Over the past few months, the spread of the coronavirus has thrown a wrench in many cannabis companies’ plans for expansion. Indeed, production facility closures, layoffs, and inventory writedowns are now commonplace in the industry. With the situation…
further exacerbated by oversupply issues, cannabis stocks have taken a deep dive for the worse.
With the coronavirus pandemic subsiding in Canada but causing record high daily cases in the U.S., the industry outlook is becoming more and more uncertain. As a result, only cannabis companies with healthy growth will likely come out on top. Today, let’s take a look at two such companies.
A global cannabinoid company
Compared with the same period last year, sales at Cronos Group (NASDAQ:CRON) in the first quarter of 2020 increased by a staggering 181% to $8.4 million. At the same time, the company’s operating loss was $45.1 million, which was $31.9 million less than in Q1 2019. With $1.3 billion total in cash and investments, Cronos should have no problem operating without further diluting stockholders, as its annualized operating expenses amounted to just $180 million.
Although it achieved significant growth, the company is facing profitability issues. In the quarter, Cronos recognized large inventory writedowns that left its gross profits at negative $6.5 million. However, the good news is that the company’s revenue grew by 100%, from $1.1 million in Q1 2019 to $2.2 million in Q2 2020.
Currently, Cronos estimates it will face significant headwinds going forward as many of its retail and distribution partners have closed up shop due to measures to contain the coronavirus. Overall, however, I estimate long-term investors should see ample rewards by holding onto this stock in spite of short-term turmoil.
A reputable medical grower
While large-cap recreational growers have seen their growth slow down, companies producing large quantities of medical marijuana have been doing quite well thanks to the essential nature of their business. Indeed, Tilray (NASDAQ:TLRY) has not witnessed any material supply chain disruptions to its core operations.
In Q1 2020, the company’s revenue grew by 126% year over year to $52.1 million. Revenue from international medical marijuana sales was up 221%, and Canada adult-use revenue grew by 165%. While demand increased, the average selling price of Tilray’s medical products also improved from $6.34 per gram in Q1 2019 to $6.79 per gram in Q1 2020.
Tilray has become a diversified medical grower, with operations in 15 countries on five different continents. Tilray now sells its hemp to 17,000 retailers in 20 countries.
During the quarter, the company raised…
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