CRON stock soared last week on the back of some big industry news. It was another partnership between a legacy brand and a cannabis producer. This time it was tobacco giant Altria (NYSE:MO) that penned an agreement worth $1.8 billion USD for a 45% stake in Cronos Group (TSX:CRON) (NASDAQ:CRON).
CRON Stock Soared, Now What?
The deal lit a fire under CRON stock, which packed on some serious gains. It also signaled Altria's entry into the cannabis industry. Altria comes with a strong reputation as the creators of the Marlboro line of cigarettes. Its entry into the cannabis industry gives serious credence to an industry still emerging from the black markets of the world.
But a week on and at the time of writing, CRON shares are down 2.5% and are selling for $10.86 CAD. So what's around the corner for Cronos Group heading into 2019?
What will this deal mean, and is CRON stock set to soar further?
Q3 Concerns
One concern for investors is that Cronos showed a loss in its most recent quarter. In Q3 it posted a deficit of $5.5 million compared to a profitable Q3 in 2017. This was driven by operation expenses that dramatically increased to 242% year-on-year. So while worrisome, it was possibly a necessary evil because the company needs to expand production capacity to truly compete.
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On the other hand, revenue has been up 186% year-on-year and almost 11% on the quarter. The company also sold 213% more kilograms on the year.
CRON Stock in 2019
Cronos Group has set itself up to capitalize on a Canadian cannabis market worth an estimated $5.6 billion in sales next year. It also has a foothold in the US market, which is estimated to grow to $146.4 billion by 2025. Then there is Europe; the company has supply deals in Germany and Poland, and much of the rest of the world too; Cronos has arrangements in Australia, Israel, and South America.
Earmarking these jurisdictions means that Cronos Group stands out in a market packed with so many smaller companies. Its major deals, now with Altria and previously with Gingko Bioworks, cement its position as a leading company.
The cannabis industry is here to stay. CRON stock may experience price swings in the short-term, as states continue to figure out their regulations on the sale and consumption of cannabis. But longer term, this stock is solid.
Featured Image: Depositphotos/© ArturVerkhovetskiy
