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Cronos Group has turned a corner, GMP says

Cronos Group

Cronos GroupFollowing a third quarter that bested his expectations on the topline, GMP Securities analyst Martin Landry is feeling optimistic about Cronos Group (Cronos Group Stock Quote, Chart, News: TSXV:MJN).

On Wednesday, Cronos Group reported its Q3, 2017 results. The company generated Adjusted EBITDA of negative $500,000 on revenue of $1.3-million,a topline that was up 962 per cent over the same period last year.

“We have successfully transformed the company over the past year and a half. We are now focused on executing our strategy to generate accelerated revenue growth and create long-term shareholder value,” said CEO Mike Gorenstein.

In a research update to clients today, Landry maintained his “Buy” rating on Cronos Group, but raised his one-year price target on the stock from $4.00 to $4.50, implying a return of 11.9 per cent at the time of publication. The analyst explained his more bullish take.

“After some past challenges, MJN appears to have turned a corner in Q3, providing us increased confidence in the outlook,” the analyst says. Our positive stance is based on: 1) a strong management team establishing key partnerships and deploying capital effectively, 2) capacity expansion of 45,000kg elevating MJN’s production profile to amongst industry leaders, and 3) a strong platform for international growth with Cronos Israel. Our target is based on a DCF using: 1) a discount rate of 10% (11% previous), (2) avg. market share of 4% and avg. EBITDA margin of 32% (31% previous, and (3) a terminal growth rate of 3%.”

Landry thinks Cronos Group will generate EBITDA of negative $3.2-million on revenue of $4.5-million in fiscal 2017. He expects those numbers will improve to EBITDA of positive $15.2-million on a topline of $58.3-million the following year.

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About The Author /

Cantech Letter founder and editor Nick Waddell has lived in five Canadian provinces and is proud of his country's often overlooked contributions to the world of science and technology. Waddell takes a regular shift on the Canadian media circuit, making appearances on CTV, CBC and BNN, and contributing to publications such as Canadian Business and Business Insider.
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