How Should Cannabis Investors Interpret Cronos Group's Earnings Report?

: CRON | Cronos Group Inc. - Common Share News, Ratings, and Charts

CRON – On Monday, Cronos Group (CRON) finally released their Q4 results.

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On Monday, Cronos Group (CRON) finally released their Q4 results. There was widespread speculation that due to the stock being primarily listed as an American company, the delay was caused due to the new accounting principles. Investors hate uncertainties especially when it comes to financial reports. Usually, a delay in earnings could be an indication that a very negative quarter is ahead. 

CRON reported fourth-quarter net income of $61.6 million which is 16 cents a share, versus a loss of $9.7 million, or 5 cents a share, just a year ago. The company said it had $1.2 billion in cash and equivalents on its balance sheet at the end of December.

During this quarter, Cronos Group tacked on a non-cash gain of $118.8 million due to a change in value related to the $1.8 billion investment tobacco company Altria Group Inc. made in the weed producer. We believe this was due to a plunge in the value of the Canadian Dollar. Analysts were expecting a loss of 3 cents a share on revenue of $11.6 million.

CRON also wrote down $22.1 million on cannabis plants and oil and said this was primarily driven by falling prices. The company said it expects additional inventory write-downs in the short term because of falling prices and tougher market conditions.

Shares of CRON have traded down about 15% since reporting earnings but still carries a market cap of about $2 billion.

In terms of the results, CRON completed an audit committee review and restated certain 2019 unaudited interim financial statements. The company also expanded its Canadian distribution to new provinces and product categories across the adult-use market. CRON established Cronos Fermentation which is a crucial step in advancing the production of cultured cannabinoids in partnership with Ginkgo Bioworks.

This quarter the company also enhanced its research and development capabilities at the Peace Naturals Campus along with advancing operations at Cronos Israel with GAP and GMP certifications. By the sounds of it, this quarter was all about advancing their long term operations.

CEO Mike Gorenstein said, “We are pleased that the Audit Committee has completed its review and that Cronos Group is now current with the filing of our financial reports. As we move forward, we are committed to improving our internal controls and financial reporting practices, maintaining the highest standards of transparency and accountability, and enhancing our capabilities and resources across functions to support our strategy.”

It’s promising that the company has assured investors that their accounting practices are in-line now and that transparency for the company is a top priority. 

As CRON moves forward in this challenging economic environment, we believe this company will do better than some of their peers due to its large cash balance.  With that cash, we look forward to watching CRON capitalize on some great acquisitions. 

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CRON shares were trading at $5.37 per share on Wednesday afternoon, down $0.30 (-5.29%). Year-to-date, CRON has declined -29.99%, versus a -22.71% rise in the benchmark S&P 500 index during the same period.

About the Author: Aaron Missere

Aaron is an experienced investor who is also the CEO of Departures Capital. His primary focus is on the cannabis industry. He also hosts a weekly show on YouTube about marijuana stocks. Learn more about Aaron’s background, along with links to his most recent articles. More...

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