Compressed margins at Aurora Cannabis (Aurora Cannabis Stock Quote, Chart, News: TSXV:ACB) were just one aspect of a weaker than expected quarter, says GMP Securities analyst Martin Landry.

This morning, Aurora Cannabis reported its fourth quarter and fiscal 2017 results. In its Q4, the company posted EBITDA of negative $1.8-million on revenue of $5.9-million, worse than the positive $200,000 on a topline of $9.1-million that Landry had modeled.

“Aurora’s story has been defined by agility, innovation and disciplined execution, achieving unprecedented growth in customers, revenue and shareholder value, and consistently validating our aggressive business strategy to build a globally dominant cannabis company,” said CEO Terry Booth. “Aurora is powering ahead on multiple fronts with domestic and international expansion through intelligent vertical and horizontal integration, and successfully implementing advanced technologies into all areas of operation. In addition, our balance sheet and capital market strength, along with our global reputation for high-quality and rigorous regulatory compliance, allow us to capitalize on opportunities available to very few other companies worldwide.”

Landry notes that Aurora isn’t getting as much per gram as he expected.

“The revenue miss was mainly driven by lower than expected average selling prices, combined with slightly weaker volumes. Grams sold were 755kg, up 16% QoQ but below our 929kg forecast. Average selling price per gram came in at $7.45, up 12% QoQ but lower than our $9.77 forecast, which was admittedly too high,” he says.

The analyst says the bottom line is being impacted.

“Surprisingly, the company’s adjusted gross margin decreased sequentially to 66% from 73% previously, despite a contribution from cannabis oils, which have a much higher profitability profile,” he adds. “This could be explained in part by higher wholesale purchases, however, this was not disclosed. ”

In a research update to clients Tuesday, Landry maintained his “Buy” rating and one-year price target of $3.25 on Aurora Cannabis, implying a return of 14.4 per cent at the time of publication.