Cronos Stock Appears Set to Climb
In general, pot stocks have come down from their highs earlier this year. Unsurprisingly, financial news outlets don’t talk about these tickers as much as before.
But that’s exactly why this could be a good time to pay attention to the sector again. While there’s way less hype surrounding pot stocks than before, many companies are still churning out serious growth.
Take a look at Cronos Group Inc (NASDAQ:CRON), for instance.
Cronos is a vertically integrated cannabis company headquartered in Toronto, ON, Canada. Starting in 2012, the company has been building a global network with partnerships, production, and distribution across five continents.
With a market capitalization of around $2.4 billion, Cronos isn’t the biggest pot stock. But it is a name to be reckoned with in the industry. The company’s products are distributed across all provinces in Canada.
Notably, its wholly owned Canadian licensed producer Peace Naturals Project was granted the first non-incumbent medical cannabis license by Health Canada in 2013. Cronos Fermentation, another subsidiary wholly owned by Cronos, received a processing license from Health Canada in April 2021. (Source: “Investor Presentation,” Cronos Group Inc, May 7, 2021.)
As just mentioned, Cronos has been building a global network. In the U.S., the company manufactures, markets, and distributes hemp-derived supplements and cosmetic products through its subsidiary Redwood Holding Group, LLC.
Meanwhile, Cronos Group Inc has joint ventures in Israel and Columbia, as well as distribution agreements in Europe and Australia.
In March 2019, one thing that made headlines in the pot sector was Altria Group Inc’s (NYSE:MO) $1.8-billion strategic investment in Cronos. The transaction gave Altria—one of the largest producers and marketers of tobacco products in the world—a 45% stake in Cronos.
Considering how successful Altria has been in brand and product development in highly regulated markets—and its financial capacity and wherewithal—the deal was great news for CRON stock investors.
Moreover, while many pot stocks—including some prominent ones—are still trading over the counter in the U.S., Cronos Group Inc is listed on the Nasdaq. Having one’s shares listed on a major U.S. stock exchange can lead to more exposure, higher liquidity, and a larger investor base.
In its home country, Canada, Cronos stock is listed on the Toronto Stock Exchange. The company’s ticker symbol is “CRON” on both exchanges.
Cronos Group Inc (NASDAQ:CRON) Stock Chart
Chart courtesy of StockCharts.com
Looking at the above chart, we see that CRON stock has come back to Earth after shooting to the moon earlier this year. Today, Cronos stock trades around the same level it did before the takeoff last November.
But Cronos Group Inc’s business has grown over the past year.
According to the company’s latest earnings report, it generated $15.6 million of net revenue in the second quarter of 2021. That represents a 58% increase year-over-year. (Source: “Cronos Group Reports 2021 Second Quarter Results,” Cronos Group Inc, August 6, 2021.)
In particular, the company’s U.S. revenue rose by two percent from a year earlier, while its Rest of World revenue surged by 74%.
Obviously, Cronos’ U.S. revenue growth doesn’t seem that impressive compared to what it earned elsewhere. But the company has more tricks up its sleeves.
On June 14, Cronos announced a strategic investment in PharmaCann Inc., a leading vertically integrated U.S. pot company. (Source: “Cronos Group Announces Strategic Investment in PharmaCann, a Leading U.S. Cannabis Company,” Cronos Group Inc, June 14, 2021.)
PharmaCann has a broad footprint in the U.S. market. It has six production facilities and 24 operating dispensaries across New York, Illinois, Ohio, Maryland, Pennsylvania, and Massachusetts.
A wholly owned subsidiary of Cronos Group Inc purchased an option to acquire roughly a 10.5% ownership stake in PharmaCann for approximately $110.4 million. Following the exercise of the option, Cronos and PharmaCann will enter commercial agreements that will allow each company to offer its products through either company’s distribution channels.
“We were attracted to PharmaCann as an investment because of their disciplined capital allocation, strong track-record and compelling licensed manufacturing and retail footprint,” said Cronos’ president and chief executive officer, Kurt Schmidt. (Source: Ibid.)
Pot stocks may seem out of favor at the moment, but given the growth in Cronos Group Inc’s business and what it plans to do, CRON stock—which trades at just $6.41 apiece—could be a good opportunity.