Cronos Group (CRON) reported its third-quarter earnings on November 12. For the quarter, the company missed analysts’ revenue and EBITDA estimates. Cronos Group posted revenues of 12.7 million Canadian dollars, which was lower than analysts’ estimate of 14.14 million Canadian dollars. The adjusted EBITDA was 23.9 million Canadian dollars below analysts’ expectation of -19.87 million Canadian dollars. The company’s lower selling price was one of the main reasons for the lower revenues. Cronos Group’s revenues per gram fell 47.8% from the same quarter the previous year to 3.75 Canadian dollars. The weak third-quarter performance and weakness in the cannabis sector due to lower-than-expected earnings from Aurora Cannabis (ACB) and Canopy Growth (CGC) (WEED) dragged the stock down. Since Cronos Group reported its third-quarter earnings, it has lost 21.8% of its stock value as of November 15.
Analysts lowered their target prices for Cronos Group
Since Cronos Group reported its third-quarter earnings, four analysts have lowered their target prices. Cormark Securities cut its target price from 20 Canadian dollars to 12 Canadian dollars. CIBC lowered its target price from 20 Canadian dollars to 17 Canadian dollars. Canaccord Genuity reduced its target price from 13 Canadian dollars to 12 Canadian dollars, while MKM Partners lowered its target price from 14 Canadian dollars to 12 Canadian dollars. Overall, analysts’ consensus target price for Cronos Group is 12.88 Canadian dollars as of November 15, which represents a fall of 18.0% from 15.70 Canadian dollars as of October 15. The new consensus target price implies a 12-month return potential of 54.1%. As the above graph shows, Cronos Group’s consensus target price has gradually fallen since September.
On November 15, Aphria (APHA), Canopy Growth, and Aurora Cannabis were trading at a discount of 120.4%, 48.5%, and 61.7% from their respective target prices as of November 15.
What are analysts saying?
Despite several analysts lowering their target prices, Bank of America Merrill Lynch’s Christopher Carey looked optimistic about the stock.
As reported by MarketWatch, MKM Partners’ Bill Kirk stated that he was disappointed by Cronos Group’s third-quarter performance. He said that the sector faces high inventory levels and pricing pressure, which would be challenging to address in the short term.
Analysts’ ratings for Cronos Group
Since Cronos Group reported its third-quarter earnings, there hasn’t been a change in analysts’ ratings. Analysts continue to favor a “hold” rating for the stock. Among the 12 analysts that follow Cronos Group, 58.3% recommend a “hold” rating, 33.3% recommend a “buy” rating, and 8.3% recommend a “sell” rating. As the above graph shows, Cronos Group has received increased coverage in the last 12 months. In November 2018, only five analysts covered the stock.
Let’s look at analysts’ recommendations for Cronos Group’s peers:
- For Aphria, 76.9% of the 13 analysts that follow the stock have given a “buy” rating.
- Despite Aurora Cannabis scaling down its expansion plans, 47.1% of the 17 analysts recommend a “buy” ratings for the stock.
- Analysts favor a “hold” rating for Canopy Growth. Among the 21 analysts, 57.1% recommend a “hold” rating.
YTD stock performance
So far this year, Cronos Group has lost 41.9% of its stock value. Higher operating losses in the second and third quarters and weakness in the cannabis sector could have dragged the stock down. During the same period, Aphria, Aurora Cannabis, and Canopy Growth have lost 28.0%, 47.1%, and 44.6% of their stock values.
For Aurora Cannabis’s first-quarter performance and Canopy Growth’s second-quarter performance, read Aurora Cannabis: Good or Bad News for Its Q1 Earnings? and Canopy Growth Stock Falls after Weak Q2 Earnings. Also, visit 420 Investor Daily for more marijuana-related news.