After a rough couple of years, cannabis companies are back in favor on expectations that marijuana might be federally legalized under the new Washington power structure, asserts Mike Cintolo, growth stock specialist and editor of Cabot Top Ten Trader.
An up-and-coming player in this field is Cronos Group (CRON), which offers a variety of cannabis-related products, including dried cannabis, cannabidiol (CBD) and even vape pen formulations.
The company also has medical marijuana licenses around the world along with an extensive line of cannabis-infused wellness products (including the just-launched Happy Dance, a new CBD skincare brand).
Cronos came to prominence in 2019 when tobacco stalwart Altria Group (MO) bought a 45% stake in the Canadian company for $1.8 billion.
The deal gave Cronos a huge war chest, and the firm still has $1.3 billion in cash on the sideline left over with no debt. It plans to use some of that cash to achieve its goal of having a commercialized scale of cannabinoids by this September, which would allow fermented cannabinoids to be used in future products.
While the firm is very small (just $11 million in revenue in Q3), revenue growth has been consistently strong, including a 96% sales gain in Q3, a big acceleration from the Q2 slowdown last year.
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The results were driven by continued growth in the adult-use Canadian cannabis market, plus sales of the firm’s Peace Naturals-branded cannabis products to the Israeli medical market. Looking ahead, the market expects sales to jump between 80% and 100% in each of the coming three quarters.
Management, meanwhile, is encouraged with the expansion of new retail locations in Canada. And if the U.S. Congress legalizes cannabis as many expect, the company should be in great position to take advantage of it.
Technically, CRON reached a peak of $24 in 2018 before the long marijuana bear market took hold; shares crashed as low as $4 last March and were still hanging around five through October.
But the action since the election has been solid, with an initial pop in November, a sharp-but-reasonable four-week decline around year-end and a boom higher following the Georgia elections. If you're game, you can take a swing at CRON around here.
