2019 was a bad year for the cannabis industry, with most of the companies within the industry losing over 50% of its value virtually. Cronos Group (TSX:CRON) (NASDAQ:CRON) was no different – where it used to be one of the hottest pot stocks valued at $12 billion, it currently has the valuation below $3 billion and trading at over $ 8 per share. The stock of the company is further at risk of falling below $5 per share.
Huge Cash Pile Puts The Company At Advantageous Position
Despite the bearish cannabis market, the demand for marijuana continues to grow. The bearish trend also would wipe out the small competitors making way for Cronos to revive itself. The Canada based company also remains capable of coming out victorious over the current crisis without much difficulty. Cronos Group had a cash reserve of over 2 billion dollars as of the previous quarter. There was also zero debt attached virtually. The company has a market cap of around 2.7 billion dollars and has managed to trade at Price to Sales ratio of 84.
Cronos Groups further stands at an advantageous position by having Altria Group as its huge investor. Cronos acquired cash worth 2 billion dollars from the giant last year, thus gaining stability in an industry where companies are struggling with positive cash flow generation. Cronos can manage to continue investing in the business and thereby growing its revenue. Apart from the financial backing from Altria Group, Cronos can also gain valuable insights from the group on developing and maintaining shareholder value.
The group is well known for its ability to use commoditized ingredients to make significant profits. The partnership could also help Cronos in its business, as tobacco and cannabis share quite many similarities. However, the short-term fate of the stock of Cronos Group cannot be accurately forecasted, especially during such a period of high volatility.