Cronos (CRON), once one of the highest high-flyers among cannabis stocks, has recently disappointed investors. After sailing to new heights in early February, CRON stock has quickly tumbled.
It’s close to impossible to value CRON stock on any real fundamental basis. The company is valued at over $3 billion, but generated C$5.6 million in Q4 revenue, below consensus estimates of C$10.4 million. How quickly that revenue grows will determine the long-term trajectory of the stock.
It seems investors are running low on that rare commodity “patience,” sending the stock down over 9% today. However, when CIBC’s John Zamparo looks at the stock in the context of a peer cannabis play, the analyst actually sees considerable room for Cronos to rise.
Zamparo reiterates an Outperform rating on CRON stock, while boosting his price target to $30.00 (from $22.00), which implies an upside of nearly 50% from current levels. (To watch Zamparo’s track record, click here)
Zamparo opined, “The company’s somewhat underwhelming 4Q results relative to consensus estimates are not particularly meaningful to us at this stage. We are cognizant of the impressive run CRON has been on YTD (+87% vs. +57% for the sector), as well as elevated valuations within the space, but we note numerous positive catalysts remain. U.S. banking reforms, strategic M&A, and possible adult-use legalization in Israel are all potentially positive drivers.”
“Cronos management has been far more reluctant than peers to reveal capital allocation plans, particularly on the U.S. CBD industry. But we believe the company’s capital deployment track record (returning nearly 900% on its Whistler investment) and asset-light approach (gaining exposure to European, LATAM and Asian markets at modest prices) give us conviction capital will be deployed with discipline and a focus on long-term ROIC,” the analyst added.
Granted, not everyone is as enthusiastic about Cronos as Zamparo, as TipRanks analytics reveal CRON as a Hold. In fact, out of 8 analysts polled in the last 3 months, Zamparo seems to be the sole bull vs. 5 fence sitters (‘hold’ ratings) and 2 bears (‘sell’ ratings). Worthy of note, the 12-month average price target still stands at $22, which implies about 20% upside from current levels.
To read more on the nitty gritty of what’s going on in the rising cannabis industry, click here.