Shares of Cronos Group (CRON) are on the rise on Wednesday after Bank of America Merrill Lynch analyst Christopher Carey double upgraded the stock to Buy. Following recent comments by management, the analyst has improved confidence that Cronos is near announcing a launch in the U.S., making a near-term bear thesis "increasingly untenable."
BUY CRONOS: In a research note to investors, Bank of America Merrill Lynch's Carey double upgraded Cronos Group to Buy from Underperform and raised his price target on the shares to $20 from $13. Following recent comments by management, the analyst has improved confidence that Cronos is near announcing a launch in the U.S., and sees better near-term visibility in the largest market for cannabis-derived compounds in the world as a "significant" near-term catalyst for the shares. The company is also "beginning to flex" its near group-leading balance sheet, he contended, adding that partnerships like the one with Altria (MO) will lead to a transformation that will create a "vastly different" company in the years ahead. The analyst argued that as this process accelerates, a near-term bear thesis becomes "increasingly untenable," especially with Cronos value fractions peers despite more cash and similar market opportunity.
In a recently published note, Carey had said that he expects the current $2B U.S. cannabidiol market to grow to $11.5B in 2032, which may prove conservative. The analyst does not see Cronos entering the U.S. by acquiring a cannabis retailer, but rather sees it leveraging Altria’s distribution to launch its own products. The potential to scale distribution nationally via Altria separates Cronos versus peers, especially those unable to access frequented channels like C-stores/mass, a larger channel versus cannabis stores, he contended. Overall, the analyst thinks Cronos will focus on creams, tinctures, and vapes/sprays for the U.S., and sees "M&A filling gaps."
PRICE ACTION: In morning trading, shares of Cronos have jumped almost 8% to $15.50.
OTHER CANNABIS STOCKS: Other publicly-traded companies in the space include Tilray (TLRY), KushCo (KSHB), Innovative Industrial Properties (IIPR), MediPharm Labs (MLCPF), CV Sciences (CVSI), CannTrust Holdings (CNTTF), General Cannabis (CANN), India Globalization Capital (IGC), ICC International Cannabis (KNHBF), Biome Grow (ORTFD), MediPharm Labs (MLCPF), Indiva (NDVAF), OrganiGram (OGRMF), Elixinol Global (ELLXF), Planet 13 Holdings (PLNHF), Wayland Group (MRRCF), Khiron Life Sciences (KHRNF), Liberty Health Sciences (LHSIF), Sunniva (SNNVF), Sproutly (SRUTF), DionyMed Brands (HMDEF) and GrowGeneration (GRWG).
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Cronos Group
+1.09 (+7.56%)
Altria Group
-1.1 (-2.18%)
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HMDEF
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