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Cronos Group Inc T.CRON

Alternate Symbol(s):  CRON

Cronos Group Inc. is a Canada-based global cannabinoid company engaged in building intellectual property by advancing cannabis research, technology and product development. The Company operates through one segment, which is comprised of operations in Canada and Israel and is involved in the cultivation, manufacture, and marketing of cannabis and cannabis-derived products for the medical and adult-use markets. The Company’s international brand portfolio includes Spinach, PEACE NATURALS, and Lord Jones. The Spinach brand offers pre-rolls infused with cold-filtered cannabis extract and coated in kief, and all-in-one disposable vapes. The Lord Jones is a hemp-derived cannabidiol (CBD) brand. Its Lord Jones Hash Fusions are a line-up of premium ice water hash infused pre-rolls. This brand also offers vapes and edibles. Its PEACE NATURALS offer Peppermint CBD, a blend of CBD extract, quality medium-chain triglycerides (MCT) oil, and a hint of natural peppermint flavor.


TSX:CRON - Post by User

Bullboard Posts
Post by roooon Aug 31, 2018 5:10am
245 Views
Post# 28547272

Motly Fool take

Motly Fool take

So what

Investors need to keep today's drop in perspective. Cronos Group stock is still up more than 40% in just the past month despite the fallout from the Citron Research report.

There is some truth to the points raised by Citron. Unlike several of its peers, Cronos Group has not disclosed the size of its supply agreements with Canadian provinces. However, referring to this omission as "deceiving the investing public" is a stretch.

Cronos did have some contamination issues with its cannabis products in 2017. But so did one other Canadian marijuana grower. The company appears to have resolved those issues.

Is Cronos Group's revenue less than several other Canadian marijuana growers? Yep. But it's also increasing it faster than many of them, too. And while the company isn't investing much in R&D, that's not exactly a major problem at this point.

There are two issues raised by Citron Research that I think are more relevant to Cronos Group's future. Questions about its international strategy and its likelihood of being selected as a partner by Diageo or another major company are valid, in my opinion.

Cronos claims a major partnership with German pharmaceutical distributor Pohl-Boskamp and a joint venture in Australia, and it recently teamed up with Delfarma to enter the medical cannabis market in Poland. Despite all of these efforts, I do think it's possible that Cronos could get left behind to some extent in the global cannabis market.

As for a Diageo partnership, my hunch is that  there are candidates higher on the list for the big beverage company. With much of Cronos Group's recent gains fueled by speculation that it could be picked by Diageo, a sell-off is probably warranted.

Now what

Citron Research's track record is mixed at best. Investors shouldn't panic just because Citron raised issues about Cronos, none of which are secrets to anyone who follows the marijuana grower.

However, questioning whether or not a stock has shot up too much is a good thing to do. Cronos Group's market cap hinges on an extraordinary level of growth. It will no doubt see tremendous growth when Canada's recreational market opens in October. I'm not sure, though, that the growth will be enough to justify the stock's current valuation.

I don't think Cronos is, as Citron alleges, deceiving investors. But investors shouldn't deceive themselves that the path forward for Cronos Group will be easy and that the momentum from the last month is sustainable.

 

Bullboard Posts