Cresco: Q3 Results Make it a Smart Value Buy
Canadian cannabis stocks continue to dominate the headlines as several of these stocks are solid buys. Of course, there are great cannabis and hemp stocks in the U.S. as well. A few of these U.S.-based stocks are great plays for investors who are looking for long-term growth potential. Cresco Labs (OTC: CRLBF) is one such cannabis stock and it’s Q3 results make it a smart value buy.
Lack of Federal Legalization Bodes Well for Cresco
Based out of Chicago, Illinois, Cresco is one of the largest multi-state, vertically integrated cannabis companies in the US. After five US states declared marijuana legal in early November, there has been plenty of chatter about the federal government legalizing marijuana across the country.
However, US-based companies like Cresco stand to gain if cannabis is federally illegal. Until the federal government legalizes marijuana, Canadian pot companies that trade on US exchanges can’t step over the border. This gives US-based companies more time to expand and fortify their US market penetration without more competition.
For instance, Yahoo Finance asked Connecticut Governor Ned Lamont if he intended to pursue the legalization of the plant in 2021. He responded with a resounding “yes”.
“Right now, I’m surrounded by states — New Jersey and Massachusetts — where marijuana is already legal. I don’t need a lot of people driving back and forth across the border. We’re trying to keep people close to home as best we can right now. I think legalizing marijuana — doing that safely and making sure that no poison is laced in — I think is one to keep people closer to home,” he said.
Governors from New York and Virginia have also voiced their intentions to pursue legalization in the New Year.
According to a recent report, cannabis sales in Illinois topped $100 million in October 2020. Recreational marijuana sales clocked $75 million, up by $8 million from September. The first 10 months of 2020 have seen sales worth $500 million in the state, out of which $300 million is from the medical marijuana segment. But what about Cresco’s Q3 Results?
Cresco: Stellar Q3 Results
Cresco reported revenue of $153.3 million for the third quarter of 2020, a sequential increase of 63% or $59 million from the second quarter of 2020. Analysts had predicted revenues of $116.2 million and Cresco beat the numbers easily.
Both segments, wholesale and retail, experienced revenue growth. Wholesale grew 65% to $90.5 million because of an increase in harvests thanks to expanded capacities in Illinois and Pennsylvania. Retail grew because of the rise in revenues in same-store sales and new store openings in Illinois.
CEO Charles Bachtell said, “Cresco Labs entered the third quarter firing on all cylinders achieving record levels of revenue, profitability, and cash flow…. Our retail is outperforming, and we are generating substantial operating leverage”.
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This was the third consecutive quarter where sequential growth has been more than 40% and it is accelerating, which indicates that the company picked up steam as the year went by. Adjusted EBITDA was $46.4million, an increase of 182% from Q2 of 2020, driven by an increase in revenue. Net income clocked in at $4.9 million, up from a net loss of $4.7 million in Q2 2020.
Its cash flows hit a new record $17.8 million, up over 80% from Q2 of 2020, and the company had $57.7 million of cash and equivalents in hand at the end of the quarter.
Bottom Line: Why does Cresco’s Q3 Results Make it a Smart Value Buy?
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Cresco pot stock is currently trading at ( ) and analysts have given it a target of $12.41, an increase of over 41% from current levels. As of November 24th, 2020, analysts are very bullish on Cresco because it beat consensus estimates handsomely and their latest Q3 results are just the cherry on top.
In addition to this, Cresco expects new stores to open up in Pennsylvania, and more revenue coming in from adult-use sales in Massachusetts and Arizona. We believe Cresco cannabis stock is a smart value buy. Pick up some shares soon.
Cresco: Q3 Results Make it a Smart Value Buy
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