Cronos Group Inc (NASDAQ: CRON) is having an overwhelmingly rough day in the market today, down nearly 10% after a dramatic rise over the past few trading sessions. Nonetheless, if you’re wondering whether or not to buy the dip, I can give you four reasons why the dip in CRON value represents a potential opportunity.
4 Reasons To Buy The CRON Dip
As mentioned above, Cronos has been screaming in the market as of late. However, today is a rough day. In my view, the declines represent an opportunity, and it all has to do with recently announced supply agreements.
On August 21, 2018, CRON announced a series of four supply agreements, under which it will supply adult-use recreational cannabis to key markets in Canada. These regions include:
- Ontario – Cronos secured a supply agreement with the Ontario Cannabis Retail Corporation, nailing down the Ontario province.
- BC – BC or British Columbia was grabbed as well with the company’s agreement with the BC Liquor Distribution Branch.
- Nova Scotia – The company also announced a supply agreement with the Nova Scotia Liquor Corporation, bringing its products to the Nova Scotia province.
- Prince Edward Island – Finally, the company signed a supply agreement with the Prince Edward Liquor Corporation, locking down Prince Edward Island.
Importantly, these supply agreements will put the company into the 4 key provinces of Canada, exposing its products to more than 50% of the Canadian population.
What’s The Big Deal?
On June 20, 2018, Canada became the second country in the world to legalize the use of cannabis on a recreational level for adult users. However, as with any major change in law, there was a timeframe put in place with regard to when legalization would actually occur.
On October 17, 2018, Canadians will have their first bits of access to legal cannabis through liquor and cannabis stores both online and in a brick and mortar setting. Since June 20th, cannabis growers, processors, and other members of the cannabis industry have been working to mint supply agreements, surrounding the supply of these newly legalized products to retail outlets throughout the country.
While there are several brands working to get their slice of available shelf space, Cronos seems to be the most active. Due to this overwhelmingly high rate of activity, the company has already cemented relationships that will put its products in front of more than 50% of the target population for those products.
As a result of their hard work, when the Canadian adult-use canabis industry launches in October, we can expect to see a strong ramp in revenue generated by the company. Of course, this is where the opportunity is presented.
Why The Stock Is Falling
With such good news reported as of late, many are wondering why Cronos is falling in the market today. It’s my opinion that this is nothing more than traders taking profits. After dramatic rises like the one we’ve seen from CRON over the past several sessions, it’s normal to see some profit taking at the top, presenting an opportunity for the next investors to get in at a discount. There’s nothing out there that suggests that today’s declines are any different.
Get Ready For Gains Ahead
Once this profit taking session is over, I believe that we will continue to see a strong run in the value of Cronos. With supply agreements nailing down more than 50% of a new market, the company’s revenue is likely to climb in a big way ahead. With CRON cementing its brands as leadership brands in the space, the sky is the limit here!