Yesterday, Cronos Group (TSX: CRON) showed once again that the demand for U.S cannabis assets is high with their strategic investment in one of the larger private operators, PharmaCann. Cronos is investing $110.4 million for a 10.5% potential ownership stake via a call option as Cronos cannot own U.S cannabis assets if they want to keep their shares trading on the tier one exchanges. This deal values PharmaCann at roughly $1.05 billion.
This announcement seems like it has not affected analysts’ outlook on Cronos, with the weighted 12-month price target stuck at C$9.38, or a downside of roughly 13%. There are 12 analysts who cover the company, with two having buy ratings, and seven having hold ratings. One analyst has a sell rating and two have strong sell ratings on the stock. The street high sits at C$14.44 from Raymond James while the lowest comes in at C$8.50.
In Raymond James’ note sent after the news, the firm reiterated their buy rating and price target saying that, “CRON seems to be turning up the heat.” Cronos has had heavy news flow recently and this just adds to their excitement for the company.
First off, they say that PharmaCann itself is a pretty decent asset with 6 production facilities and 23 dispensaries in 6 limited licenses states. Sarugaser says that this “in our view, makes this a wise investment for CRON as it proceeds steadily into the U.S. market.” He also believes that this deal might not end in Cronos acquiring PharmaCann but rather “bears more hallmarks of a strategic investment,” as it’s for only 10.5% of the company currently.
Sarugaser believes that the company is gaining momentum as the company announced on June 4th that it is accelerating its biosynthesis program, he believes that between these two news releases it marks a foundational step in the right direction after being left new-less for so long. He believes that this step is one that will start to “rev up the massive CRON-Altira-Ginkgo marketing machine.” Sarugaser speculates that Cronos CBG might be sold at PharmaCann VeriLife locations.
Information for this briefing was found via Sedar and Refinitiv. 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.