Cronos stock is trading higher after Cronos Group (TSX:CRON) (NASDAQ:CRON) reported lower-than-estimated third-quarter revenue.
Misses Revenue Estimations
The situation with the cannabis industry has been quite troublesome over the course of the past months, and many of the biggest companies in the industry have reported disappointing earnings in the third quarter. The latest in that line is Cronos Group, which announced its Q3 2019 financial results on Tuesday.
The Canadian cannabis producer fell short of expectations, and in addition to that, the revenue per gram from the cannabis it sold declined due to oversupply. Cannabis producers have ramped up production considerably in recent months, but the number of stores and retail outlets has not grown at the same rate, making it difficult for companies to offload the cannabis they produce.
This has caused plenty of producers issues with oversupply, Cronos included. In its third-quarter results, Cronos reported revenue per gram of only $3.75 for cannabis sold outside the United States, and that represents a 50% drop. On top of that, the company’s costs rose around five times and hit $34.8 million.
>> Organigram Stock Slumps on Lowered Q4 Sales Guidance
Despite what could perhaps be considered a disappointing Q3, Cronos stock is up about 2% to 8.24 on the Nasdaq today.
Cronos Group attributed the rise in its costs to administrative expenses and other costs. While it is true that the company managed to grow its cannabis sales outside the United States for the quarter by around six fold and hit 3,142 kilos, this did not quite reflect on the bottom line.
The company posted revenue of $12.7 million CAD for the quarter, which fell short of analysts’ estimates of $13.7 million CAD. While it is true that Cronos managed to turn a profit of as much as $788.4 million CAD, or 53 cents a share, it should be noted that this was due to the derivative liabilities revaluation, which added $835 million CAD to the books.
However, it is the drop in revenue per gram that should come as a bit of a disappointment for most investors. That being said, the opening up of the derivative market in Canada later on this year should go a long way in killing the oversupply problem.
Cronos stock has tumbled about 65% from its peak price in 2019.
Featured image: Canva
