If you’re a believer in the broader cannabis narrative, the third-quarter earnings season isn’t getting off to a great start. Long considered one of the most stable names in the “botanical” industry, Cronos Group (NASDAQ:CRON) released its Q3 results, to much anticipation and let’s face it, anxiety. Unfortunately, stakeholders of CRON stock were right to be apprehensive.
On surface level, the report wasn’t that terrible. Prior to the disclosure, analysts had projected a loss on earnings per share of 3 cents. Instead, Cronos Group mitigated the profitability picture with an EPS loss of 2 cents. Given that earlier this year, Wall Street was looking for bottom-line thinking, Q3 was theoretically a win for Cronos stock.
However, we must look at the numbers in context. When we do, we’ll realize that CRON’s revenue haul of $10.1 million against a consensus target of $10.45 million was a bit of a disaster for Cronos Group stock.
One of the main reasons why investors remained patient with CRON stock was the underlying company’s growth potential. Transitioning from an illegal substance to a fully legalized one in Cronos’ native Canada, cannabis offered massive upside possibilities. However, rolling this out was a different matter.
Turns out, the Canadian government is just as inept as our own government, if not more so. Health Canada, the country’s health-related governing agency, created application and licensing backlogs for prospective marijuana enterprises. Because of this administrative fiasco, weed supplies skyrocketed, depressing both pot prices and Cronos stock.
Is it time to abandon the sinking ship that is CRON stock?
CRON Stock to Shift Toward CBD Market
Although I haven’t consulted anyone, I’m almost certain that most of my InvestorPlace colleagues will say yes. Moreover, I wouldn’t blame any that do. From the get-go, names like Cronos stock were billed as speculative affairs.
Interestingly, though, Cronos Group stock “only” lost about 3% on earnings day. Granted, that’s a sizable loss. But relative to the legal marijuana industry, that’s nothing. For instance, Tilray shed less than 2% following its Q3 report.
So, why the muted bearish response against CRON stock? Primarily, I believe that most of the bad news is baked into the share price. While Health Canada’s administrative problems continue to dog Canadian cannabis outfits,