Marijuana company Cronos posted a loss Tuesday, turning investor sentiment on weed stocks hazy ahead of several names in the sector set to report earnings this week.
Cronos Group (NASDAQ:CRON) reported a wider-than-expected loss, despite nearly tripling revenue, as ramp-up in investments compressed margins as Its shares fell.
Cronos reported a loss of revenue, like most of its rivals, Cronos is hoping its string of investments to boost production will turn a profit as the legalization of marijuana in Canada has sparked up demand, leading to a supply shortage, which some analysts expect could last for up to a year.
The company said, however, that going forward, marketing and sales costs would be “quite a bit lower,” as the bulk of the costs during the quarter was related to the Canadian legalization.
Wall Street expects the company to report a net loss in revenue.
Tilray slumped Wednesday after more than tripling its cannabis sales, prompting a wider-than-expected loss, leaving traders with little choice but to say “no” to weed stocks.
Tilray has been lauded by some on Wall Street as the pot stock to watch given its early mover advantage in the sector and its supply agreements with major Canadian pharmacies.
“We believe the company’s [Tilray’s] supply agreements with major Canadian pharmacies could offer greater awareness and easier patient access to Tilray’s cannabis products,” Benchmark said last month.
“We expect Tilray to achieve meaningful share of the Canadian cannabis market based on initial supply agreements and an early mover advantage in creating national brands.”
Surging revenue growth combined with wider losses are not uncommon as cannabis producers continue to invest to ramp up manufacturing. But the decline in average selling prices raised fears of a possible oversupply, triggering a sea of red across weed stocks.
Source: Investing.com
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