Canadian Cannabis enterprise Cronos Group’s stock captured a daily high of around 9 percent as a result of analysts forecasted its revenue has increased by 500 percent over the past year, but turned out to be 6.76 percent higher based on the closing price on March 25. At the closing bell, the stock settled at $20.53 per share. Cronos Group is set to announce its fourth quarter 2018 financial results on Tuesday, March 23. It is worth noting that in Q3 2018, revenue of the organization grew by 186 percent and year-over-year Kilograms Sold amount went up by 213 percent.
Why Wall Street is Bullish on Cronos Group
A Bloomberg sample of analysts foresees that Cronos Group’s revenue for the fourth quarter will reach as high as $10.8 million and there is a likelihood the company will reach break-even in the accounting year 2018. Except if we see a growing cost of revenue because of a correlative increase in operational costs, including Selling, General and Administrative Expenses (SG&A), the general opinion forecast of analysts sees a profit of $0.33 per a share for fiscal 2018.
Moreover, the pending legalization of Cannabis in New Jersey also played a vital role in turning Cronos Group’s stock bullish at the beginning of the week. Once passed, the bill will approve, regulate, and tax the recreational use marijuana, and help major Cannabis producers to expand their market that will help boost revenues in the following quarters of 2019.
Because this would be first quarterly financial update after cigarette company Altria Group made the $1.8 billion investment in Cronos Group and secured a 45 stake in the company, investors are especially attracted to the performance of the marijuana producer.
“Altria is the ideal partner for Cronos Group, providing the resources and expertise we need to meaningfully accelerate our strategic growth,” said Mike Gorenstein, the CEO of Cronos Group, when Altria Group concluded the investment earlier last year.
Most Cannabis companies that provided their Q4 2018 earnings have disclosed explosive sales growth and investors are projecting Cronos Group’s revenue to jump in line with overall industry growth in the United States.
Technical Analysis of Cronos Group
Since being listed on NASDAQ in February 2018, Cannabis Cronos Group’s stock has risen by at least 180 percent. Actually, since the start of 2019, its stock price has climbed by around 101%, including the gains observed on Monday.
Over the past two weeks, Cronos Group’s stock slowly declined but found strong support close to the $19.00 per share level. Furthermore, the Commodity Channel Index created a divergence and indicated that the long-term uptrend will likely to resume soon. However, even with the 9 percent gain on Monday, the stock is still trading beneath the short-term downtrend line.
Even though the bulk of the sales growth prediction is being priced in by the market, the actual results on Tuesday will help provide confirmation pertaining to a range of financial metrics that may even further harden the bullish momentum we saw on Monday.
If we see that the administration of the Cronos Group succeeded at leveraging the investment from Altria Group to grow the revenue as forecast by analysts, but at the same time, increased operational efficiency to reach breakeven, it will give the market sufficient reason to zoom past the recent downturn and test the resistance near $27.00 per share over the coming weeks.
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