Cronos Stock (NASDAQ:CRON) Falls After Earnings: A Good Buying Opportunity?

The cannabis sector has been in trouble for many months now, and some of the biggest companies in the sector have experienced steep declines in their stock prices. Cronos Group (TSX:CRON) (NASDAQ:CRON) has not been able to escape either, and in 2020 so far, the stock has declined by as much as 27%.

Earnings Review

This past Friday, the company announced its financial results for the 1st quarter, and it could be worthwhile for investors to take a closer look at the performance. Here is a quick look at some of the highlights and takeaways from the company’s first-quarter results.

Cronos’ revenues soared by as much as 181% year on year to rise from $3 million in the prior-year period to $8.4 million. That being said, it fell short of analysts’ estimates of $10.7 million. The company’s international operations, which rose by 100% year on year, contributed as much as $6.3 million to the figure. The revenues in its domestic market in the United States came in at $2.2 million, and the disappointing performance has been blamed on coronavirus related drop in sales.

The most surprising bit from the performance was the $75.7 million worth of profits generated by Cronos Group in the quarter. However, it should be noted that the profit had been generated only because of the revaluation of derivative liabilities to the tune of as much as $113.4 million for the quarter. Operating loss stood at $45 million.

One of the most important things to look for in a business in these troubled times is the sort of cash balance it possesses, and in that regard, Cronos is in a strong position. The company reported that it had cash, short term investments and cash equivalents to the tune of $1.3 billion as of March 31 this year. If its rate of cash burn remains the same, Cronos would need to look for fresh capital at some point in late 2021.

The expected growth in the cannabis derivative market in Canada is expected to be a major boost for Cronos. On the other hand, the company’s facility in Israel is expected to produce revenues in the second half of the year, and that is another major positive. However, the second wave of coronavirus infections could prove to be highly damaging to the company.

About Travis 491 Articles
Started investing in 2013 with $8,500 I turned that into 180k within a few months. Every year since I have increased the amount of money made from micro cap stocks and stock options.

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