Owning pot stocks can feel like being on a roller-coaster ride. Just ask anyone who held Cronos Group Inc (NASDAQ:CRON) stock over the last few months.
When I wrote the article “Cronos Group Inc: This $7 Pot Stock Could Be Special” for Profit Confidential in November 2020, Cronos stock was trading around—unsurprisingly—$7.00 per share. By early-February 2021, it had shot up to more than $15.00 per share, marking a more-than-100% return in less than three months.
However, as the chart below shows, CRON stock was not able to stay at that level for long, and it has since pulled back. At the time of this writing, Cronos stock is trading at $10.37 apiece.
The reality is that, when a stock goes up by an enormous amount in a short period, it almost always experiences a pullback.
There are many reasons behind this pattern. One way to look at it is that investors who bought CRON stock at $7.00 more than doubled their money when the stock hit over $15.00. They wanted to take their profits, so there was some selling pressure in Cronos stock.
Cronos Group Inc (NASDAQ:CRON) Stock Chart
Chart courtesy of StockCharts.com
It’s worth noting that growth stocks as a whole have not been very popular in recent weeks. Many of the stocks that shot through the roof last year have retraced a portion of their gains.
That said, the growth thesis in the cannabis industry remains as solid as ever. And as one of the most prominent pot stocks on the market, Cronos Group Inc’s business is firing on all cylinders.
Headquartered in Toronto, ON, Canada, Cronos is a global cannabinoid company with international production and distribution across five continents.
The company’s portfolio includes the global wellness platform “Peace Naturals,” the recreational marijuana brands “COVE” and “Spinach,” and the hemp-derived cannabidiol (CBD) brands “Lord Jones,” “Happy Dance,” and “Peace+.” (Source: “Investor Presentation: November 2020,” Cronos Group Inc, last accessed March 15, 2021.)
I consider CRON stock to be a prominent pot stock for two reasons. First, it’s one of the few pot companies to have its shares listed on a major U.S. stock exchange—as opposed to trading over the counter. Second, Cronos received a $1.8-billion strategic investment from Altria Group Inc (NYSE:MO), one of the largest tobacco companies in the world. The deal gave Altria a 45% stake in Cronos.
Cronos Group reported fourth-quarter and full-year 2020 results on February 26, 2021. While Cronos stock didn’t regain much upward momentum after the earnings news release, the results were actually quite impressive.
In the fourth quarter of 2020, Cronos generated $17.0 million of consolidated net revenue, representing a whopping 133% increase year-over-year. (Source: “Cronos Group Reports 2020 Fourth Quarter and Full-Year Results,” Cronos Group Inc, February 26, 2021.)
There was growth across the board: In the U.S., the company’s revenue surged 30% from a year earlier, and in the rest of the world, its revenue grew 193%.
Cronos reported a gross loss of $14.9 million for the fourth quarter of 2020. While that’s not an insignificant amount, it did represent a year-over-year improvement considering that, in the fourth quarter of 2019, the company’s gross loss was $20.1 million.
It’s also worth noting that, in full-year 2020, Cronos Group Inc generated $46.7 million of revenue, an amount that nearly doubled the $23.8 million it earned in 2019. With the COVID-19 pandemic and the ensuing lockdowns, many industries were struggling in 2020, so the fact that Cronos still nearly doubled the size of its business that year shows just how resilient the company is.
Cronos Group Inc doesn’t provide forward-looking revenue guidance, which isn’t unusual among cannabis companies. After all, the industry is at an early stage. With the evolving regulatory environment and the COVID-19 pandemic, it’s very hard to say what the numbers will be in the coming quarters.
And this kind of uncertainty could be unsettling for some investors. That’s why I always say pot stocks are not for everyone; remember the roller-coaster ride I mentioned earlier.
That said, Cronos’ business is on the right track. For investors who believe in the future of the legal cannabis industry, Cronos stock remains a name worth considering.