Cronos Gets a New Price Target from Raymond James


Dec. 24 2019, Updated 12:06 p.m. ET

Cronos Group (CRON) is an exciting prospect among cannabis players. Despite being a smaller company than rivals Aurora Cannabis (ACB) and Canopy Growth (CGC) (WEED), Cronos has strong fundamentals. The company reported its third-quarter earnings results in November. Recently, Raymond James gave it a new price target.

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Raymond James issues price target for Cronos

On December 21, a Cannabis Investment Group research article stated that Raymond James had released a new price target for Cronos. The company gave the stock a price target of $12 and an “outperform” rating.

Most analysts rated Cronos as a “hold.” The overall view on most cannabis stocks changed after HEXO (HEXO) reported dismal fourth-quarter results and announced that it wouldn’t be able to hit its fiscal 2020 targets. Since then, analysts’ and investors’ confidence in the sector has dwindled.

According to a Cannabis Investment Group report, in the last 60 days, Cronos’s price target has fallen 18.6% from $21.4 to $17.4.

Analysts’ ratings and target prices

Many brokerage companies lowered their price targets for Cronos after its third-quarter earnings results. To learn more, check out What Do Analysts Recommend for Cronos Group? Cronos’s third-quarter results failed to impress—as did Aurora Cannabis’s and Canopy Growth’s. The disappointing earnings results of these three leading cannabis companies dragged the whole sector down.

As of December 24, 13 analysts cover CRON. Of these analysts, 15% recommend “strong buys” on the stock, while 23% recommend “buys.” Another 54% rate it as a “hold,” while 8% call it a “sell.” The stock’s average target price is 12.5 Canadian dollars, which indicates a 35% potential upside from its current trading price. The stock closed at 9.2 Canadian dollars on Monday.

Meanwhile, the average target price for Aurora Cannabis stock is 4.87 Canadian dollars, 84% higher than its closing price yesterday. Nine out of 20 analysts call Aurora stock a “hold.”

Furthermore, the price target for CGC is set at $21.7, which is 10% higher than its last closing price. Seven out of 12 analysts call CGC a “hold.”

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What to know about the Cronos-Altria deal

Many analysts feel the Cronos-Altria deal could be beneficial to the company. Cronos is targeting the expansion of its US CBD business, so joining hands with a US company sounds like a wise choice. In October, Altria stated on its earnings call that it felt investing in Cronos was the right choice. Altria holds a 45% stake in Cronos. To know more about Altria’s views, check out Cronos Group Joins Altria to Bet on Cannabidiol Market.

The Cronos-Altria deal will prove fruitful for the company once marijuana legalization happens on a federal level in the US. Currently, CBD-based products are gaining popularity in the US, and we expect Cronos to have an advantage given its CBD portfolio. Read Will CBD Cosmetics Products Lift Cronos Group? to know more. With this deal, the company plans to launch vape products in Canada. Analysts expect the deal to drive its sales growth. However, market growth for vape products in the US looks hazy as a result of rising vaping concerns.

In an article in Investors Business Daily in October, Stifel analyst Andrew Carter upgraded Cronos to a “buy” and called it “a new king in the north.”

The analyst said, “We believe Cronos will showcase an enhanced revenue growth profile leveraging the distribution capabilities of Altria to build its U.S. CBD business and demonstrate breakthrough product potential in the Canadian vapor segment.”

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Why are analysts interested in CRON?

Owing to the popularity of the marijuana sector, many consumer companies are showing interest in collaborating. HEXO and Molson Coors have a partnership. Meanwhile, Constellation Brands holds a significant chunk of Canopy Growth.

According to some industry analysts, while Cronos is a smaller company by market cap, it’s made wise investment decisions. Aurora Cannabis and Canopy Growth have focused on manufacturing and developing production facilities to produce better marijuana products. However, this has raised some issues.

For example, Aurora’s debt burden is rising. Meanwhile, Constellation is holding Canopy back, but an increase in production has created a demand-supply issue. A lack of legal stores is still an issue in Canada, which is affecting legal sales and increasing illegal sales. To know more about why sales have declined in Canada, read Cannabis Sales Decline Across Canada—Why?

Cronos and its peers’ stock performances

Since it reported its third-quarter earnings results on November 12, CRON has fallen 11.2%. However, in December, the stock is up 2.2%. Year-to-date, CRON has lost 35.8% of its stock value. Meanwhile, ACB has lost 19.6%, and CGC is down 6.1% in December. Cannabis stocks’ performances have been a bit of a letdown this year. To learn more, read Cannabis Sector 2019 Review and 2020 Outlook. Analysts and investors expect Cannabis 2.0 to kick-start the sector’s revenue growth in 2020.

Take a look at 420 Investor Daily for more marijuana-related news.


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