Cronos stock is soaring today after analysts at MKM Partners upgraded Cronos Group (TSX:CRON) (NASDAQ:CRON) from 'neutral' to 'buy', despite the company delaying the release of its earnings report last week.
Earnings Delay
Cronos Group announced last week that it was delaying the publication of its fourth-quarter and full-year earnings, simply citing a “delay in the completion of its financial statements” as the reason. The announcement sparked a sharp drop off in Cronos stock, with some speculating that the delay may be as a result of the firm switching from IFRS accounting to GAAP, although Cronos has provided no further clarification on the matter.
Differing Stances on Cronos Stock
Earlier this week, Stifel analyst W. Andrew Carter downgraded Cronos stock from 'buy' to 'hold,' with a price target lowered from C$12.00 to C$8.00. Carter noted the 15-day extension the firm requested for the publication of its earnings and added that it is unlikely to meet this deadline and may even request an extension of a further 180 days. He added that the most likely reason for the delay is "undetected behavior," and management is "fully incentivized to pursue a definitive conclusion" with full transparency.
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Today, Cronos shares are recovering from losses incurred in recent days and are currently up around 10% following the upgrade from MKM. The analysts brushed off concerns regarding the delayed results, arguing that bulk wholesale is the source of the late filing, which is not part of Cronos Group's core business. In addition, tobacco giant Altria Group Inc's (NYSE:MO) US$2.5 billion investment in Cronos adds another level of assurance to investors, given its majority board control.
Further Speculation
Some have speculated that the issues that plagued rival frim Tilray (NASDAQ:TLRY) in its fourth-quarter earnings could resurface when Cronos eventually releases its results. In particular, the lack of retail visibility, especially in Ontario, has been hurtful to both firms; however, Tilray lacks a big-money backer like Cronos, and the business models of the two firms are quite different.
Cronos stock is currently trading for $5.85 on the NASDAQ.
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