Cronos Group Inc (TSX:CRON)(NASDAQ:CRON) released its quarterly results yesterday. The company continued to show strong sales with revenues climbing 120% year over year to $6.5 million.
Cronos posted a small operating loss of $558,000, which was an improvement from the $2.2-million loss it recorded a year ago. Gains on derivative liabilities related to its deal with Altria gave the company a boost of $436 million to its bottom line, which helped push Cronos to a positive net income number of $428 million.
However, the stock dropped on the day as still fell short of sales estimates of $7 million and it also warned that adjusted EBITDA isn’t going to get stronger.
CFO Jerry Barbato said on the earnings call that "As we continue to invest in our business, our brands and R&D initiatives, our adjusted Ebitda will likely decline over 2019 but position the company for accelerated growth in 2020."
In Q1, adjusted EBITDA was already at an $8.9-million loss, worse than the $7.9-million loss in Q4 and a big jump from the $1.5-million loss it incurred a year ago. And so with adjusted earnings already bad and only getting worse, it’s not going to encourage investors to jump on board, especially with pot stocks having so much volatility and Cronos in particular not being a cheap one to buy.
The good news, however, is that Cronos still has an advantage over many of its peers with a big investor like Altria involved, which is going to be key to helping its growth. And with the edibles market around the corner, sales could get even more of a boost.
The stock may be down, but I wouldn’t be surprised if it recovers.
