This Is the Most Overvalued Pot Stock and Its Quarterly Report Proves It

The marijuana industry has been blazing hot to begin 2019, and perhaps no pot stock with a valuation of more than $1 billion has been hotter than Cronos Group (NASDAQ:CRON). Shares of the Ontario-based grower have more than doubled since early December, which is when the company announced that it was receiving a $1.8 billion equity investment from tobacco giant Altria (NYSE:MO) — an investment that closed this month and gives Altria a 45% equity stake in Cronos.

With Wall Street investment banks and independent research reports calling for substantial growth in the marijuana industry over the next decade, the belief among investors has been that Cronos Group’s partnership with Altria and its now-rich cash position puts it in pole position to succeed.

But as the company’s recently released fourth-quarter and full-year report showed, this couldn’t be further from the truth. If anything, Cronos Group’s operating results reaffirmed my belief that it’s the most overvalued pot stock on the market…

Cronos Group’s fourth-quarter and full-year operating highlights

Don’t get me wrong — Cronos Group had plenty to tout with the release of itsĀ fourth-quarter and full-year results. Net sales for the recent quarter, which include recreational sales since Canada lifted the curtain on adult-use prohibition on October 17, as well as excise taxes that are reduced from gross revenue, rose 248%, to 5.6 million Canadian dollars ($4.2 million). The company cited the legalization of recreational weed and organic growth in cannabis oil revenue sales for its more than tripling in year-over-year sales.

For the full year, sales growth was an even more robust 285%, with revenue clocking in at 15.7 million Canadian dollars ($11.7 million). Here, Cronos attributed growth to recreational legalization, higher cannabis oil usage, production expansion, and a larger pool of medical patients.

As you can imagine, Cronos also honed in on its game-changing deal with Altria. The company ended 2018 with “only” CA$32.6 million ($24.4 million) in cash, and the completion of Altria’s investment now gives the company more than $1.8 billion to work with as it aims to boost its international presence, diversify its product line, market its brands and build engagement with consumers, and potentially increase its production capacity. Not to mention, Cronos now…

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