Cronos Group Inc (NASDAQ: CRON) stock has made a remarkable comeback in recent weeks. The companies stock price has gained 55% in the last month, reviving its bullish investor sentiment we initially saw in early 2019. The key drivers for this growth include the US election outcome, positive Q3 results and analysts optimistic outlook moving into 2021. This article will breakdown the forecasts for Cronos stock moving into 2021.
Table of content
What are analysts forecasting for CRON:NASDAQ stock in 2021?
Firstly, its important to consider what analysts are forecasting for Cronos stock for 2021 when implementing an investment strategy. According to CNN data, the input of 12 analysts suggests a median 12 month price target at $6.07. This is a 15% downside respective of todays current price. The higher quartile 12 month price targets suggest an upside potential of 16% while lower quartile suggest steeper downside of 40%. Now what do these targets mean?
The larger proportion of analysts are more conservative regarding the current price of Cronos stock. With the current price above the median 12 month price target, the associated risk is heightened. However, the majority of these price targets were set earlier this year. Therefore, incorporating more recent targets can be beneficial in evaluating a position. One day after the Q3 earnings call, an outperform upgrade by Raymond James set the 12 month price target to $10 a share. The upgrade was a compliment to Cronos investors suggesting the institution can see CRON tracking nicely into 2021. It is always important to consider up to date price targets alongside the averages to provide a more rounded perspective.
Cronos revenue forecasts moving into 2021
Firstly, the revenue forecasts for the annual year of 2020 are averaging at $42.3 million. Moving into 2021, the revenue is expected to more than double, with averaged estimates predicting revenue of $90 million. More bullish estimates suggest revenue to get as high as $164.5 million. With more conservative predictions forecast $45 million for 2021. The spread on these forecasts suggests some uncertainty moving into 2021. However, the companies plans to deliver CBD healthcare products, expansion in Israel and Canada alongside a new CEO Kurt Schmid does suggest strong direction moving into 2021 (opinion not advice).
“The opportunities before Cronos Group are more exciting than ever and I am honored to have brought the company to this important inflection point as we bring on Kurt Schmidt to serve as our new President and CEO. We look forward to continuing to launch innovative cannabinoid products in Canada and to expand our portfolio of U.S. hemp-derived CBD brands. Internationally, we’re pleased with the progress we have made in Israel and as regulations continue to evolve, we will look to establish ourselves as a leader in the markets in which we operate.”said Mike Gorenstein, Executive Chairman of Cronos Group. See Q3 statement here.
Key external factors driving Cronos stock
The Election outcome
The cannabis industry as a whole saw a big shift in investor sentiment this month. Biden’s election campaign caught the attention of the Cannabis sector. Speculation arose that the Democrats lead by Biden could seek to reschedule or lessen the penalties of the use/distribution of cannabis. Now it’s important to note, a president cannot directly call for an executive order to deschedule cannabis (completely remove Marijuana as a class act drug).
“We believe the Biden win is an important step on the path to federal permissibility of cannabis in the U.S. market through decriminalization and descheduling,”.said Canopy CEO David Klein- CNN article here.
It is ultimately up to Congress to reschedule cannabis to a lower Class Act drug which would benefit companies such as Cronos in supply and distribution. Read more about the effects of a Biden election on the cannabis industry here.
The earnings call on the 5th of November 2020 outplayed analysts EPS forecasts by 33%. The company posted $11.4 million in revenue for Q3 2020, almost doubling revenue posted in Q3 2019. It is also worth noting the company posted an operating loss of $41.2 million, which was $10 million more than the Q3 period in 2019. Further, the company had noted the increase in the operating loss was a result of many factors. These include increased R&D, advertising expenses alongside administrative and equity related costs. To conclude, the Q3 earnings showed plenty of positive direction which has definitely been a driver on Wallstreet.
I am obliged to remind our viewers that this article is not financial advice but rather investment commentary from extensive research.
In conclusion, the shift towards cannabis stocks due to external factors discussed in this article have been the tailwind for Cronos stock to flourish. The ambitious expansion in Israel, launch of CBD products and its change in management from the top will all play a role in 2021. However, with every good opportunity, the associated risk must be calculated. We will be watching Cronos closely as we move into 2021.
We’ve partnered with Stake. Use our code “YIG” to receive a free stock when funding your new account.
Stake is one of the leading US trading platforms for Australian and UK investors. Click here to start trading US stocks with $0 commission on trades and a streamline trading experience. For more information on our referral program click here.
The information above is not financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.