CRON Stock Falls Hard Despite Improved First Quarter Earnings

CRON stock

CRON stock is having a tough day as shares of Cronos Group Inc. (TSX:CRON) (NASDAQ:CRON) tumbled despite the company posting improved revenue and net loss for the fiscal first quarter.

Improved Results

The company reported a 15% increase in net revenue in the Q1 from $2.9 million CAD a year ago to $6.5 million CAD, which was a result of the increase in sales of CBD oil and dry flower. Net income for the quarter was $427,812 CAD and EPS of $0.48, which is an improvement from a year ago loss of $0.01 per share.

According to analysts’ estimates, the company was expecting a net loss of $0.03 CAD per share on revenue of $6.39 million CAD. Loss widened from $1.5 million CAD in Q1 2018 to $9 million CAD in the Q1 2019.

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In the Q1 2019, Cronos sold around 1,111 kg compared to the 501 kg in 2018. This reflects a 122% growth that was driven by increased production and the launch of recreational adult use in Canada. The cost per gram sold in the first quarter was $2.69, which is a 14% drop from $3.13 in Q1 2018. Cannabis oil sales grew, contributing to 23% of the net product revenue in Q1 2019 compared to 9% in Q1 2018.

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At the time of writing, CRON stock is down over 9% at $14.06.

Corporate Transactions

Mike Gronstein, the CEO of Cronos Group, stated that in Q1 2019 the company performed well when you consider the estimates. He added that the company is focused on building its distribution, supply chain, and brand portfolios. In the quarter, the company completed various corporate transactions such as the $2.4 billion CAD investment by Altria Group Inc. (NYSE:MO). The investment gives the Canadian tobacco producer 45% of Cronos with an option of upping its stake to 55% at $5.3 billion CAD.

In March, Cronos sold 19% of its equity interest in Whistler Medical Marijuana Corporation to Aurora Cannabis Inc. (NYSE:ACB) and received around $24.7 million in Aurora’s common shares that were eventually sold for $25.6 million in cash.

The stock has fallen about 45% from its February peak price of $25.10. Nevertheless, the stock is still up about 30% so far in 2019.

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