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What happened
Actions of Cronos Group (NASDAQ: CRON), a Canadian cannabis producer, slipped after several analysts published downgrades following yesterday's earnings call. Investors worried that the Cannabis program run by the Canadian government will not go fast resulted in a 12.5% drop in inventory this morning and a 9.1% loss at 2:26 pm. EDT on Wednesday.
So what
Several analysts, including Canaccord's Matt Bromley, demoted the Cronos group after the company released earnings-free results in the last three months of 2018. Compared to its peers, Cronos has not really made it worse . Unfortunately, the competition has set the bar quite low.
Source of the image: Getty Images.
Cronos was the first licensed cannabis producer to list its shares on a major US stock exchange, but it is now the smallest turnover. Revenues increased 49% from the previous quarter to only $ 5.6 million Canadian.
This was not enough to cover expenses and operations lost $ 21.5 million, accounting for 137% of unacceptable fourth quarter revenues.
Now what
Statistics Canada reported that total sales of licensed cannabis in January were lower than in the previous month. If sales figures for February are not much better than January's, the Cronos group and its peers could have big problems.
International sales are not yet significant enough to be mentioned, which means that Cronos relies on its domestic market to finance its operations over the next few years without asking for another document from investors. This will be a problem, as the domestic market reached $ 1.2 billion Canadian annualized in the fourth quarter and does not seem to be growing much. Do not forget that Cronos has to share this pie with half a dozen major licensed growers and at least a hundred smaller ones.
In one way or another, the Cronos Group still has a market capitalization of $ 3.3 billion. Unless another company like Altria or Constellation Brands take an irrational decision and start throwing money at Cronos, it will not stay that long.
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