Cronos Group Inc. (CRON) shares fell more than 10% during Wednesday's session after full-year financial results failed to impress investors. Revenue rose 284.8% to C$15.7 million, and net losses reached C$0.11 per share. The company's first full quarter of recreational sales fell behind its large-cap peer group, which reported net revenue of between C$21 million and C$83 million for the quarter.
Many analysts responded by downgrading Cronos stock and/or lowering their price targets. Canaccord analysts downgraded Cronos stock from Hold to Sell, citing the lofty valuation and Canada's slow start. PI Financial analysts also downgraded the stock from Buy to Neutral, and Cormark analysts downgraded the stock from Speculative Buy to Market Perform. However, CIBC analysts remained bullish, raising their price target on Cronos shares to C$30.
While many analysts have focused on revenue, management reiterated on its conference call that its business model "is not to be the farmer" and that the company is instead focused on areas where its sees long-term sustainable value, such as developing and marketing innovative branded products and working with experts in other verticals.
From a technical standpoint, the stock broke down from the 50-day moving average, trendline support and S1 support levels at around $18.54 following its financial results. The relative strength index (RSI) moved closer to oversold levels with a reading of 37.93, but the moving average convergence divergence (MACD) remains in a prolonged downtrend. These technical indicators suggest that the stock has room for more downside.
Traders should watch for a move toward trendline and S2 support levels at around $15.44, where the stock could see some consolidation before attempting another move higher. If the stock rebounds back above key support levels, traders could see a move higher to retest its highs near R1 resistance at $24.92, although that scenario may be less likely to occur given the bearish market sentiment.
The author holds no position in the stock(s) mentioned except through passively managed index funds.