Shares of Aurora Cannabis (NYSE: ACB) have been on a tear in 2019. The leading marijuana producer’s stock is already up more than 80% so far this year — and a staggering 2,000% over the past three years.
Aurora Cannabis Inc. is a Canadian licensed cannabis producer, headquartered in Edmonton. It trades on the Toronto Stock Exchange as ACB But the marijuana industry’s torrid expansion is still in its early innings, and plenty more gains could still lie ahead for this cannabis stock’s investors. A partnership with a major beverage company, such as PepsiCo , could also accelerate Aurora’s entry into the cannabis infused drink market .
On March 13, Aurora announced that it had appointed billionaire Nelson Peltz as a strategic advisor. Peltz has extensive contacts in the consumer goods industry, after having served on the board of powerful companies such as Mondelez International. He intends to use these relationships to help Aurora pursue a partnership in the consumer goods space.
A deal could provide Aurora with some much-needed expansion capital. The company has used its own shares to finance its rapid, acquisition-fueled growth, and the corresponding dilution has weighed on its stock price . An investment from a major consumer goods company on the order of Constellation Brands’ $4 billion investment in Canopy Growth or Altria’s $1.8 billion deal with Cronos Group would require Aurora to sell a sizable stake in its business, but it could make dilution less of an issue going forward.
A partnership with a major beverage company, such as PepsiCo, could also accelerate Aurora’s entry into the cannabis-infused drink market . A deal with Aurora would allow PepsiCo to outmaneuver its archrival Coca-Cola, which has expressed interest in a partnership with the cannabis producer. Moreover, a deal with PepsiCo’s Frito-Lay snacks division could help Aurora establish a beachhead in the nascent marijuana edibles market.
Peltz could also seek to strike a partnership with a consumer packaged goods giant like Mondelez International. In addition to having served on the company’s board of directors, Peltz’s multibillion-dollar investment firm, Trian Fund Management, owns a sizable stake in Mondelez, which gives him additional leverage to push for a deal.
With cannabis-infused beverages and edibles likely to be legalized in Canada by October, it may not be long before Aurora finds a willing partner. News of a deal would likely send the cannabis company’s shares sharply higher.
In addition to marijuana, hemp is a massive potential market that should help to fuel Aurora Cannabis’ growth in the years ahead. Hemp-derived cannabidiol (CBD) is expected to be a particularly attractive market. As with marijuana, people use CBD to treat a variety of ailments . But unlike marijuana, hemp-based CBD isn’t psychoactive, so it doesn’t get people high. It’s therefore expected to enjoy more widespread appeal, with the global CBD market reaching as high as $22 billion by 2022, according to Brightfield Group.