Should Investors Buy Cronos Group Ahead of Earnings Next Week?

With earnings season in full swing, we are days away from seeing how Cronos Group (CRON) performed over the previous quarter. The cannabis company is scheduled to report earnings next week before the market opens on November 5th, 2020.

The third quarter has been tough for Canadian cannabis producers as the industry saw sales pick up in the second quarter as consumers stockpiled in anticipation of a long drawn out lockdown. As lockdowns subsided, sales fell back to the normal levels in the third quarter.

This year has been challenging for many companies due to their lack of profitability and access to capital. Many companies have had to turn to alternate forms of financing, such as dilution, in order to stay afloat. Fortunately, this hasn’t been the case for CRON, as the company received an early investment from Altria Group (MO) back in 2018 of $1.8 billion dollars.

But, despite having adequate capital to finance operations, the company has still not been able to achieve a profitable quarter. Cannabis stocks in general have been too focused on expansion and not on profitability, and that appears to be the case with CRON. Plus, many cannabis companies have to deal with illegal pot being sold at lower prices.

According to Zacks Investment Research, the consensus EPS forecast for this coming quarter is $-0.06, which would be a drop from $-0.02 from the same quarter last year.  Wall Street analysts views of CRON are mixed, with 2 Buy ratings, 2 Hold ratings, and 1 Sell rating.  And the Stocknews POWR Ratings have CRON rated as a Sell, with “D’s” in Trade Grade, Buy & Hold Grade, and Peer Grade. 

The only way for the company to see the stock rise if the company outperforms expectations, which is not likely as the industry has struggled the last few months.  Therefore, I am currently on the sidelines waiting to see how the company has been performing.

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CRON shares . Year-to-date, CRON has declined -27.25%, versus a 6.59% rise in the benchmark S&P 500 index during the same period.

Aaron is an experienced investor who is also the CEO of Departures Capital. His primary focus is on the cannabis industry. He also hosts a weekly show on YouTube about marijuana stocks. Learn more about Aaron’s background, along with links to his most recent articles.

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