Wall Street Likes Cresco Lab’s Expansion Activities

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Cresco Labs is a company set for expansion. Now that legalization will take effect in its home state of Illinois on Jan. 1, Cresco’s stock should benefit as sales expand across the state.

Moreover, it has become one of the few American marijuana companies to expand outside of its home state. Assuming its acquisitions go through, Cresco will also become a key player in both California and Florida. With its reach across the U.S. (and soon in Canada), along with its massive revenue growth, Cresco stock could become one of the more lucrative plays in the U.S. marijuana industry.

Cresco Expanding In Home State

Cresco’s Chicago base of operations seems fortuitous with the recent move by the state of Illinois to fully legalize marijuana. The company predicts that legalization will bring annual statewide sales of between $2 billion and $4 billion. As the leading marijuana company in Illinois, it will take the largest share of that revenue. It also plans to have ten dispensaries in operation, up from the current five, when legalization becomes official on Jan. 1.

Company Awaits Approval On Key Acquisitions

Despite this, most of the news has focused on Cresco’s plans outside of Illinois.

The company plans to move into Florida by acquiring VidaCann medical dispensaries. This would make Cresco the 5th largest dispensary in Florida.

Cresco is also in the process of acquiring California-based Origin House (OTC:ORHOF). The purchase brings Cresco into the country’s largest cannabis market. Buying Origin House would give the company six licenses to operate five production facilities and over 450 dispensaries across California. Moreover, it grants ownership to 180 Smoke vape shops in Canada. Despite the delays, analysts expect the deal to close by the end of the year.

However, delays with the Origin House purchase have weighed on Cresco’s stock. On June 11th, U.S. antitrust authorities asked the company to submit additional information regarding the purchase. Both companies have approved the merger, and Cresco expressed confidence that the request would only amount to a short delay.

Analysts See Cresco Stock Offering Massive Revenue Growth

Earnings are forecast to increase 266.7% this year and 700% the next. Revenue estimates appear nearly as dramatic.

Despite this delay, I think Cresco stock offers a reasonably-priced alternative to Canadian marijuana stocks. Cresco is also one of the few American marijuana companies to operate in more than one state. In a market where marijuana cannot legally cross state lines, this remains a challenge.

Still, despite these challenges, the forecasts continue to improve for Cresco stock. Wall Street predicts that the company will start reporting quarterly profits by next quarter.

Earnings are forecast to increase 266.7% this year and 700% the next. Revenue estimates appear nearly as dramatic. Analysts predict a 520.8% increase in revenue to $268.51 million. They expect that revenue number to hit $712.7 million by next year.

This takes its forward price-to-earnings (P/E) ratio to just 24.4. As a comparison, the S&P 500 trades at about 22.3 times earnings. This makes Cresco stock a considerable bargain, especially compared to Canadian counterparts such as Canopy Growth (NYSE: CGC) and Aurora Cannabis (NYSE: ACB).

As legal restrictions loosen, some of the speculative buying that has benefited Canadian cannabis stocks should spread south the border. Given the multi-state reach and $1 billion-plus market cap of Cresco, I think CRLBF stock will become one of the larger beneficiaries.

The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Capital 10X hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer.

Will Healy
Will Healy is a freelance business and financial writer based in the Dallas area. In addition to marijuana, energy, and mining stocks, he has also written about real estate, insurance, personal finance, and macroeconomics. In addition to Capital 10X, his articles have appeared on sites such as InvestorPlace, Yahoo! Finance, MSN Money, Kiplinger’s Personal Finance, GOBankingRates, and Seeking Alpha. Will holds a B.S. in Journalism from Texas A&M University, an M.S. in Geography from the University of North Texas, and an MBA from the University of Texas at Dallas. Phone: 416-721-8257. Address: 682 Indian Road Toronto, Ontario M6P 2C9.

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