Improving Pot Sector Climate Bodes Well for Cronos Stock

Cronos Stock

Market Looking Better for CRON Stock

After being comatose for the majority of the year, marijuana stocks mounted a strong rally following the decision by Maryland and Missouri to legalize recreational marijuana, It’s clear the move to state-approved recreational marijuana is picking up, but getting the conservative states on board will likely be difficult. The key here remains the federal decriminalization of recreational pot.

For a broad measure of the pot sector, look at ETFMG Alternative Harvest ETF (NYSEARCA:MJ). The exchange-traded fund (ETF) rallied 33% to $6.02 on November 15 after declining to $4.54 on October 13.

Chart courtesy of StockCharts.com

One of the top 10 marijuana stocks in the ETFMG ETF is Cronos Group Inc (NASDAQ:CRON). This vertically integrated marijuana play has been generating strong financial growth and potentially strong long-term price appreciation that could drive its shares significantly higher.

Cronos stock is down 35% over the last year and 21% in 2022 to a level I see as a decent entry point to add shares.

Chart courtesy of StockCharts.com

Cronos Group Inc Delivering Strong Financial Growth

Cronos Group has delivered impressive revenue growth so far, with its revenues surging 2,176%, at a compound annual growth rate (CAGR) over the past five years of 119.6%.

Fiscal YearRevenues (Millions)Growth
2017CA$4.1N/A
2018CA$15.7284.9%
2019CA$31.5100.6%
2020CA$62.798.9%
2021CA$93.348.9%

(Source: “Cronos Group Inc.,” MarketWatch, last accessed December 6, 2022.)

Over the next two reported years, Cronos is expected to ramp up its revenues by 27.6% to $95.0 million (around CA$119.1 million) in 2022 and by 25.6% to $119.3 million (around CA$149.6 million) in 2023. (Source: “Cronos Group Inc. (CRON),” Yahoo! Finance, last accessed December 6, 2022.)

As far as its bottom line goes, Cronos Group Inc is years away from turning a profit. The critical thing now is for the company to continue increasing its revenues and steadily narrowing its losses, which is what the company has been doing.

Cronos reported an adjusted loss of $1.07 per diluted share in 2021, but that’s expected to narrow significantly to a loss of $0.29 per diluted share in full-year 2022 and a loss of $0.19 per diluted share in 2023.

Cronos Group Inc will have the financial flexibility to grow its operations and execute its strategy without the need to worry about capital. Its balance sheet shows minimal debt of $6.9 million coupled with a large war chest of $888.8 million in cash.

Analyst Take

CRON stock’s price deterioration presents an opportunity to interested investors. My view is that Cronos stock will continue to be one of the top marijuana stocks.

Cronos Group Inc is already a leading player in Canada, and the full opening of the U.S. pot market could bring even more opportunities.