Cronos Group (CRON) reported a much larger than expected loss in the fourth quarter and warned that low weed prices may continue to weigh on the company. Cronos Group shares and other marijuana stocks fell.
X
The Canadian marijuana producer lost 31 cents a share, far more than the six cents predicted by Zacks. In total, Cronos reported a net loss of almost $ 112 million during the quarter.
Sales of $ 17,046 million increased 133% over the previous year and 50% over the previous quarter, exceeding estimates of $ 13.78 million.
Sales in the US, where it owns the CBD Lord Jones brand, were $ 3.5 million, an increase of 30% over the previous year. The company’s “rest of the world” segment, which includes sales in Canada and other areas outside the United States, had a 193% sales gain to $ 13.54 million.
But the company continued to burn money, noted Matt Bottomley, an analyst at Canaccord. In the fourth quarter, the Cronos Group operated with an annualized free cash flow burn of about $ 162 million, he said. Sales, general and administrative costs, together with R&D costs, increased 31% to $ 40.4 million, increasing losses quarter after quarter.
Cronos also cashed $ 15 million in dehydrated cannabis and extracts, “mainly due to the price pressure of cannabis products on the Canadian market”. Cronos warned that “it may incur new write-offs due to price pressures in the market”. Canada’s lowest weed prices have also hit other marijuana stocks.
Bottomley said that “the company’s historic confidence in wholesale third-party purchases for its products likely continues to weigh on its path to profitability.”
IBD Live: a new tool for daily stock market analysis
Cronos Group Stocks, Marijuana Stocks
Cronos Group shares fell 2% on the stock market today. The stock currently has a composite rating of 78. Its EPS rating is 8.
Among other marijuana stocks, Canopy growth (CGC) fell 1%. Tilray (TLRY) lost 0.8%. Aurora Cannabis (ACB) fell 0.4%. Aphria (APHA) fell 1%.
Marijuana stocks have plummeted since February 10, after hopes of US legalization and signs of a stampede by retail investors – potentially fueled by the Reddit WallStreetBets board – drove them up.
Ulta Beauty Launch
On Friday, Cronos also announced plans to launch Happy Dance, a line of hemp-derived CBD body and bath products co-founded by actress Kristen Bell in Ulta Beauty “in the coming weeks”. Ulta will be the first major US retailer to sell the products. Ulta will sell products online and in more than 550 stores in the United States
This launch will occur while retailers in the United States face occupancy restrictions due to the coronavirus pandemic. Cronos noted that “certain beauty retailers and other retailers have temporarily closed their physical stores”.
Cronos said sales outside the United States were not “materially impacted” by the pandemic during the quarter. But he said prolonged blocks and changes in consumers’ buying habits “should have a negative impact on the company’s short-term revenue growth in Canada.”
Other Canadian marijuana companies remained cautious about selling CBD in the U.S., pending further guidance from regulators.
YOU MIGHT LIKE:
What stocks of marijuana are good buys after wild swings?
CGC Stock: Canopy growth rises after gains; Should you buy now?
Are Tilray’s shares a purchase after earnings increase?
United States economy: technology-driven innovation will survive the coronavirus pandemic and threaten millions of jobs