CRON-5-4-18-300x263 Cronos Group Inc Update (CRON)

Following up on our previous post, the technical scenario shows the stock break down from its current symmetrical triangle formation with slightly higher volume. Bearish sentiment can’t be confirmed, at least from a technical standpoint, until such a move follows through.

 

On the fundamental end of things:

After posting strong December-quarter revenue growth, Cronons Group Inc (NASDAQ: CRON) saw its shares drop 15% from its May 30 high, reflecting our view that top-line growth isn’t everything. Sales advanced nicely, but cost of sales, net of unrealized gains on assets, rose at an even higher clip, contributing to wider adjusted gross losses and a weaker adjusted gross margin. Furthermore, CRON’s aggressive expansion, as reflected in the increase in PPE, and mores specifically, construction-in-progress, over the last year, adds to operating leverage and increases its business risk. From a fundamental standpoint, CRON will need to maintain its high-sales growth rates long enough to earn a more favorable return on its invested capital.

 


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