Cronos Group Inc. (CRON): A Bull Case Theory

We came across a bullish thesis on Cronos Group Inc. (CRON) on Substack by Jake LaMotta. In this article, we will summarize the bulls’ thesis on CRON. Cronos Group Inc. (CRON)’s share was trading at $1.93 as of Feb 7^th. CRON’s trailing P/E was 65.31 according to Yahoo Finance.

A cannabis industry professional using software as a service-based tools to streamline operations.

Cronos Group (CRON) is an incredibly undervalued stock, trading at just $1.85 with a market cap of around $700 million. For that price, investors are acquiring $1.1 billion in tangible assets, including $860 million in cash, $47 million in inventory, and $162 million in property, plant, and equipment, among other valuable assets. This equates to nearly $2.80 per share in tangible book value and a net-net value of $2.38 per share, suggesting the stock is being mispriced. Despite this, Cronos is not a struggling or cash-burning company. It’s growing its top line at an impressive 30% annually, expanding margins, and operates the number one cannabis brand domestically. The company’s net sales are expected to exceed $140 million, even with the punitive excise tax, and margins are set to improve further as the export business—exempt from the excise tax—grows. Cronos represents a rare situation where a net-net stock is actually thriving rather than facing decline. The market’s disappointment with the company’s cash not being put to immediate use is understandable, but Cronos’ management is wisely holding back from ill-advised acquisitions in an overly competitive market. Cronos can be viewed as two distinct businesses: a growing cannabis producer with substantial domestic market share and a cannabis SPAC, sitting on cash and waiting for the right opportunity. At its current price, Cronos is a compelling investment, offering significant upside potential without paying a fair price for either of these business segments.

Cronos Group Inc. (CRON) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 13 hedge fund portfolios held CRON at the end of the third quarter which was 12 in the previous quarter. While we acknowledge the risk and potential of CRON as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than CRON but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.

Disclosure: None. This article was originally published at Insider Monkey.