The incredible four-bagger returns in cannabis stocks like Cronos Group (TSX:CRON) may or may not lead to a crash next. One thing is certain: the weak Q4 2018 results remind investors that this sector is purely speculation.
Cronos reported an eye-popping 282.9% increase in revenue which, in absolute terms is $15.7 million. It lost $19.2 million for the year ($0.11).
Two analysts could not publish downgrades fast enough. PI Financial and Canaccord issued bearish notes while CIBC wrote about positive catalysts ahead. Who is right?
Cronos has Altria’s (NYSE:MO) financial backing so the latest losses add little fuel for bearish short-sellers. The ballooning loss, from a net income of $2.5 million to a loss of $19.2 million, is expected.
Cronos is ramped up revenue from $4.1 million last year to $17.1 million. R&D rose to $2.4M while sales and marketing rose four-fold to $4.1M.
Cronos continued its facilities expansion and expects that at controls are put in place, yields for each growth cycle to keep improving at each cycle. Investors long on CRON stock need only watch COGS – cost of goods sold – in the quarters ahead.
The firm will need to increase efficiency, downstream processing and packaging, value-add on products that come online, and sales of cannabinoids. Should that happen, the stock will hold current levels.
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