Raymond James: Cronos Financials A “Relative Non-Event”

On February 26th, Cronos Group (TSX: CRON) (NASDAQ: CRON) reported fourth quarter and full year financial results. The company reported fourth quarter total revenue of C$17 million, a 50% increase quarter over quarter, while also reporting negative gross margins of 87% or -C$14.9 million. Adjusted EBITDA came in at -C$53.1 million. For the full year, Cronos reported net revenues of $46.7 million, an almost 100% increase year over year; adjusted EBITDA came in at -C$147.3 million for the full year.

Cronos Group currently has 11 analysts covering the company with a weighted 12-month price target of C$9.69. This is slightly up from the average before the results, which was C$8.74. Two analysts have buy ratings, seven analysts have hold ratings, while two analysts have strong sells on the company.

In Raymond James’ note to investors, they reiterate their C$11 price target and outperform 2 rating. Rahul Sarugaser, Raymond James’ analyst, headlines, “4Q20: Big Revenue Beat, EBITDA Miss | New Dist. Deals, CBG Biosynthesis on Track for 3Q21.”

Although they call the quarterly and full year results a “relative non-event,” Cronos beat Raymond James’ revenue estimate of C$14 million, while EBITDA swung into a large miss with their estimate being -C$26.3 million.

Sarugaser says that the revenue beat was mainly driven by strong growth in the Canadian adult-use segment and sales to Israel, which was us 39% quarter over quarter. In an exciting turnaround, Cronos’ U.S CBD sales more than doubled quarter over quarter and had a 52% gross margin. The growth was driven by the Lord Jones CBD branded product sales.

Onto Raymond James’ favourite topic, Cronos’ partnership with Ginkgo Biosynthesis. They reiterate management’s third-quarter 2021 date, for when the company expects to commercialize cannabinoids derived from fermentation. Sarugaser writes, “CRON is one of the companies we believe will change the cannabinoid product landscape through its longstanding commitment to innovation paired with its (and Altria’s) significant resources.”

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.

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