Cronos Group, one of the biggest publicly-traded medical weed entities impress potential investors. Cronos sells cannabis oils and dried marijuana that come under multiple brands. This Group has a market cap of $2.12 billion. Cronos currently trades at 139 times sales.
The Canada-based firm recently concluded a deal with Ginkgo Bioworks, a biotech corporation in Boston (Massachusetts), United States. This $122-million business partnership will explore ways of producing cannabinoids in laboratories instead of plants. However, a probable disadvantage in market stock price poses a significant concern.
Partnering with Ginkgo leverages the capabilities of the two organizations. Laboratory-produced pot will help the Cronos Group boost margins by reducing time and money expenditure on:
- Plant cultivation
- Human care
- Climate control
One upside is many consumers choose non-flower methods of getting high. Edibles, as well as oils, provide more consistency for effects and dosage.
Cronos encountered volatile progress during the last few months. This development resulted mainly from the legalization of adult marijuana in Canada. Stocks soared 45% since the company’s Initial Public Offering in March. Nevertheless, observers claim Cronos Group grew too fast. Proof lies in its 364-ratio of Price to Earnings. However, analysts on Wall Street believe the numerous deals of Cronos mean progress for the company.
Cronos partnered with prominent companies in the industry such as Cura Cannabis Solutions, MedMen Enterprises, Pohl-Boskamp GmbH, and Mucci Farms. The third-party testimonials indicate superior operations and efficient management. Looking at the Q2 Company report highlights the Group’s 428% increase in sales (year over year). It reached C$3.39 or US$2.6 million. Sales composition looked impressive.
19% of collective earnings came from marijuana oil sales. One year ago (the same quarter) Cronos did not show any oil sales. CBD target smaller groups of patients compared to dried weed. However, this is a substantially higher margin product than dried flower counterparts. If Cronos Group chooses oils as a significant element of future sales, profit margins can outperform competitors in the global market.
Capacity to Produce
The Cronos Group remains in the process of growing production capacity. Yet, it ended Q3 of 2018 with more than three times the value of cannabis oils compared to December 31, 2017 (Supply included finished products). Marijuana inventory rose 39% during that period.
Cronos now looks at the international markets with legalized medical marijuana. The company’s Australian subsidiary received a manufacturing license for medical marijuana. At the same time, it completed a distribution partnership with Delfarma, a pharma wholesale company. It can also potentially reach around 40% of the Polish marketplace.
What’s in store for Cronos?
Some analysts say the company stock does not have strong buy endorsements. Others support a buy blessing. Critics of Cronos strongly suggest waiting until the company stock proves its worth on Wall Street. Valuation remains crucial compared to yearly production volume.
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