Cronos Earnings: Management Pulls Guidance as Revenue Decline Continues; Cutting Fair Values

No-moat Cronos reported disappointing second-quarter results, with year-to-date net revenue trending well below both management’s full-year guidance of $100 million-$110 million and our previous $102 million full-year forecast. With the target looking out of reach, management retracted full-year guidance, and we’ve cut our 2023 revenue forecast to $81 million. Partially offsetting a smaller top line, we’ve reduced our forecast for full-year overhead expenses by roughly $12 million to $80 million, as cost-cutting efforts have progressed better than we expected. The net effect is that we have lowered our fair value estimate to $2.50 and CAD 3.50 per share, down from $3 and CAD 4, respectively. Shares look undervalued, but we see better risk-adjusted upside in cannabis among U.S. multistate operators.