There have been two cannabis companies in particular that have been considered by some analysts to be overbought. Cronos Group (NASDAQ: CRON) and Tilray Inc (NASDAQ: TLRY) are two companies that have been trading at extremely high multiples, even in comparison to other marijuana companies.
Investors and analysts alike have been keeping their eyes out for the latest financial figures to see whether the expensive price they paid for the stock is justified. Unfortunately for Cronos Group, the company reported it’s Q1 2019 revenue figures today, missing their quarterly targets and leading to a selloff from disappointed investors.
Cronos reported that it saw a 120 percent revenue increase to $6.5 million, a figure that just wasn’t high enough to justify the steep multiples its stock is trading at. In comparison to Q1 2018, revenue was only at $2.9 million, with most of this increase coming from the launch of Canadian adult-use cannabis. In comparison to Q4 2018, revenue increased by 15 percent, which was primarily driven by CBD oil.
Despite these revenue figures, however, Cronos still reported a widening loss in its financial statements, having lost $9 million in Q1, which was substantially higher than the $1.5 million they lost in the previous year.
“In the first quarter of 2019, the business performed in line with our expectations. We continue to stay laser-focused on our strategy of building our supply chain, distribution, intellectual property and brand portfolios,” said Mike Gorenstein, CEO of Cronos Group. “We’re delighted to have officially closed our transaction with Altria and to kick off a relationship we expect to lead to significant growth and value creation. Altria’s investment and the services that Altria will provide to Cronos Group will enhance our financial resources and allow us to expand our product development and commercialization capabilities. Altria’s skills in these areas as well as its regulatory expertise position Cronos Group to compete, scale and lead the rapidly growing global cannabis industry as markets open and welcome legalization.”
In response to the news, shares of Cronos Group plunged around 8 percent in today’s trading session. Overall, Cronos’ figures were not surprising to many who didn’t think it was possible for the giant cannabis company to justify its traditionally expensive ratios.
It’s become an increasingly common phenomenon in the cannabis space with companies who, despite having impressive growth in any other industry, simply aren’t growing fast enough to satiate the interest of the markets.
As of yesterday, there were no analysts giving a buy rating on Cronos, while five had a “hold” position and a further two had a firm “sell” for the company.
Cronos Group Company Profile
Cronos Group Inc is a diversified and vertically integrated cannabis company. Its principal activities involve production and sale of cannabis in federally legal jurisdictions, including Canada and Germany.
The company sells dried cannabis and cannabis oils under its medical cannabis brand Peace Naturals. It seeks to invest in companies either licensed or actively seeking a license, to produce medical marijuana pursuant to Canada’s Marihuana for Medical Purposes Regulations. The company other brands include Spinach and Cove. – Warrior Trading News
