Cronos Group Inc. (CRON) shares briefly soared more than 13% on Wednesday morning before giving up some of those gains by mid-session. After reaching reaction highs in March, the stock fell more than 40% to lows of around $13.50 in May before today's analyst upgrade.
Bank of America Merrill Lynch analyst Christopher Carey upgraded Cronos stock from Underperform to Buy and raised his price target from $13.00 to $20.00 per share. The analyst believes that the company is nearing a launch in the United States, could soon flex its industry-leading balance sheet, and continues to add partnerships that could create a "vastly different" company over the coming years.
In particular, the analyst believes that Cronos will enter the U.S. market by leveraging Altria Group's (MO) distribution channels to launch its own CBD products. The potential to scale distribution via Altria Group differentiates the company from its peers that don't have access to mass market retailers. The near-term focus is likely to be on CBD creams, tinctures, and vape cartridges for the U.S. with M&A filling in product category gaps.
From a technical standpoint, the stock briefly broke out from trendline resistance at around $16.00 before giving up gains by mid-session on Wednesday. The relative strength index (RSI) rose to neutral levels of 50.59, while the moving average convergence divergence (MACD) could experience a bullish crossover. These indicators suggest that the stock could see more upside if a reversal materializes.
Traders should watch for a breakout from upper trendline resistance toward the 50-day moving average at $16.36 over the coming sessions. If the stock fails to break out, traders could see a move lower to retest trend line support at around $13.50. If the stock breaks out from trendline and 50-day moving average resistance, traders could see a move toward reaction highs near the 200-day moving average at $18.00.
The author holds no position in the stock(s) mentioned except through passively managed index funds.