Since early March, Cronos (NASDAQ:CRON) stock has been slowly burning. Note that the shares have gone from $24 to $14.
One of the key reasons is that there has been a general bearishness across the cannabis sector. For evidence, look at the selloffs in shares like Canopy Growth Corp (NYSE:CGC), Tilray (NASDAQ:TLRY) and Aurora Cannabis (NYSE:ACB). After all, it looks like Wall Street’s expectations for the typical marijuana stock were simply too exuberant.
Interestingly enough, the sentiment remains fairly awful. According to S3 Partners, short sellers held positions of about $5.1 billion in 150 marijuana stocks. And 84% of this is concentrated in 20 of those stocks.
Now, the volatility should not be a surprise. The cannabis industry is still in the nascent stages, making it difficult to make predictions. It also does not help that the Canadian market continues to have problems with supply chains and black-market activities.
Earnings Preview for Cronos Stock
So, what does this all mean for CRON stock? On Thursday, we’ll get a better picture of things. The company will report its second-quarter results, which will come out before the market opens.
As for the estimates, they call for CRON to post a loss of 3 cents a share. Analysts also forecast revenues to spike by 116% to $5.6 million. In the prior quarter, the growth ramp was about 120%, with the main driver being the adult-use market in Canada. There was also a 122% jump in kilograms sold to 1,111 kilograms.
The current quarter has certainly seen lots of activity. Here’s a look at some of the notable highlights:
- The company appointed Dr. Todd Abraham as the chief innovation officer. Before taking this position, he held executive posts at Mondelēz International (NASDAQ:MDLZ), The Pillsbury Company and Procter & Gamble (NYSE:PG).
- CRON entered an agreement to acquire an 84,000 square foot of GMP compliant fermentation and manufacturing facility in Winnipeg, Canada from Apotex Fermentation. Some of the capabilities include: microbiology, organic and analytical chemistry, quality control and method development.
Yet perhaps the biggest event was the $300 million acquisition of Redwood Holding Group LLC. On the news, Cronos stock rose by nearly 9% to $13.84.
According to Cronos CEO Mike Gorenstein, the Redwood acquisition provides multiple synergies. First, the company specializes in hemp-derived cannabidiol (CBD) skincare products. This expands Cronos’ scope. Second, the two teams can combine their expertise and potentially expand into other CBD-based consumer products. Third, it provides a PR boost in that Cronos isn’t just another marijuana stock. Instead, their company offers practical solutions for everyday needs. Cannabis just happens to be the platform of choice.
Bottom Line on CRON Stock
Going into the quarter, Wall Street remains quite skeptical of CRON stock. Consider that there are currently eight analysts who have a “hold” rating, four with a “sell” and only two with a “buy.”
But I think this could be an advantage. If anything, Cronos stock is at a good entry point, especially for those investors with a long-term focus. The company’s $1.8 billion investment from Altria (NYSE:MO) opens up many opportunities for acquisitions, research and development and other growth initiatives. There will also be the expertise with distribution/marketing, the handling of regulations and product development. All in all, I think CRON stock remains one of the best ways to play the cannabis wave right now.
Tom Taulli is the author of the upcoming book, Artificial Intelligence Basics: A Non-Technical Introduction. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.