While Canadian cannabinoid company Cronos Group Inc. (CRON) has been expanding its business, that’s not paying off well. The company is struggling with lower cannabis flower sales in its Rest of the World segment and a decline in revenue in the U.S. segment.
The company reported a 20% year-over-year drop in net revenue at $20.14 million for the quarter ending March 31. Gross profit for the same period stood at a dwindled $2.38 million, marking a decrease of $4.55 million compared to the prior-year quarter. Also, its bottom line remained in the red.
Although the trend of states legalizing cannabis has been on the rise and support for legalization maintains a steady incline, the battle for mainstream acceptance is far from over. Thus, it could be a bumpy road ahead for the company to turn its business to profitability and growth.
From my perspective, CRON is not ideally suited for short-term investors. The following detailed analysis of several key metrics substantiates my bearish stance.
Analyzing CRON’s Financial Performance: A Detailed Review of Key Metrics 2020-2023
The trailing-12-month net income of CRON has demonstrated a clear fluctuating downward trend spanning from September 2020 to March 2023 based on the given data series.
- On September 30, 2020, CRON’s net income was $77.29 million.
- It then hiked downwards to -$73.14 million by December 31, 2020, indicating the beginning of their losses.
- An overarching trend of fluctuation followed, although generally in the negative zone. A notable drop occurred in the first quarter of 2021, with a reported -$310.49 million, marking an all-time low for the year.
- However, on June 30, 2021, there was a stride toward recovery with small losses of approximately -$146.46 million.
- Sadly, another peak decline was witnessed at -$373.70 million by the close of the third quarter of the same year.
- Despite the minor improvements throughout 2022 and 2023, the values remained below zero. For instance, on December 31, 2022, and March 31, 2023, the net income was capped at -$168.73 million and -$155.27 million, respectively.
From September 30, 2020, to March 31, 2023, CRON experienced a significant negative growth rate as its net income plunged from $77.29 million to -$155.27 million. This data flags a certain level of financial instability within CRON, particularly accentuated by the final values in the series.
Based on the provided data, the trend of trailing-12-month revenue for the company from September 2020 to March 2023 demonstrated a generally upward progression, with noticeable fluctuations.
- Starting at $36.61 million in September 2020, the revenue steadily rose, finishing at $74.44 million in December 2021.
- By March 2022, a substantial surge led to the amount landing at $86.86 million.
- June and September 2022 witnessed a steady climb, hitting an all-time high of $94.81 million in September.
- However, there were significant drops in the final quarter of 2022 and the first quarter of 2023, leading to a decrease to $91.90 million in December 2022 and then further down to $87.01 million in March 2023.
In terms of growth rate, when measured from the initial value of $36.61 million (September 2020) to the latest value of $87.01 million (March 2023), CRON experienced a growth rate of approximately 137.77%. It’s crucial to note that while the overall trend showed substantial growth, the downward trend during the last reported periods since December 2022 alerts potential challenges that the company might be facing.
The Analyst Price Target for CRON experienced a mix of stability and decline from November 12, 2021, to July 4, 2023. Here is an overview:
- From November 12, 2021, to November 26, 2021, the price target remained stable at $7.5. However, it dropped to $7 on November 26, 2021, and held steady till February 18, 2022.
- The Analyst Price Target then declined steadily from $7 in February 2022 to $4 on March 11, 2022, and remained at this level until May 20, 2022.
- A slight increase was observed on May 13, reaching $4.25 before decreasing back to $4 on May 20 - a level maintained until around August 12, 2022.
- We then notice a sharper decline from $4 in early August 2022 to $3.5 by October 7, 2022, which persisted for a month before narrowing to $3.49 on November 4, 2022, and eventually settling at $3.4 from November 18, 2022, to February 24, 2023.
- After fluctuating between $3.3 and $3.123 between December 30, 2022, and April 28, 2023, the Analyst Price Target plunged sharply to $2.995 on May 19, 2023, remaining constant until July 4, 2023.
Looking at the overall dataset, the initial value was $7.5 (on November 12, 2021), and the last recorded value was $2.995 (on July 4, 2023). Calculating growth from the first to the last value gives a decrease of approximately -60.07% over the total period. The more recent data from 2023 show a consistently reduced target value compared to 2021 and 2022, underscoring the need for increased focus on this recent downward trend.
Assessing CRON Share Price Trends from January to July 2023
The data from January to July 2023 chronicles the share price trend of CRON. Let’s look at the details:
- On January 6, 2023, the price was $2.53. Over the month, it saw a slight decline, closing at $2.47 by January 27.
- For February, the prices started at $2.51 on February 3, then saw a steady decrease, ending at $2.16 by February 24.
- In March, the prices decreased consistently, starting at $2.11 on March 3 and falling to $1.92 by the end of the month.
- April saw a slight fluctuation, with prices moderately recovering to $1.92 on April 21, but it ended at a low of $1.80 on April 28.
- In May, the prices rose slightly in the middle of the month to $1.90 on May 5, only to fall again to $1.78 towards the end of the month on May 19.
- June began with a low at $1.74 but saw a steady rise throughout, with a significant surge at the end of the month to reach $1.88 on June 30.
- This upward momentum carried into July, with the price hitting $2.04 on July 3.
Looking at this data, it can be concluded that CRON had a general decreasing trend in share prices from January 2023 till May 2023, post which the trend reversed with prices gradually increasing from June 2023 onwards. However, it should be noted that the growth rate was slightly fluctuating and not stable during the period. Here is a chart of CRON’s price over the past 180 days.
Analyzing CRON’s POWR Ratings
CRON has an overall D rating, translating to a Sell in our POWR Ratings system. It is ranked #25 out of 28 stocks in the Agriculture sector. This rank is slightly higher than previous weeks and sits towards the lower end of the performance spectrum, as smaller numbers indicate better performance.
For a more detailed review, here is the progression of the CRON stock’s performance and ranking over time:
- From the week of January 7, 2023, to February 25, 2023, the CRON stock maintained a consistent F and later a D rating and mostly held steady at the #25 spot in its category.
- Its rank slightly improved to #24 during the week of February 11, 2023, and it continued to oscillate between the 22-24 ranks up until the week of April 1, 2023. At this point, it attained its best rank of #21 in the category.
- However, the stock fluctuated again between ranks 22 and 25 through to the most recent date, July 1, 2023.
Overall, while CRON showed minor improvements in terms of its rank within the Agriculture category over time, it has remained relatively constant overall with a D rating.
The POWR Ratings for CRON in the most noteworthy dimensions are as follows:
- Growth:
In the growth dimension, CRON has started strong, with a rating of 77 in January 2023. The rating increased slightly to 78 in February 2023 before experiencing a gradual downward trend with values of 70 in March 2023, 71 in April 2023, and then plummeting to 62 in May 2023. The trend continued with further decreases to 56 in June and a slight rise to 58 in July 2023.
- Stability:
CRON began with a modest rating of 21 in January 2023, which increased to 22 in February, followed by a substantial increase to 32 in March which remained stable in April. The stability value made a considerable jump to 38 in May, further escalated to 41 in June, then finalized at a high of 43 in July 2023.
- Value:
In the value dimension, CRON started at 12 in January 2023, which was fairly low. This rating increased gradually to 13 in February, making a noticeable ascent to 19 in March, 22 in April and May, 24 in June, and retaining the same score in July 2023.
Based on the above analysis, it’s evident that the growth dimension had the highest ratings at the beginning of the year. However, it showed a declining trend over the subsequent months. On the other hand, stability and value dimensions demonstrated clear ascending trends but remained low throughout the time frame.
Stocks to Consider Instead of Cronos Group Inc. (CRON)
Other stocks in the Agriculture sector that may be worth considering are Golden Agri-Resources Ltd (GARPY), AGCO Corporation (AGCO), and ICL Group Ltd. (ICL) -- they have better POWR Ratings.
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CRON shares were trading at $2.04 per share on Tuesday morning, up $0.07 (+3.55%). Year-to-date, CRON has declined -19.69%, versus a 16.92% rise in the benchmark S&P 500 index during the same period.
About the Author: Subhasree Kar
Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics.
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