The cannabis industry had been in the middle of turmoil even before the coronavirus pandemic hit, and many of the biggest stocks in the industry had experienced considerable declines in the period. While Cronos Group (TSX:CRON) (NASDAQ:CRON) was not an exception in this regard, the company’s status as one of the biggest players in the industry makes it an interesting proposition.
The cannabis company is backed by the tobacco behemoth Altria, and that places it in a good position to tide over the present crisis. Hence, it might be worthwhile to figure out if the Cronos stock is worth investing in or not.
The company announced its Q4 2019 and full-year financial results last month. Year on year, sales rose by as much as 71%, and the major reason behind the growth was due to sales generated in the United States. Last year, Cronos did not have a presence in the United States market. The acquisition of Redwood Holding Group gave the company a foothold on the hemp market in the United States and also gave it a legal way of entering the market. If the company can continue to expand its operations in the United States, then it can hope to grow its revenues steadily.
That being said, it should be noted that Cronos still failed to meet analysts’ expectations of $11.6 million in revenues. However, at the same time, investors might draw comfort from the fact as on December 31, 2019, Cronos had cash and cash equivalents to the tune of $1.2 billion. Last month, it had also emerged that the United States Securities and Exchange Commission had asked the company with regards to its revenues recognition.
That forced the company to restate its financials, and that must have come as a bit of a jolt for investors. While it is true that the company is expected to survive the coronavirus crisis, that alone does not make it a stock worth buying. The SEC issue has put a bit of dampener on proceedings as well. While Cronos may have the cash pile to generate growth, it might not yet be the best time to invest in the company.