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Cronos Group Still Has Good Upside

|Includes: Cronos Group Inc. (CRON)
Summary

Cronos Group has 67 per cent upside, according to GMP Securities.

GMP Securities is maintaining his “Buy” rating and $17.00 target price for Cronos Group.

GMP Securities projects CRON to generate revenue and EBITDA in 2018 of $19.7 million.

Despite the slower than anticipated rollout of legal recreational cannabis throughout Canada, analyst Martin Landry of GMP Securities is still maintaining his “buy” rating and his $17.00 target price for Cronos Group. Cronos Group reports its third-quarter financials on November 13, 2018.  “Despite the possibility of near-term issues in the onset of the recreational market, our long-term forecasts remain unchanged. Between the ramp-up of Building 4 and the Cronos GrowCo JV, we anticipate the company will have ample capacity in 2019,” Landry had said in a client update this past Monday.  Cronos Group is a globally diversified and vertically integrated cannabis company with a presence across five continents. Cronos Group operates two wholly-owned Canadian licensed producers: Peace Naturals Project Inc., which was the first non-incumbent medical cannabis license granted by Health Canada, and Original BC Ltd., which is based in the Okanagan Valley, British Columbia. Cronos Group has multiple international production and distribution platforms across five continents.

Martin Landry also mentioned, “while we expect Cronos to have received its sales license for Building 4, the company’s large 280,000 sq. ft. facility in Stayner, Ontario, the first harvest from Building 4 may have only occurred in November. In addition, with harvests being staggered, Cronos may have limited volumes available to supply the recreational market in Q4/18.”

Landry is currently projecting CRON to generate revenue and EBITDA in 2018 of $19.7 million (was $42.8 million) and negative $7.9 million (was $4.3 million), respectively. His estimates for 2019 also remain unchanged at revenue of $160.7 million and an EBITDA of $49.4 million. At the time of his publication, Landry’s $17.00 target represented a projected return of 67.2%. 

Investors who are keeping a close eye on Cronos Group Inc. (OTC:CRON) stock; watched recent volatility movements, they can see that shares have been recorded at 14.47% for the week, and 11.47% for the last month. Taking a look back at some historical performance numbers for Cronos Group Inc. (OTC:CRON), we can see that the stock moved -20.19% for the last five trades. Cronos Group has also been investing in new product offerings like rso oil. For the last month, company shares are -38.85%. For the last quarter, the stock has performed 12.40%. Over the past full-year, shares have performed 177.53%. If we look back year-to-date, the stock has performed -12.02%. The company maintains price to book ratio of 7.04. A P/B ratio of less than 1.0 can indicate that a stock is undervalued, while a ratio of greater than 1.0 may indicate that a stock is overvalued.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.