Cronos Group (NASDAQ:CRON) ended the week on a down note after it released a set of quarterly results revealing a steep net loss.
For the Canadian marijuana company’s fourth quarter of 2020, net revenue came in slightly over $17 million, well above the nearly $11.4 million of the preceding quarter, and a robust 133% higher than the Q4 2019 result. The latest top-line number also comfortably exceeded the average analyst estimate of $13.8 million.
Alas, the story was far different on the bottom line. The company’s net loss was nearly $112 million ($0.31 per share), a dramatic change from last quarter’s profit of $68.5 million, and the Q4 2019 profit of almost $61.6 billion. Analysts were expecting a per-share net loss of only $0.06. No wonder the share price went south.
Cronos attributed its revenue growth principally to growth in recreational cannabis sales in Canada. While the U.S. is still a relatively small market for the company, its cannabidiol (CBD) brand Lord Jones helped push sales in the country 30% higher.
On the negative side, pricing pressures in its native Canada (where the black market is pushing prices down) forced Cronos to book a $15 writedown on cannabis flower and extracts during the quarter. The company’s focus on research and development, while possibly beneficial in the long term, pushed such costs 31% higher to over $40 million.
Although losses are common in the marijuana industry, this one was rather dramatic and investors did not appreciate it. Cronos stock fell by nearly 3.2% on Friday, a steeper fall than the S&P 500‘s 0.5% slip.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
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