Cronos Group (CRON) reported mixed earnings early Tuesday, as marijuana stocks respond to the first clues into the state of Canada’s nascent legal recreational cannabis market. Tilray (TLRY) earnings come out after the close.
Cronos Group Earnings
Estimates: Analysts expected a two-cent per-share loss during the third quarter, on revenue of $3 million.
Results: Cronos lost 4 Canadian cents per share, while revenue rose 187% to 3.76 million Canadian dollars. Kilograms of cannabis sold soared 213% to 514 kilograms. Cannabis oil sales represented 29% of total revenue.
Cronos already sells in Ontario, British Columbia, Nova Scotia and Prince Edward Island, which represent over 50% of the Canadian population, and expects to secure additional provincial listings as more production capacity comes online.
Meanwhile, other marijuana stocks reported major news. Green Thumb Industries (GTBIF) agreed to buy Nevada-based Integral Associates in a deal valued at $290 million. And the Green Organic Dutchman reported a Q3 loss of $11.3 million and capital spending of $25 million.
Shares of Cronos Group were down 3.2% at 8.18 on the stock market today. Cronos stock is below its 50-day line.
Cronos Group in February became the first pure-play pot company to list on a major U.S. exchange. Its earnings come as analysts look for a clearer read into Canadian marijuana companies’ cost and profit trends, after the industry spent big to expand in the months prior to Canada’s recreational legalization on Oct. 17.
The company, via two partnerships, has sharpened its focus on cannabinoids, the chemical compounds in cannabis. Cannabinoids include THC and CBD — a compound that doesn’t get you high and is said to have soothing or anti-inflammatory properties.
Cronos, through a partnership with Technion Research, aims to examine the compounds’ potential for skin-care treatments. The other partnership, with Ginkgo Bioworks, will focus on producing cultured cannabinoids and making them more accessible to customers.
Cronos, in a September press release, said that many “pharmaceutically relevant” cannabinoids come in low quantities in the typical cannabis plant, making them difficult to extract.
Marijuana stocks retreated after Canada legalized recreational weed on Oct. 17. Since legalization, stores have run out of pot. Some analysts have cut their recreational sales forecasts. Executives have said that the bigger opportunity is the global medical market for cannabis.
Questions have also emerged over whether customers really care about the particular brand of their pot. Aurora Cannabis, during its earnings conference call on Monday, said that brand awareness is there. But it said it expected the recreational pot shortages to continue.
Cronos sells two recreational weed brands — Cove and Spinach. But GMP Securities analyst Martin Landry, in a research note late last month, said Cronos might have “limited volumes available” to serve the recreational market in the fourth quarter. As reasons, he cited staggered harvests, and the state of its sales license for a 280,000 square-foot facility in Ontario.
“While we expect Cronos to have received its sales licence for Building 4, the company’s large 280,000 sq. ft. facility in Stayner, Ontario, the first harvest from Building 4 may have only occurred in November,” Landry wrote.
Estimates: Analysts expect a 14 percent per-share loss. Sales are seen coming in at $10 million.
Results: Tilray earnings are due after the close.
Tilray stock edged up 0.9% Tuesday. The stock is below its 50-day line.
As Canada marijuana producers try to expand their capacity to produce more pot, Cowen analyst Vivien Azer said she expected only around $1.5 million of Tilray’s sales for the quarter to have come from recreational purchases.
She said medical sales would account for the “vast majority” of Tilray’s top line “for the next few quarters.” Tilray has signed supply agreements with five Canadian provinces for the recreational market.
Tilray in August launched High Park to produce recreational weed in Canada. High Park has the rights to produce and sell products like Marley Natural, Bob Marley’s official cannabis brand.
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