CRON Stock Forecast: Cronos Signs $122-Million Deal to Produce Lab-Grown Cannabis

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CRON Stock Forecast

Cronos Group Inc (NASDAQ:CRON) is looking to take pot out of the ground and into the lab, signing a $122.0-million deal with Ginkgo Bioworks Inc. to genetically engineer the active compounds found in marijuana. The CRON stock forecast received a shot in the arm, with shares rising 16% by Tuesday afternoon.

The deal sees the two companies come together in order to extract the DNA from cannabis plants that produce valuable substances and chemicals.

But more importantly as far as CRON stock is concerned, this is a tech innovation in a sector that could use it.

It’s like going into “a foot race with a Formula One race car,” Mike Gorenstein, chief executive officer of Toronto-based Cronos, said in an interview with Bloomberg. (Source: “Cronos Partners With Ginkgo to Develop Lab-Grown Cannabis,” Bloomberg, September 4, 2018.)

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Ginkgo, for its part, maintains a 100,000-square-foot lab in Boston.

Cronos sealed the deal with $22.0 million in cash to fund research and development, and another $100.0 million worth of common shares that will be released as certain production milestones are hit.

Ginkgo met with several other marijuana companies before deciding on Cronos.

“They hadn’t spent a zillion dollars buying out too many farms. Their focus is to get the right stuff and make it the most efficiently with the highest purity,” Jason Kelly, CEO of closely held Ginkgo, said in an interview with Bloomberg. “The reality is that brewery economics is going to wipe the floor with farming economics.”

“It’s cheaper, it’s not subject to weather conditions, the price isn’t all over the place, it’s not different if you grow it in Morocco or somewhere else, it’s just a much better product.” (Source: Ibid.)

Considering that just last week, CRON stock was taken to task as being overvalued by a short seller and criticized for lacking transparency, this is certainly welcome news for supporters of the company.

Analyst Take

The CRON stock forecast got a much-needed boost with this bold move.

The company is looking to find ways to innovate that will separate it from the competition. Using technological innovation to boost production, expand product variety, and otherwise improve its product is going to be a huge asset as these companies vie for market share.

What we’re waiting to see is the promise of this new tech. If this partnership can deliver on its potential of producing high-grade cannabis in a lab on the cheap, all without having to battle the elements and other typical cultivation difficulties, then we may see a new powerhouse emerge in the industry.

CRON stock is already strong, but this recent move could help it jump to the next level.