Analyst: Dump This Pot Stock Now

Jefferies wonders when Altria value creation will begin to materialize for Cronos

Lillian Currens
Feb 25, 2019 at 1:38 PM
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The shares of the marijuana concern Cronos Group Inc (NASDAQ:CRON) are sinking today, after Jefferies initiated coverage on the stock. The analyst started CRON with an "underperform" rating, and questioned "when Altria value creation will being to materialize," following the cigarette company's decision to invest $1.8 billion in Cronos in December. CRON stock is down 5% at $27.35, at last check. 

CRON stock is just coming off a Feb. 4 all-time high of $25.10, and has already doubled in 2019. The stock is now testing a floor atop its 20-day moving average, which hasn't been breached on a daily closing basis since Dec. 31.

Jefferies isn't the only one with reservations about the stock, though. Of the five analysts following Cronos, three maintain a tepid "hold" rating. What's more, the consensus 12-month target price of $19.57 represents a discount to CRON's current price. 

Several short sellers are likely cheering the pot stock's decline today. Short interest grew 8.4% in the most recent reporting period, and now accounts for nearly 15% of Cronos Group's total available float.

Meanwhile, the equity's Schaeffer's Volatility Index (SVI) of 0.79 stands just higher than 18% of all other reading from the past year. This means that short-term options are pricing in relatively low volatility expectations -- good news for options traders who might want to bet on CRON stock's near-term trajecotry.


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