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Should Cronos Group be in Your Cannabis Portfolio?

Published 06/17/2021, 11:36 AM
Updated 06/17/2021, 12:30 PM
© Reuters.  Should Cronos Group be in Your Cannabis Portfolio?

© Reuters. Should Cronos Group be in Your Cannabis Portfolio?

Cannabinoid producer Cronos Group (NASDAQ:CRON) has made significant progress in expanding its distribution network and accelerating the commercialization of its products. But the company has been burning cash at a rapid pace and is still unprofitable. Furthermore, its weak financials don’t justify its lofty valuation. So, we think the stock could retreat further. Read on.Based in Toronto, Canada, Cronos Group Inc. (CRON) is a cannabinoid company that manufactures and markets hemp-derived supplements and cosmetic products under the Lord Jones and Happy Dance brands in the United States. CRON’s stock has gained 28.1% over the past year due to its expanded distribution network and strategic investments. However, over the past three months, it the stock has declined 15.5%. This can be attributed primarily to the loss reported by the company for the first quarter of 2021.The stock is currently trading at $8.61, which is 45.5% below its 52-week high of $15.8.

While hopes for a federal level legalization of cannabis remain strong, it is highly unlikely that such a bill will be passed this year. This being the case could limit CRON’s growth.

Also, the marijuana sector has become crowded of late with new operators that are trying to grab market share from their peers. Amid this scenario, CRON is trading at a high valuation despite being unprofitable. So, we expect the stock to decline further in the near term.

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