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Cronos Group Inc CRON

Morningstar Rating
$2.02 −0.06 (2.88%)
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Company Report

Cronos Earnings: Decline in Gross Margin Overshadows Expense Reduction; Shares Fairly Valued

No-moat Cronos reported disappointing fourth-quarter results, with net revenue of $24 million, 4% lower sequentially. Moreover, gross margin more than halved from the third quarter to 8% due to disruptions from the Israel-Hamas war; continued oversupply in Canada pressuring prices; and unfavorable mix shift. After revisiting our assumptions, we've lowered our top-line forecast to 6% per year over the next decade, down from 8%, as we see increased competition not only in Cronos' Canadian home market but also its export markets. Additionally, we've reduced our long-term gross assumption to the high-20% range from the high-30% range. Partially offsetting these changes, Cronos has made good progress on its operating expense savings programs. We've cut our fair value estimates to $2 and CAD 2.80 per share, down from $2.50 and CAD 3.50. Shares are fairly valued, and we think US multistate operators Curaleaf and Green Thumb offer more attractive upside.

Price vs Fair Value

CRON is trading at a 3% premium.
Price
$2.06
Fair Value
$5.00
Uncertainty
Very High
1-Star Price
$3.80
5-Star Price
$1.00
Economic Moat
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Capital Allocation
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Bulls Say, Bears Say

Bulls

Altria Group’s investment of $1.8 billion provides Cronos with capital and a strategic partner with significant product development, branding, and regulatory experience. If successful, Altria Group may increase its ownership of Cronos or potentially acquire it.

Bears

Cronos' small size adds difficulty to reaching profitability, as it struggles to leverage overhead expenses.

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News

Trading Information

Previous Close Price
$2.08
Day Range
$2.012.10
52-Week Range
$1.642.64
Bid/Ask
$2.02 / $2.04
Market Cap
$769.85 Mil
Volume/Avg
1.6 Mil / 2.2 Mil

Key Statistics

Price/Earnings (Normalized)
Price/Sales
8.82
Dividend Yield (Trailing)
Dividend Yield (Forward)
Total Yield

Company Profile

Cronos Group, headquartered in Toronto, Canada, cultivates and sells medicinal and recreational cannabis through its medicinal brand, Peace Naturals, and its two recreational brands, Cove and Spinach. Although it primarily operates in Canada, Cronos exports medical cannabis primarily to Israel. In the U.S. the company has an option to acquire 10.5% of U.S. multistate operator PharmaCann upon easing of federal prohibition.
Sector
Healthcare
Industry
Drug Manufacturers - Specialty & Generic
Stock Style Box
Small Growth
Total Number of Employees
447

Competitors

Valuation

Metric
CRON
ACB
CGC
Price/Earnings (Normalized)
Price/Book Value
0.700.390.65
Price/Sales
8.820.560.94
Price/Cash Flow
Price/Earnings
CRON
ACB
CGC

Financial Strength

Metric
CRON
ACB
CGC
Quick Ratio
21.681.791.13
Current Ratio
22.543.791.79
Interest Coverage
−9.27
Quick Ratio
CRON
ACB
CGC

Profitability

Metric
CRON
ACB
CGC
Return on Assets (Normalized)
−0.53%−23.44%
Return on Equity (Normalized)
−0.55%−57.88%
Return on Invested Capital (Normalized)
−4.90%−20.86%
Return on Assets
CRON
ACB
CGC
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Drug Manufacturers - Specialty & Generic Industry Comparables

Ticker
Name
Morningstar Rating for Stocks
Economic Moat
Market Cap
ZTS
Zoetis Inc Class AJtl$87.4 Bil
MKKGY
Merck KGaA ADRZycmbz$74.3 Bil
HLN
Haleon PLC ADRFqhvk$38.5 Bil
VTRS
Viatris IncMvzrk$15.1 Bil
RDY
Dr Reddy's Laboratories Ltd ADRRphf$12.4 Bil
CTLT
Catalent IncFkxnw$10.3 Bil
CURLF
Curaleaf Holdings IncDbhr$3.6 Bil
PRGO
Perrigo Co PLCJrm$3.6 Bil
PBH
Prestige Consumer Healthcare IncKyrhnm$3.5 Bil
GTBIF
Green Thumb Industries IncFqgz$3.1 Bil

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