Apr 07, 2020 (Market Realist via COMTEX) -- Cronos Group /zigman2/quotes/206842762/composite CRON -3.12% disappointed analysts and investors with its results for the fourth quarter of fiscal 2019. The company missed analysts' revenue estimates by a big margin. Also, the EBITDA losses were much higher than analysts' expectations. Analysts wonder if the company will survive short-term challenges. Cronos Group might not hit profitability in fiscal 2020. As a result, analysts revised their estimates for fiscal 2020 and beyond. Let's take a look at the estimates.
Analysts revise revenue estimates for Cronos Group
In April, Cronos Group's disappointing fourth-quarter results made analysts revise their estimates for fiscal 2020. Let's take a look at the company's revisions. Now, analysts expect Cronos Group to report 119 million Canadian dollars in revenue for fiscal 2020 compared to 143 million Canadian dollars in March. The estimate was before the company missed its revenue estimates. Notably, the company said that COVID-19 could have an impact on its operations.
Analysts also lowered the revenue estimates for fiscal 2021 and fiscal 2022. For fiscal 2021, analysts expect Cronos Group to report 249 million Canadian dollars compared to 328 million Canadian dollars in March. For fiscal 2022, analysts expect the revenue to be around 370 million Canadian dollars from 564 million Canadian dollars.
Overall, there was a drastic revision in the revenue estimates. Cronos Group has launched its variety of high-end vape and edibles products in the markets. Analysts hoped that Cannabis 2.0 products would help cannabis companies increase their revenue growth and hit profitability. However, I think that COVID-19 could be one of the reasons for the drastic revision.
Marijuana sales have been rising amid the pandemic. Cannabis production will be impacted negatively if the pandemic continues longer. Marijuana legalization efforts could get delayed . Cronos Group's deal with Altria depends on marijuana legalization in the US. Also, the FDA's hesitance towards CBD products challenged Cronos Group's CBD product portfolio's growth in the US. Cronos Group will be able to capture the US markets if more states legalize marijuana. In Canada, store roll-outs will also get delayed if the pandemic continues.
Analysts expect higher losses in fiscal 2020
I think that analysts expect COVID-19 to impact Cronos Group's profitability. The sudden surge in cannabis sales could be a one-time thing amid the lockdown panic. Analysts expect higher EBITDA losses for fiscal 2020. For fiscal 2020, the EBITDA loss could be around 68 million Canadian dollars compared to the estimate of 52 million Canadian dollars in March. Analysts hoped that Cronos Group would report a positive EBITDA of 22 million Canadian dollars in March. After the company's results, analysts expect it to report an EBITDA loss of 13 million Canadian dollars in April. For fiscal 2022, analysts think that the EBITDA will be positive but lower at 50 million Canadian dollars.
The gross income could also come in lower in fiscal 2020 at 41 million Canadian dollars compared to estimates of 81 million Canadian dollars in March. For fiscal 2021, the gross income estimate fell to 95 million Canadian dollars from 182 million Canadian dollars in March.
Raymond James is hopeful about Cronos Group
Many analysts downgraded and reduced the target price for Cronos Group stock after its dismal fourth-quarter results. To learn more, read Cronos Group: Wall Street Is Bearish after Its Earnings . Many analysts also reduced the target price for Hexo after its disappointing earnings results.
Currently, Canaccord Genuity, PI Financial, and CIBC are all bearish on Cronos Group stock. On Monday, Cowen and Company cut the target price to 8 Canadian dollars from 10 Canadian dollars. Currently, 13 analysts still cover Cronos stock. Eight analysts recommend a "hold"--compared to seven earlier. None of the analysts recommend a "strong-buy"--compared to one analyst earlier. Meanwhile, three recommend a "buy" and two recommend a "strong sell."
Recently, Raymond James analyst Rahul Sarugaser shared his views after reviewing Cronos Group's fourth-quarter results. Due to the dismal results, he might reduce the target price for the stock. However, he still thinks that Cronos Group is an attractive pick. He said , "We are confident CRON will emerge from this crisis strong given its partner and balance sheet, and will find itself in an environment of reduced competition, especially in Canada. Our assumption that CRON would capture 12 percent of Canadian cannabis market share remains. But, the material change in the course of its US operations (Peace+pause), we've adjusted our estimates downward." Sarugaser reaffirmed his "outperform 2" rating for Cronos Group. However, he reduced the target price from $12.00 to $10.50 for the stock.
Marijuana stocks' performance
Cronos Group stock has been trading lower since its results. Overall, cannabis stocks have been performing well due to a surge in cannabis sales. Cronos Group closed with a gain of 4.5% on Monday. Meanwhile, Aphria /zigman2/quotes/207425803/composite APHA -1.86% , OrganiGram /zigman2/quotes/209289540/composite OGI -6.95% , and Hexo /zigman2/quotes/200008967/delayed CA:HEXO -8.60% closed 6.3%, 5.5%, and 2.6% higher on Monday. Read What Can You Expect from Marijuana Stocks in April? to learn more.