Cronos Group (NASDA: CRON) share price double since the start of this year. The bull-run is supported by an investment of $1.8 billion from Altria Group. CRON share price jumped from $9 a share at the beginning of this year to $21 a share at present. Traders believe that $1.8 billion of investment from Altria Group would not only help in expanding CRON production potential, it would also aid Cannabis Company to enjoy the 100 years of Altria’s experience in the tobacco industry.
In addition, bulls believe Altria’s experience in the tobacco business could be leveraged to speed up CRON’s penetration in the cannabis market. Thus, the combination of both companies would provide a valuable synergistic potential.
Altria’s CEO said, “Selecting the right partner in this category was critical and we’ve done just that” and further added that “our investment will allow Cronos to more quickly expand its global footprint and production capacity.”
According to the agreement between both companies, Altria Group will receive a 45% stake in the CRON, which could enlarge 10% every year over the following four years. Altria will also have the right to appoint four directors at Cronos board, including one independent director.
Source: Market Realist
Cronos Group appears in a solid position to expand the penetration in cannabis markets. This is evident from its recent financial performance. The company had generated revenue of $3.8 million in the latest quarter, representing a growth of 180% from revenue of $1.3 million in the same period the previous year.
Kilograms of cannabis sold rose to 514 kilograms, up 213% from 164 kilograms in the year-ago period. Cronos says the increase in revenues and kilograms sold was supported by improved production capacity and higher demand from domestic and international medical cannabis channels. The growth in recreational cannabis market added to the revenue growth.
Overall, Cronos looks in a strong position to capitalize on increasing demand from cannabis markets. The investments of $1.8 billion would help CRON to expand their production facilities and distribution network both in Canada and the United States. Therefore, CRON shares are likely to extend the upside momentum in fiscal 2019.