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After a long and challenging summer for cannabis-sector stockholders, investors were hoping for a recovery in Cronos Group (NASDAQ:CRON) stock. Then the bombshell news struck: on Sept. 11, the current presidential administration announced plans to ban flavored e-cigarettes in the wake of a lung-disease outbreak and at least six deaths.
With vaping being an integral part of the cannabis and CBD market, the legalized cannabis sector suffered and Cronos stock was no exception.
That begs the question of whether holders of CRON stock should panic-sell or take advantage of what could be an opportunity to buy low and, hopefully, sell at a higher price later.
Assessing the Damage to CRON Stock
It only took a few trading days for Cronos Group stock to slide from $11.60 (I’ll be referring to the American version of the stock here) on Sept. 11 to slightly more than $10 per share. That’s pretty extensive damage to CRON stock, especially considering that there wasn’t been any particularly negative or damaging company-specific news during that time.
As I see it, this is simply overreactive, fear-based selling due to the vaping crackdown. InvestorPlace’s Josh Enomoto summed up my sentiment on the situation quite nicely:
In the nearer term, shares might be more volatile than usual. However, in the long run, I don’t see this impacting the company… It will take time for this issue to cool down. But once it does, CRON stock can get back to its business of growing cannabis in a fiscally sustainable manner.
No one is claiming that Cronos Group stock will immediately climb back to its all-time high, and the CRON stock price is likely to wobble and chop around as the vaping issue plays out in the media and the investing community. My thesis, really, is that the entire cannabis sector will stage a comeback and investors will remember what they shouldn’t have forgotten in the first place: CRON is one of the biggest and most respected companies in the cannabis industry.
This, Too, Shall Pass
For the time being, the current presidential administration is ultra-aggressive in its stance towards flavored e-cigarettes, with U.S. Health and Human Services Secretary Alex Azar declaring the administration’s intention to “clear the market of flavored e-cigarettes” to protect “children, families, schools and communities.”
The next thing you know, flavored e-cigarettes were being outlawed in San Francisco, Michigan, and Boulder, Colorado; Ray Lopez, the alderman of Chicago’s 15th ward, garnered some publicity for himself when he introduced an ordinance that would ban vaping products — all of them, not just the flavored variety — throughout Chicago.
And so, banning mania is in full swing and no one knows when it will end or how it will be resolved. We have to bear in mind, though, that CRON is headquartered in Toronto and Canada is undergoing what we might call Cannabis 2.0: The Next Phase of Legalization.
In mid-October, Health Canada will permit the sale of cannabis-infused edibles and beverages as well as vapes; these products could hit the shelves in Canada as soon as the middle of December. Regulators and lawmakers in the United States can fret and complain all they want, but they have no authority to prevent Canada’s Cannabis 2.0.
In any case, Cronos Group President and CEO Mike Gorenstein didn’t seem overly concerned when he spoke with Jim Cramer about the vaping controversy, as he insouciantly “noted that nicotine and cannabis are very different products and in Canada, cannabis vaping products are not yet allowed to be sold.”
The Takeaway on Cronos Group Stock
If anything, the vaping crackdown should prove to be a temporary shock to the broader cannabis market and particularly to CRON stock. My favorite investing strategy is to wait for scares like this to pass; that’s the time to get in, hold on, and let the profits roll in.
As of this writing, David Moadel did not hold a position in any of the aforementioned securities.
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