Cronos Group (NASDAQ: CRON) had an eventful Q1. The company's revenues surged 25.05M, or up 98.5% YoY. Other fundamentals for the stock were also clearly in the green, with net income up 79.77% and diluted EPS up 79.55%. The company's strong prior performance could be an indication that it will keep this trend moving forward and post a positive earnings card for Q2'22 that's scheduled for August 9. When Cronos Group's Q1 results were announced this year the company's shares increased 14% after it beat revenue estimates by $1M. A similar jump could be on the cards if Q2's results are equally or more positive than the last. So let's peer behind the curtain and see if such a leap is possible.
Analyst Expectations
Analysts are divided down the middle when it comes to the company's performance in the near term. Over the last three months, the company has received 6 revenue up revisions and 5 revenue down revisions. One analyst gave the stock a positive revision for its EPS. Shares of Cronos group currently have a 31.54% upside to the MarketBeat consensus price target. Analysts have generally overestimated the performance of Cronos Group's shares over the last five years.
In terms of the company's rating, the company was covered by 13 analysts, giving it an average rating of buy. This was helped by 3 analysts giving the stock a strong buy recommendation, and 2 analysts giving it a buy recommendation. The majority of analysts (7) who reviewed the stock gave it a hold recommendation while one analyst gave it a sell rating.
Growth and Efficiency
Something that's working in the company's favor is the fact that its revenue growth and efficiency metrics are beating the sector medians for several important ratios. The company's revenue growth is 70.65% or a 355.62% difference from the sector median of 15.51%. On an FWD basis, the company's growth is also strong at 51.89% to the sector median of 14.36%.
Although Cronos Group is presently unprofitable, there is evidence that its utilization of assets is more efficient than its sector competitors. This efficiency is reflected in its return on total capital at -7.86% to the sectors -20.39%. The company's return on total assets at -19.51% is also less than -28.18% for the sector.
Investors' Risk Appetite for Speculative Stocks
One factor that may throw a spanner in the works is that cannabis stocks as a whole have been suppressed since 2021. Cronos Group's shares are currently down -20.24% YTD and several of the company's competitors have also suffered a contraction in their share prices. Canopy Growth (NASDAQ: CGC) suffered more with a -72.47% contraction and Tilray Inc (NASDAQ: TLRY) contracted -47.53%.
The lack of hope for federal legalization has been a major headwind for this industry, as well as investors parking their money into more defensive investments and away from value stocks. Companies with negative earnings have been punished by a rotation into dividend-paying companies as a recession becomes more apparent with GDP falling for a second straight quarter.
