Shares of marijuana company Cronos Group soared on Thursday after the company topped third quarter financial results.

For the quarter the Canadian pot producer’s overall net income was $68.5 million. This was helped by a $105.3 million gain resulting from a change in the value of derivative liabilities related to tobacco company Altria’s investment in the company.

Cronos reported that it earned 19 cents per share. This was ahead of Zacks’ estimates for a loss of six cents. Sales rose 15% to $11.358 million, also better than forecasts for $10.83 million.

The company’s total reported operating loss was $41.2 million, a bigger loss than the prior quarter. Crono’s U.S. business also dropped 24% from the prior quarter to $1.639 million. Cronos said that in the U.S., “a significant number of the company’s retail customers continued to be challenged by permanent and temporary store closings.”

The company said that stores that were open were running with reduced hours and staff, and dealing with thinner traffic.

“Further decreases in consumer demand, increases in Covid-19 case numbers in various states in the U.S. and extended periods of retail store closure could result in negative impacts on future operating results,” the company said.

Cronos booked $35 million in impairment charges and $5 million on the Lord Jones brand. It was in 2019 that the company purchased Lord Jones for $300 million.
“With the company spending $300 million on this first acquisition, the performance limits the enthusiasm for deploying capital towards future endeavors,” remarked Stifel analyst Andrew Carter.

“Given the capital spent and the performance, we believe the company needs to fully frame the opportunities and realities for this business in order to properly frame expectations.”

In October Cronos launched a CBD brand in the U.S. in partnership with actor Kristen Bell. Cronos’ Peace Naturals medical weed brand also launched in Israel last month.

Canaccord analyst Matt Bottomley remarked, “Although details on this remain thin, we believe it is largely attributable to the historical reliance on third-party wholesale purchases for products, and that the company has not yet ramped up its top-line to critical mass.”

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