Right here is 1 in style Robinhood inventory that could possibly be even riskier than Dogecoin – Motley Idiot
Whatever you think Dogecoin (CRYPTO: DOGE), it was a big winner this year. The price of the popular cryptocurrency has shot up more than 6,400%. That return even outperforms the best-performing stocks currently popular with Robinhood.
But Dogecoin proponents and opponents would also likely agree that the cryptocurrency is risky. Some traders who bought at the high a few weeks ago are now sitting at a 45% loss.
However, this cryptocurrency isn’t the only investment alternative that exposes buyers to the potential of big losses. Here’s a popular Robinhood stock that could be even riskier than Dogecoin.
A shadow of his former self
At least one of the most popular stocks among Robinhood investors has fallen more than Dogecoin this year. Aurora cannabis (NASDAQ: ACB) Stocks are currently trading more than 50% below their February high.
The whole story is much worse for Aurora, however. Marijuana stock has lost more than 90% of its value since early 2018.
At one point, Aurora was the largest cannabis producer in the world by market capitalization. Reports even turned up that coke considered partnering with the company to develop cannabis-infused beverages. However, it all seems like old history now.
While several of its competitors in the Canadian cannabis market have gained major partnerships, Aurora has yet to close a deal with a major player in the consumer goods industry. And the company is now nowhere near the largest cannabis producer in the world. It barely makes it into the top 5 Canadian companies and could easily lose its place in the top 10 largest North American cannabis companies.
What makes Aurora so risky
However, you could argue that Aurora is less risky now that it is just a shadow of its former self. To some extent, that is true. However, there are still some major risks that the company is exposed to.
Aurora’s biggest problem is that it continues to lose a lot of money. In the company’s third quarter results released in May, Aurora recorded a net loss from continuing operations of $ 165.7 million. Aurora has stated in the past that it is on the right track to generate positive adjusted earnings before interest, taxes, depreciation and amortization (EBITDA). This goal has still not been achieved.
Since it continues to be unprofitable, Aurora has to resort to stock offers to raise more money. However, these offers dilute the value of the existing shares. Less than a week after the third quarter results were released, Aurora filed a prospectus amendment setting up a new stock program in the market. This program allows the company to sell up to $ 300 million in shares. Another dilution is on the way.
Aurora’s position would be better if its financial results improved, but it doesn’t. The company’s sales declined 25% year over year in the third quarter, with cannabis consumer sales plummeting 53%. The competition in the Canadian market is fierce with high price pressure.
The company’s goal is in the US cannabis market. Currently, however, Aurora cannot enter the US market and list its shares on a major US stock exchange due to federal marijuana laws.
Does Aurora have any advantages over Dogecoin? Indeed, yes – and it is a significant one: the struggling cannabis producer has more control over his future than Dogecoin.
As with most cryptocurrencies, the valuation of Dogecoin depends entirely on the whims of the buyers. It has no value in and of itself. There’s no board or management team working every day to find ways to increase the price of Dogecoin (unless you want to count the tweets from self-proclaimed “dogefather” Elon Musk).
Aurora, on the other hand, has a board of directors and executives who develop and execute strategies to improve the company’s assets. You have saved costs. You are looking for possible acquisitions. Perhaps these efforts will work; maybe they won’t. Unlike Dogecoin, however, Aurora is not completely exposed to external forces.
Despite this advantage, it is still possible that Aurora will be a riskier bet than Dogecoin in the future. However, the good news for investors is that you don’t have to take risks that you are not comfortable with. There are many other investment alternatives that offer better risk-reward ratios than Aurora Cannabis or Dogecoin.
This article represents the opinion of the author who may disagree with the “official” referral position of a premium advisory service from the Motley Fool. We are colorful! Questioning an investment thesis – even one of our own – helps us all think critically about investing and make decisions that will help us get smarter, happier, and richer.