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.
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.
As the founder of The Deep Dive, Jay is focused on all aspects of the firm. This includes operations, as well as acting as the primary writer for The Deep Dive’s stock analysis. In addition to The Deep Dive, Jay performs freelance writing for a number of firms and has been published on Stockhouse.com and CannaInvestor Magazine among others.