Cronos stock has been declared the best pot stock on the Canadian market by Stifel's Andrew Carter, who has championed Cronos Group (TSX:CRON) (NASDAQ:CRON) as "The New King in the North" in a note to investors.
Cronos Stock Well Positioned in the 2.0 Market
Carter upgraded Cronos stock from a "hold" to a "buy" while also lowering his price target from $16.50 to $14.00. Cronos Group is well-positioned to take full advantage of the second wave of cannabis legalization, which came into effect on October 17, due to its strong cash position and the backing of tobacco giant Altria (NYSE:MO). Altria closed a $2.4 billion CAD deal in exchange for a 45% stake in Cronos back in May and will provide its industry-leading expertise on vaping technology to the Canadian cannabis firm, a product that is hotly anticipated by the 2.0 market.
Cronos stock has been on the slide for most of 2019, in line with prevailing market trends, but a recent wave of good news surrounding the company and the arrival of legalization 2.0 have seen somewhat of a recovery in recent days, leading Cronos shares to trade up nearly 10% in the last week. Carter argues that Cronos Group's current value represents a discount compared to global competitors due to underperformance and losses obtained during a "sector meltdown" since July.
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"We believe renewed investor enthusiasm is inevitable as we consider the $200 billion global opportunity driven by regulatory and demographic tailwinds," Carter wrote. The company also offers "clear points of differentiation" from sector headwinds, which suggest that its recent underperformance is a solid buying opportunity for Cronos stock. Cronos has grown revenue, and Carter said it will likely use its partnership with Altria to build its US CBD business.
Cronos Australia
Cronos stock was boosted last week by news of a $20 million AUD initial public offering of its joint venture, Cronos Australia. The IPO will see 40 million new shares issued at a price of $0.50 AUS, and once completed, Cronos Group will hold a 31% stake in the new entity, which is expected to have an initial market cap of $64.4 million AUD. Cronos Australia will debut on the Australian Stock Exchange (ASX) on November 11.
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