Is Cronos Group Inc. (TSX:CRON) Stock a Buy Right Now?

Cronos Group (TSX:CRON) just secured a major investment from a global tobacco company. Is this the top marijuana stock to own right now?

| More on:
Dice engraved with the words buy and sell

Image source: Getty Images.

Cronos Group (TSX:CRON) just received a huge vote of confidence from a major tobacco company and that has investors wondering if this pot stock is now a top pick in the marijuana sector.

Let’s take a look at the current situation to see if Cronos deserves to be in your portfolio right now.

Altria deal

Cronos recently confirmed it was in talks with American tobacco giant Altria. Rumours of discussions between Canadian cannabis companies and beverage or cigarette firms have been common in recent months. In this case, a deal has emerged, and it is a big one that could jump-start a recovery in the marijuana sector.

Altria is taking a 45% stake in Cronos for $2.4 billion. That equates to $16.25 per share, which is a 16% premium to the closing price before the deal was announced. Under the agreement, Altria has the right to increase its stake to nearly 55% at a set price of $19 per share. Altria will get four board seats out of an expanded seven spots, effectively giving the tobacco giant control on the strategic direction Cronos will take going forward.

The news sparked an initial surge of 30% in Cronos shares to above $18, so the market likes the deal and Altria appears to have made a wise investment.

Time will tell if the enthusiasm has legs. Corona maker Constellation Brands invested an additional $5 billion in Canopy Growth in August at a price of $48.60 per share. The stock soared above $76 in the following weeks, but recently fell below $38.

Cronos is viewed as a leader in the research and development side of the industry, with specific interests in cannabinoid extraction and cultivation in lab environments. The company announced a key research agreement in September with Ginko Bioworks to produce cultured cannabinoids.

The tobacco industry is scrambling to adjust to changing trends in its industry, and Altria’s interest in Cronos could trigger a wave of similar moves by other players in the sector.

Should you buy Cronos?

Altria’s investment should boost investor confidence in Cronos and the $19 warrants could help support the stock. If you like the overall prospects of the industry, and are willing to ride out some additional volatility, Cronos deserves to be on your pot stock radar.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Andrew Walker has no position in any stock mentioned.

More on Investing

A cannabis plant grows.
Cannabis Stocks

Canopy Growth Stock Is Rising But I’m Worried About This One Thing

Canopy Growth stock is soaring as the legalization effort makes real progress in both Germany and the United States.

Read more »

young woman celebrating a victory while working with mobile phone in the office
Investing

3 Roaring Stocks to Hold for the Next 20 Years

These top TSX stocks are excellent long-term buys, given their multi-year growth potential and solid underlying businesses.

Read more »

Two seniors float in a pool.
Dividend Stocks

TFSA: How to Earn $1,890 in Annual Tax-Free Income

Plunk these investments into your TFSA to earn passive income and avoid the taxman.

Read more »

grow dividends
Investing

Here’s My Top 3 TSX Stocks to Buy Right Now

Even though the TSX has been rising, there are still some good bargains out there. Here are three top compounding…

Read more »

Target. Stand out from the crowd
Investing

Prediction: This Canadian Growth Stock Could Double by 2030

Alimentation Couche-Tard (TSX:ATD) is a top growth stock that could do well over the next six or so years.

Read more »

Businessman holding AI cloud
Tech Stocks

Could Investing $20,000 in Nvidia Make You a Millionaire?

Nvidia stock has made investors millionaires in the last 10 years. Is it too late to invest to become a…

Read more »

Engineers walk through a facility.
Dividend Stocks

1 TSX Stock I Wouldn’t Touch With a 10-Foot Pole

AtkinsRéalis (TSX:ATRL) is one TSX stock I'd never invest in.

Read more »

money cash dividends
Stocks for Beginners

Have $500? 3 Absurdly Cheap Stocks Long-Term Investors Should Buy Right Now

If you're looking for cheap stocks, these three have a huge future ahead of them, all while costing far less…

Read more »