Cronos Gets Downgrade and Price Target Cut From Stifel

Cronos declines after a Stifel analyst downgrades his rating on shares of the medical marijuana producer to hold from buy.
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Cronos Group  (CRON) - Get Report dropped Tuesday after Stifel analyst W. Andrew Carter downgraded his rating on shares of the medical marijuana producer to hold from buy and cut his share price target.

The problem: “Uncertainty surrounding the company’s inability to file its SEC filings and the investigation around its revenue recognition practices,” Carter wrote in a report.

The company said last week it would delay its earnings release scheduled for Feb. 27 to March 17.

The delay stemmed from a “review by the Audit Committee of the Company’s Board of Directors, with the assistance of outside counsel and forensic accountants, of several bulk resin purchases and sales of products through the wholesale channel and the appropriateness of the recognition of revenue from those transactions,” the company said.

All this makes the company difficult to analyze now, Carter said, adding he doesn’t believe the company will release its report on March 17.

“We believe the outside involvement from ‘outside counsel and forensic accountants, underscores the potential gravity of the situation,'” he wrote.

Still, “we believe culpability of senior management is unlikely, balancing long-term incentives of a company well positioned in the category versus limited near-term benefits of any aggressive accounting treatment,” Carter said.

Carter remains a long-term bull on the stock. “We continue to believe the company will showcase a differentiated revenue growth profile by meeting the early demands of the Canadian vapor segment and developing innovation supportive of an enduring right to win in the global cannabis category.”

He lowered his share-price target to C$8 (US$5.99) from C$12.

At last check, Cronos stock traded at US$5.51, down 8.55%.