Cronos Group (NASDAQ:CRON) share price plummeted 10% after posting substantial revenue and earnings growth for the final quarter of the last year. Traders blame downgrade from analysts for the dip in price. Canaccord Genuity has downgraded Cronos stock amid higher valuations. The firm has changed its rating from “Hold” to “Sell” with the price target of $6.50.
Cronos stock is up more than 200% in the last year alone, while the marijuana index rose from 132 points to 248 points over the previous twelve months.
Cronos Group has impressed traders with its stunning financial numbers and growth plans. The company reported sales growth of 274% Y/Y in the latest quarter, leading its full fiscal year sales to increase by 636% year over year.
It has also achieved several milestones during the last year, including the joint venture with MedMen Enterprises and new construction at its Peace Naturals facility. It is the first licensed marijuana producer to list on NASDAQ exchange.
“We are building Cronos Group with a focus on the long-term and 2017 set the foundation for the explosive growth we have already started realizing in 2018,” said Mike Gorenstein, CEO of Cronos Group.
Higher Valuations Impacts Analysts Sentiments
Canaccord Genuity analyst Matt Bottomley believes the company has the competitive advantage over its peers, but its valuations aren’t offering the strong buying opportunity.
He said, “We believe Cronos will still be a meaningful player in the space and has implemented a differentiated strategy versus many of its peers. However, at current trading levels, we would not be buyers of CRON, and we would look for lower buying opportunities in the future.”
Matt Bottomley concerns are undoubtedly true considering its price to earnings ratio of 345, substantially higher from the industry average of 1.72. Its stock also trades at the higher price to earnings ratio of 19 when the industry average hovering around 1.82.
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