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Cronos Group (NASDAQ:CRON) is a Canadian cannabis company that is based in Toronto, Ontario, and is licensed to sell its cannabis products around the world. Cannabis was legalized federally in Canada back in 2018, yet the industry has not been as lucrative to companies as first imagined. Cronos was the first cannabis company to debut on the NASDAQ exchange, and despite a historic surge at the end of 2018 and into 2019, shares have fallen nearly 200% off of those all-time highs in 2021. Learn More
Cronos gained some popularity in early 2021 as a meme stock during the Reddit short squeeze event in January. Redditors on r/WallStreetBets clung on to Cronos as an undervalued stock that had fallen alongside the cannabis industry and shares did indeed rise to a 52-week high price of $20.08 per share in early February. It has been all downhill since then though, and shareholders will be looking for some answers from management as Cronos hosts its quarterly earnings call on May 7th.

The Bullish Case:Unlike most cannabis companies, Cronos is actually positioned fairly well with minimal debt on its balance sheet and a positive revenue per share ratio. Much of the financial strength does come from its relationship with Altria (NYSE:MO), which owns a 45% stake in Cronos. This strategic partnership could pay even more dividends down the road if Cronos can utilize Altria’s distribution system throughout the United States. Cronos has also developed a strategy that sets them apart from other farming cannabis companies like Aurora (NYSE:ACB). Instead of being weighed down by an oversupply of cannabis like other farmers, Cronos has focussed on investing in marijuana supplies like vapes and fermentation technology, which could potentially allow Cronos to create pot without the need for marijuana plants at all. Cronos is still bleeding money, but in an industry where mergers and acquisitions are allowing the leaders to become more concentrated, Cronos certainly has the funds to make some moves.

The Bearish Case: The Canadian cannabis industry has been a barren wasteland for stocks. Look at companies like Aurora, Canopy Growth Corporation (NASDAQ:CGC), and the new mega brand that saw Tilray (NASDAQ:TLRY) and Aphria (TSE:APHA) join forces. Despite legalization in Canada since 2018, none of these companies have been able to sustain any sort of financial stability. Investors often point to impending legalization in the United States as a catalyst for Canadian cannabis companies, but when it comes to cross-border operations, Canadian companies are on the outside looking in. There are plenty of American cannabis brands that already have a strong presence stateside, which makes Cronos’ relationship with Altria all the more important. 

Final Verdict on Cronos Group :

The jury is still out on whether or not the Canadian Cannabis industry will ever be able to be as profitable as many believed it would be. Cronos remains an intriguing name, and the fact that it is not tied down to the farming side of the industry is definitely a positive. With Altria’s backing and plenty of money to facilitate inorganic growth through mergers and acquisitions Cronos is positioned better than other companies to find a path to profitability. 

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