Broker Canaccord Genuity Downgrades Pot Stock Cronos – Barron’s
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Broker Canaccord Genuity Downgrades Pot Stock Cronos – Barron’s

(Picture by Uriel Sinai/Getty Shots)

Picture by Uriel Sinai/Getty Shots

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A day after Canadian pot producer
Cronos Group

reported slim sales for its December quarter, analysts at Canaccord Genuity downgraded the inventory to a Sell. This morning’s gift by analysts Matt Bottomley and Bobby Burleson cite the inventory’s sky-excessive more than one and fretted at Cronos’s stupid originate in Canada’s recreational cannabis market.

On the Nasdaq, Cronos inventory (ticker: CRON) is down 11% on the sleek time, to $18.08. That is restful neatly above the analysts’ label target of $12.sixty eight.

Whereas the sales of Canada’s diverse excellent producers ranged from $15 million to $60 million within the December quarter—the first wherein the country allowed recreational sales to adults—Cronos managed sincere $four million in sales of each and every clinical and recreational pot. That even missed the low-bar of Canaccord’s forecast for $5 million.

Barron’s sought comment from Cronos on the downgrade, nonetheless bought no response.

The analysts additionally gift that Cronos’s moderate promoting label for dried bud and oil within the quarter was 5.39 Canadian greenbacks (US$four.00), which lagged on the motivate of its stare neighborhood moderate of C$6.50. Low quarter-reside inventories of US$9 million, with finest about $1 million value of accomplished items, didn’t bode neatly for this quarter’s sales, command the Canaccord gents.

Consequently of Cronos’s “rather stupid originate out of the gate within the [Canadian] rec market,” the analysts slashed their sales forecasts for the firm. Canaccord now foresees 2019 sales and money drift coming in at $eighty four million and $16 million, respectively, as a substitute of the previously-forecast $132 and $forty one million. For 2020, the analysts now predict $178 million in earnings and $64 million in money drift.

No subject its measurement disadvantage in contrast with the likes of
Canopy Speak

(CGC) and
Aurora Hashish

(ACB), Cronos has seen its inventory alternate as excessive as $25 after tobacco giant
Altria Group

plunked down $1.Eight billion for a forty five% stake—a label that represented 12 bucks a share.

“Cronos has seen its share label almost double as one of finest two licensed producers to accumulate a predominant equity funding from a world strategic accomplice,” write Bottomley and Burleson. Even on the day prior to this’s label of 20 bucks, they gift, Cronos was procuring and selling at almost ninety two-instances their estimate for 2020 money drift. In incompatibility, cannabis competitors with better ranges of recreational sales are procuring and selling at about 40-instances estimated 2020 money flows.

That is too filthy rich a premium, even for the industry bulls at Canaccord.

Write to Invoice Alpert at william.alpert@barrons.com

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March 27, 2019
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