recreational delivery delays.

In a filing this week, Tilray also said that its ability to keep operating as a “going concern” depended on getting additional financing to meet its cash needs over the next year.

However, Tilray said it was “probable” that it could “mitigate the conditions and events that raise substantial doubt about the entity’s ability to continue as a going concern for the next twelve months.”

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