In Why Jim Cramer Favors CRON and CGC published on August 8, we discussed why Jim Cramer, the widely followed host of CNBC’s Mad Money, favors Cronos Group (CRON) and Canopy Growth (CGC) (WEED). What has changed since then?
On Tuesday, Jim Cramer stated that Cronos Group and Aphria (APHA) passed Canopy Growth. Speaking about Canopy Growth in the lightning round, he said, “That was a terrible quarter. It was a terrible quarter, they still have a lot of money. I think they’ll be fine, but Cronos has now eclipsed them in my mind as has Aphria … because that quarter was just, wow.”
How have Cramer’s picks performed this year?
Canopy Growth has lost 15.3% of its stock value since it reported its first-quarter earnings on August 14. For the quarter, the company missed analysts’ top-line and bottom-line expectations. For more on Canopy Growth’s first-quarter performance, read Canopy Growth Earnings Impacted the Cannabis Sector. In April, Canopy Growth reached a high of 70.71 Canadian dollars. Since then, the stock has experienced downward momentum. Canopy Growth stock has fallen 1.5% YTD (year-to-date) as of Tuesday. However, Cramer hopes that the company’s cash will help it turn around.
In contrast, Aphria posted impressive results for the fourth quarter of fiscal 2019 on August 1. The company beat analysts’ revenue and bottom-line estimates. Cramer stated that Aphria’s impressive performance helped the company beat Canopy Growth. Aphria’s stock price rose due to its second-quarter performance and impressive outlook. As of Tuesday, the company was trading at 8.31 Canadian dollars—a rise of 20.4% since its fourth-quarter earnings. Aphria stock has risen 5.9% YTD.
Cronos Group has outperformed Canopy Group and Aphria. So far, Cronos Group has returned 8.7% this year. On August 8, the company reported its second-quarter results. Cronos Group beat analysts’ revenue expectations. However, the company’s operating losses widened. The stock has fallen 18.1% since its earnings.
In the last few months, the cannabis sector has been hit by a series of regulatory scandals. CannTrust (CTST) received a non-compliance report from Health Canada. Meanwhile, Curaleaf (CURLF) received a warning letter from the FDA for selling “misbranded drugs.” The scandals caused the sector to underperform the broader equity market. The ETFMG Alternative Harvest ETF (MJ) and the Horizons Marijuana Life Sciences Index ETF (HMMJ) have returned 3.4% and 5.8% YTD, respectively. In comparison, the S&P 500 Index has increased 15.7%.
Analysts’ recommendations for Aphria and Cronos Group
Analysts favor a “buy” rating for Aphria. Among the 12 analysts that follow the stock, 75% recommended a “buy.” On average, analysts have a 12-month target price of 14.94 Canadian dollars. As of Tuesday, the company was trading at a discount of 79.8% from analysts’ target price.
Analysts favor a “hold” rating for Cronos Group. Among the 12 analysts that follow the stock, 58.3% recommended a “hold,” 25.0% recommended a “buy,” and 16.7% recommended a “sell.” Analysts have given Cronos Group a 12-month target price of 20.30 Canadian dollars with a return potential of 29.9%.
Jim Cramer is optimistic about the cannabis sector. To learn more, read Jim Cramer Thinks Cannabis Is Back in Action.