Dow remains in the Dow; Cronos gets to smoke – the ugly fool


On Wednesday morning, the stock market fell, as investors attempted to analyze conflicting signs regarding the US economy's situation, as well as uncertainties related to the UK's imminent departure from the United States. ;European Union. As of 11:30 am EDT, the Dow Jones Industrial Average (DJINDICES: ^ DJI) was down 128 points to 25,529. the S & P 500 (SNPINDEX: ^ GSPC) down 21 points to 2,797, and Nasdaq Composite (NASDAQINDEX: ^ IXIC) fell 81 points to 7,610.

The Dow does not like to frequently change the list of 30 values ​​that make up the industry average, but sometimes member companies impose their hand on it. The group that oversees the Dow has announced that DowDuPont (NYSE: DWDP) will be replaced by one of its parts after its split into three separate companies. However, in the marijuana industry, which flies high, the Canadian pot specialist Cronos Group (NASDAQ: CRON) declassified following a profit report that raised concerns about its future.

Two piles of materials packaged by Dow on a roof.

Source of image: Dow.

How now, Dow?

Shares of DowDuPont fell 1% Wednesday morning, following last Tuesday's announcement by S & P Dow Indices. The company that oversees the composition of the key equity benchmarks, including the S & P 500 and the Dow Jones Industrial Average, said DowDuPont will be replaced by shares in the future Dow Inc., which will be traded under the DOW symbol. The move will take effect Tuesday morning, April 2, after Dow's split of DowDuPont.

Investors have been waiting for more than a year and a half for DowDuPont to begin its spin-off process, eagerly anticipating the possibility of better targeting its investment in the conglomerate's business that interests them the most. Dow Inc. will hold the bulk of the material science company's assets, while the company's agricultural component will be converted to Corteva's aggregate and will produce seeds, biotech traits, and crop protection products. . The inherited DuPont name will contain the specialty chemicals sector, which includes exposure to the electronics, transportation, nutrition and bioscience sectors.

Dow Inc.'s revenues will be the largest of the three parties, but some were skeptical that the surviving company would be large enough to retain its position as a manufacturer. Nevertheless, having no obvious alternative to represent the chemical industry, keeping Dow at the Dow makes sense, while lending itself to the obvious confluence of their respective names.

Cronos goes from top to bottom

At the same time, the Cronos group's shares lost more than 10% on Wednesday morning, adding to their modest decline on Tuesday. Canaccord's analysts downgraded the cannabis company to maintain its price target of 17 Canadian dollars, or about $ 12.67 per share.

Canaccord believes that Cronos has not experienced growth since the use of the Canadian cannabis market for recreational purposes, hoped by many investors. While analysts are willing to take a long-term view of the growth potential of the industry as a whole, it is discouraging for them to see Cronos fall behind its competitors.

These concerns were evident in the results of the Cronos group announced Tuesday morning. Despite the support of the American giant cigarette Altria Group Thanks to a $ 1.8 billion investment to acquire 45% of the marijuana grower, Cronos has not been able to generate very impressive sales growth, its revenues having only increased by 49%. % to $ 5.6 million. This represents less than one-tenth of sales by the largest player in the sector, which is well below that of other major producers.

There is still time for Cronos to catch up with his peers and having Altria's resources could be a major asset. However, in a rapidly growing industry, Cronos can not waste time, otherwise it could suffer the fate that Canaccord seems to anticipate in its analysis of the marijuana stock.

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