It has been a difficult few months for Aurora Cannabis (NASDAQ: ACB) investors. After peaking in April, the stock has seen a gradual but noticeable downtrend, following the company’s latest earnings report which showed high increase but missed the expectations of analysts. Although the company’s sales jumped 20% quarter-over-quarter, its net loss stood at $ 150 million, showing that the company is still far from profitability.

Not all Aurora news has been bad lately, however. In addition to increasing sales, the company worked on acquisitions and partnerships to diversify its product offering. One of the company’s most exciting partnerships is with the Ultimate Fighting Championship or UFC Mixed Martial Arts (MMA) league, whose athletes are well known to endorse sports supplements. (UFC belongs to Endeavor Group, which provides for an initial public offering.)

The deal in question is said to be a research collaboration, where Aurora and the UFC sports performance team will work together to see if cannabidiol (CBD) products have any benefit for MMA fighters. However, the potential for new performance-enhancing products is not the only benefit that could come from it.

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Increased visibility

One obvious benefit that could come from Aurora’s UFC partnership is visibility. In a crowded market, having a recognizable brand helps you stand out, and if the success of Nike Anything teaches us is that getting into athletics can help with that.

While Aurora’s partnership with the UFC is currently research-driven, it is possible that a number of branded benefits will flow from it, such as Aurora’s name mentioned on air during the airings of the ‘UFC or Aurora branded products bearing the UFC fighter endorsement.

Search results

Of course, the intended outcome of the Aurora-UFC partnership is to find applications for CBD oil derived from hemp or other products in sports medicine. Preliminary research has shown that CBD can be cardioprotective, meaning it helps strengthen the heart, and if this were conclusively proven, it would have obvious implications for sports medicine.

Other areas in which CBD is being researched include depression and anxiety, two conditions that can also affect athletic performance. Assuming Aurora’s research with the UFC sports medicine team is conclusive, it could result in patented products that take off in the sports health world.

Focus on high margin product categories

One of the main benefits of Aurora’s research with UFC is that it focuses on high margin products. For cannabis growers, two product areas are the most profitable: CBD products and pre-rolled joints. In contrast, the raw cannabis flower is relatively inexpensive and low-margin. Since Aurora’s partnership with UFC is focused on CBD, any resulting products would be sold in one of the higher margin cannabis market segments and could prove profitable for Aurora if they take off. .

This could be a major boon for the company, which is struggling to make consistent profits despite surging revenues.

A version of this article originally appeared on The Motley Fool Canada site. For more coverage like this, head over to Fool.ca.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.



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