Cronos's stock leaps as strong cannabis-flower sales lead to record revenue

By Tomi Kilgore

Losses narrowed and were in line with expectations as the cannabis company's gross margin improved by nearly 3 percentage points

Shares of Cronos Group Inc. traded sharply higher Thursday after the cannabis company, citing strength in flower sales, reported first-quarter revenue that rose to a record and beat expectations.

"We continue to bring new innovations to Canada across our Spinach and Lord Jones brands, which are helping to drive market-share gains," Chief Executive Mike Gorenstein said.

The Toronto-based company had exited its U.S. cannabidiol operations last year to focus on its operations in Canada and Israel.

The U.S.-listed stock (CRON) (CA:CRON) climbed 9.1% in morning trading. It has recently enjoyed some renewed investor interest, soaring 19% over the past three weeks amid increasing optimism that the U.S. government may change the Drug Enforcement Administration's cannabis classification to a Schedule III controlled substance, putting it the same category as drugs such as ketamine and anabolic steroids.

Cannabis is currently listed as a Schedule I drug, which is the same category as heroin and fentanyl.

For the latest quarter, the company reported a net loss of $24.7 million, or 1 cent a share, compared with a loss of $16.8 million, or 5 cents a share, in the same period a year ago and matching the FactSet consensus for per-share losses of 1 cent.

Revenue increased 29.7% to $25.29 million, above the FactSet consensus of $23.8 million, with sales in Canada up 30.7% to $18.87 million and sales in Israel up 26.8% to $6.42 million.

Cannabis-flower revenue jumped 33.5% to $17.53 million, and cannabis-extracts revenue rose 22.6% to $7.73 million.

The cost of sales rose by less than revenue, up 25.6% to $20.81 million, to push gross margin up by 2.7 percentage points to 17.7%.

The company said that while it continues to monitor tensions in the Middle East, it can't predict what impact the conflict might have on its employees, business and activities in the region.

Cronos's stock has soared 34.7% year to date, while the AdvisorShares Pure US Cannabis exchange-traded fund MSOS has run up 31.2% and the S&P 500 has gained 9.2%.

-Tomi Kilgore

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05-09-24 1135ET

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