Cronos Group (TSX: CRON) (NASDAQ: CRON) announced its second quarter financials this morning, reporting net revenues of $10.2 million and an adjusted EBITDA of -$17.72 million. The numbers are rather lackluster when compared to peers within the cannabis industry, leaving many scratching their heads as to why Cronos currently has such a high valuation.
During the quarter, the Tier 1 firm reportedly sold a total of 1,584 kilograms of cannabis, which is a 54% increase on a quarter over quarter basis. Cost of sales on a per gram basis came in at $3.02, which is a significant increase over the first quarter which saw per gram costs of $2.63, during a time in which many Canadian LP’s are reducing their cost per gram of production.
Notably, tier two competitors The Supreme Cannabis Co, and Village Farms, generated cannabis revenues of $9.9 million, and $4.5 million, in the first quarter respectively. Both are expected to ramp revenues significant for their second quarter, raising the question on why Cronos currently holds its market position as a Tier 1 cannabis issuer.
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However, Cronos Group reported a significant cash position of $1.5 billion and short term investments of $744 million thanks to a large infusion of cash from Altria, who took a 45% stake in the firm for $2.4 billion earlier this year. Inventory also grew over the quarter, to that of $41.67 million, implying that significant sales growth could be enroute for Cronos during the third quarter of 2019.
Cronos Group is currently trading at $14.08 on the NASDAQ, down $0.36, or 2.46% on the news.
Information for this briefing was found via Sedar and Cronos Group. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
