Nasdaq-traded shares of Cronos Group (CRON) - Get Report were dropping double digits after analysts at Canaccord downgraded the company's Canadian-traded stock to sell while maintaining its C$17 price target.
The firm is turning bearish on the Canadian adult-use marijuana market and in turn also is turning bearish on Cronos' valuation.
Cronos' shares have been on a strong run ever since cigarette-maker Altria (MO) - Get Report invested C$2.4 billion in the company, but analyst Matt Bottomley said this has stretched the company's valuation.
"With Altria's C$2.4B investment now in the books, Cronos indicated that it intends to use the proceeds to accelerate its global growth initiatives, including its human capital, distribution footprint, branding, R&D and product formulation capabilities," Bottomley wrote. "Although we believe Cronos' valuation has gotten ahead of its fundamentals, we also note that the company has compiled a number of strategic initiatives that could eventually unlock longer-term value."
Cronos' shares were already under pressure following its fourth-quarter earnings release on Tuesday, in which the company reported a significant increase revenue but a wider loss.
For the full year, the company reported a loss of 11 cents per share, after reporting a full-year profit of 1 cent a year earlier. That increase was driven by a jump in the amount of kilograms the company sold, though Cronos didn't specify how many kilos it sold.
Cronos reported full-year revenue of $15.7 million compared with $4.1 million a year earlier.
Shares of Cronos were down 11% on Wednesday to $18.
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