Cronos Group Inc (CRON)

[FUNMAN]

Cronos Reports Earnings Tomorrow. Here’s What to Expect.

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Published: Aug. 5, 2020 at 7:15 a.m. ET
By Connor Smith

https://www.marketwatch.com/articles/cronos-reports-earnings-tomorrow-heres-what-to-expect-51596626100?mod=mw_quote_news

Marijuana grower Cronos Group will report second-quarter results before the market opens on Thursday.

Unlike many of its cash-strapped peers that dumped millions of dollars into building up massive growing capabilities, Cronos (ticker: CRON) has stayed relatively lean even with its investment from U.S. tobacco giant Altria Group. Investors have grown impatient with losses from companies like Aurora Cannabis (ACB), and Canopy Growth (CGC), as pot sales continued to disappoint compared to the high-flying estimates for the Canadian market that Barron’s warned about in 2018.

Cronos, however, doesn’t sell a lot of pot. In the first quarter, it hit $8.4 million in sales. Canopy Growth topped $78 million in its March quarter. But Canopy reported a net loss of $942.7 million, compared to Cronos ’ net income of $75.7 million.

For Cronos ’ second quarter, analysts expect a net loss of $18.7 million, or 4 cents a share, with sales of $9.5 million, according to FactSet.

MKM Partners analyst Bill Kirk wrote in a note Tuesday that there’s longer-term reasons to be excited about Cronos stock, which he has a Buy rating. In the near-term, he points to its developments in Colombia and Israel, as well as its partnership with Ginkgo Bioworks to develop rare strains of cannabis.

“Cronos continues to make progress toward its goal of commercialization by September 2021, as evidenced by recently filed patents. Ultimately, we think Gingko and U.S. legislative changes offer more exciting opportunity than selling dried flower in Canada.

Kirk estimates Cronos will report net sales of $11.1 million, ahead of consensus, citing upside from sales into Israel.

“Our preference, should profitability be worse than we expect, would be for the incremental spending to be research & development,” he wrote. “In this area, we think Cronos has an opportunity to create a defensible moat.”

His colleague Alex Panagiotidis, MKM Partners’ head of derivatives and event driven, notes options market activity implies the stock could move 5.1%, up or down, on the earnings day, compared to a 6.2% average over the prior four quarters. The company’s stock has moved lower on earnings in the last nine quarters, he noted.

Cronos is the latest big pot company to report results beyond March. Aphria (APHA) shares tanked last month when the company reported a wider-than-expected loss. Inventors may look to Cronos’ results for some clues ahead of Canopy Growth’s report later in August.

Write to Connor Smith at [e-mail]