Cannabis stocks were mixed Thursday, as investors digested a surprise profit from Toronto-based Cronos that was mostly due to a change in the value of derivative liabilities.
U.S.-listed Cronos shares CRON, -8.29% CRON, -8.87% rose early in the day before paring those gains to trade down 4% in the regular session. Cronos said it had income of C$251 million ($189 million), or 22 cents a share, in the quarter, up from C$762,000, or breakeven, in the year-earlier period. Income was boosted by a C$264 million gain on the revaluation of derivative liabilities, which was offset by a C$991,000 loss on equity investments.
Net revenue remained small at C$10.2 million, up from $3.4 million. The FactSet consensus was for a loss per share of 3 cents and revenue of just C$7.3 million.
Cronos said it sold 1,584 kg of product in the quarter, up from 477 kg a year ago. The average cost of sales before fair value adjustments per gram sold was C$3.01, up 14% from C$2.63 in the second quarter of 2018. The company has a $4.8 billion market cap and has gained 35% in 2019, despite its small revenue base. All six analysts polled by FactSet rate the stock a buy.
Cowen analyst Vivien Azer said the company’s cost of goods sold was inflationary, sales, general and administrative expenses were higher thatn forecast, leading to an adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) loss of C$17.8 million — far wider than the C$9.1 million loss he was forecasting.
“With losses expected to widen during 2H19, we would remain on the sidelines,” Azer wrote in a note to clients. He reiterated his market perform rating on the stock and C$21 price target, which is about 14% above its current trading level.
U.S. cannabis accessories company Greenlane Holdings GNLN, 0.29% and market leader, Canada’s Canopy Growth CGC, -14.38% WEED, -14.47% announced an exclusive distribution deal for Storz & Bickel vapes. Smith Falls, Ontario-based Canopy acquired Germany’s Storz & Bickel, maker of the volcano, late last year.
Greenlane, based in Boca Raton, Fla., has been the exclusive U.S. distributor of the vapes since January and will now extend the partnership to Canopy. Greenlane, which went public on Nasdaq in April, has more than 11,000 retail locations, including licensed cannabis dispensaries and head shops.
Tilray shares TLRY, -10.04% rose 1.1%, after it said it has received approval from the U.S. government to import medical CBD to the U.S. to be used in clinical trials led by NYU School of Medicine. Two separate studies will test the efficacy of CBD in treating Alcohol Use Disorder and patients suffering from AUD along with Post-Traumatic Stress Disorder. The CBD in the studies is in capsule form, said Tilray.
Cresco Labs shares CRLBF, -4.83% CL, 50.00% fell 0.9%. The company said it has received approval to acquire the parent of Valley Agriceuticals, which holds one of the 10 vertically integrated cannabis business licenses issued by the state of New York. The deal is expected to close by the end of August.
Innovate Industrial Properties shares were up 0.4%. The cannabis real estate investment trust reported second-quarter net income available to common stockholders of $3.1 million, or 30 cents a share, compared with $1.2 million, or 17 cents a share, in the year-ago period. Revenue rose to $8.6 million from $3.3 million in the year-ago period. There are no reliable estimates on FactSet for the company, which paid a 60 cents quarterly dividend in July.
From Marijuana Business Daily comes the news that eight acquisitions involving public cannabis companies buying private companies closed this week. Data compiled by the news site and Viridian Capital Advisors shows there were 233 M&A deals completed so far this year, up from 185 in the same period a year ago.
Elsewhere in the sector, Aurora Cannabis ACB, -6.90% ACB, -5.80% was up 0.1%. MedMen shares MMNFF, -5.63% were down 0.7%. OrganiGram Holdings’s stock OGI, -6.89% was up 1.6%. Aphria APHA, -6.73% APHA, -7.63% was down 1.9%, and Green Growth Brands was up 1.8%. CannTrust CTST, -6.60% TRST, -6.71% was down 0.3% and Hexo was up 4%. Aleafia ALEAF, -4.02% ALEF, -4.35% was down 0.7%.
The ETFMG Alternative Harvest ETF MJ, -5.20% was up 0.9%, with 22 of its 38 component stocks higher. The Horizons Marijuana Life Sciences ETF HMMJ, -7.29% was up 0.4%, with 28 of its 54 constituent stocks trading higher.