The last year has a been a dispiriting ride to the bottom for investors of cannabis player Cronos Group (CRON). Over the trailing twelve months, the share price has dropped down by 59%. The decline is a far cry from early last year, when Cronos was a major beneficiary of the hype surrounding the fledgling cannabis industry. in March 2019, shares surged to an all-time high of $23.70. They are now changing hands for $5.64, each.
Cronos is in no way unique. The nascent north American pot industry’s struggles over the past 18 months have been well documented. Inflated valuations and the inability to meet investors’ expectations, coupled with regulatory hurdles (Canada) and unfavorable tax rates (U.S.) have devastated the balance sheets of many of the industry’s leading companies.
Cronos shares took a further beating last week, after disappointing Q2 earnings results. The coronavirus played its part yet again, resulting in the shut down of many retails stores, therefore impacting sales of Cronos’ CBD brands.
But CIBC analyst John Zamparo sees a change on the horizon, and one beneficial to Cronos in particular.
With the U.S presidential elections coming up in November, much has been made of what a Joe Biden victory – the Democratic Party’s candidate – could mean for the cannabis industry. A Democratic win is expected to accelerate federal legislation of cannabis. With this in mind, Zamparo believes “Cronos is best-positioned among our coverage universe for U.S. market entry.”
The analyst further said, “We believe CRON will offer investors potentially game-changing technology and differentiated products, as well as eventual access to the U.S. cannabis market upon legalization with capital available to deploy accretively. As America’s November elections approach, CRON should see increased interest from investors looking to capitalize on America’s potential green rush. With acute U.S. market knowledge, relationships with important retailers and brands, and relatively minimal cash burn, CRON is well-placed to eventually capitalize.”
Accordingly, Zamparo reiterated a Buy along with an $8.5 price target. Investors could be taking home a 51% gain should Zamparo’s thesis play out over the coming year. (To watch Zamparo’s track record, click here)
The rest of the Street is not quite as optimistic. Based on 2 Buys and Holds, each, and 1 Sell rating, the analyst consensus rates Cronos a Hold. However, there’s 21% upside in the cards, should the $7.03 average price target be met in the months ahead. (See Cronos stock-price forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.