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Marijuana Stocks Fall On Cronos Group’s Steep Loss, Price Warning

Cronos Group (CRON) reported a far bigger Q4 loss than expected and warned that low weed prices could continue to weigh on the company. Cronos Group stock and other marijuana stocks fell.


The Canadian pot producer lost 31 cents per share, far more than the six cents forecast by Zacks. In total, Cronos reported a net loss of nearly $112 million during the quarter.

Sales 0f $17.046 million were up 133% from the prior year and up 50% from the prior quarter, beating estimates for $13.78 million.

Sales in the U.S., where it owns the CBD brand Lord Jones, came in at $3.5 million, up 30% from a year ago. The company’s “rest of world” segment, which includes sales in Canada and other areas outside the U.S., saw a 193% sales gain to $13.54 million.

But the company continued to burn cash, Canaccord analyst Matt Bottomley noted. As of the fourth quarter, Cronos Group was operating at an annualized free-cash-flow burn of around $162 million, he said. Sales, general and administrative costs, along with R&D costs rose 31% to $40.4 million, pushing losses higher quarter over quarter.

Cronos also took a $15 million write-down on dried cannabis and extracts, “primarily driven by cannabis product price compression in the Canadian market.” Cronos warned that it “may incur further inventory write-downs due to pricing pressures in the marketplace.” Lower weed prices in Canada have hit other marijuana stocks as well.

Bottomley said that “the company’s historical reliance on third-party wholesale purchases for its products likely continues to weigh on its path to profitability.”

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Cronos Group Stock, Marijuana Stocks

Cronos Group stock fell 3.15% to close at 10.45 on the stock market today. The stock currently has a 78 Composite Rating. Its EPS Rating is 8.

Among other marijuana stocks, Canopy Growth (CGC) fell 1.4%. Tilray (TLRY) lost 0.6%. Aurora Cannabis (ACB) dropped 2.8%. Aphria (APHA) fell 2.1%.

Marijuana stocks have fallen since Feb. 10, after U.S. legalization hopes and signs of a retail-investor stampede — potentially fueled by the Reddit board WallStreetBets — drove them higher.

Ulta Beauty Launch

Cronos on Friday also announced plans to launch Happy Dance, a line of hemp-derived CBD bath and body products co-founded by the actress Kristen Bell, in Ulta Beauty “in the coming weeks.” Ulta will be the first major U.S. retailer to sell the products. Ulta will sell the products online and in more than 550 stores in the U.S.

That launch will come as retailers across the U.S. face occupancy restrictions due to the coronavirus pandemic. Cronos noted that “certain beauty and other retailers have temporarily closed physical boutique locations.”

Cronos said that sales outside the U.S. were not “materially impacted” by the pandemic during the quarter. But it said prolonged lockdowns and changes in consumers’ buying habits “are expected to have a negative impact on the Company’s short-term revenue…

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