Cresco Labs: Your Next Cannabis Investment?
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New and innovative companies come on the market every day, but that doesn’t mean they are a great investment. One over-the-counter stock that has shown potential is Cresco Labs Inc, which focuses on product innovation in the cannabis industry. With multiple different successful brands sourcing products from Cresco Labs Inc, they have been able to steadily grow their market share, leading to potentially promising results for investors. Understanding the growth strategy, current market situation, financials, and what the future holds are all key factors when considering an investment in Cresco Labs Inc.
The Facts: Cresco Labs Inc (OTC: CRLBF, CSE: CL)
It’s no secret that the cannabis industry has sparked many debates, however, with a growing number of regions legalizing its production and use, the industry continues to grow and attract investment. Cresco Labs has been in business since 2013, accumulating 21 production facilities, 51 retail licenses, and 49 owned dispensaries over recent years. This allows them to operate in 10 different states, with room to grow. As the legalization of cannabis becomes more widespread, you can expect Cresco Labs to be trailing close behind. At the core of Cresco Labs, their vision remains “to normalize, professionalize, and revolutionize cannabis,” and they seem to be following this vision in their business operations.
Cresco Labs Inc partners with national brands through a consumer-packaged goods strategy. The CPG strategy that Cresco Labs Inc adopts allows them to work with multiple different brands, diversifying their customer portfolio. Among the top brands Cresco Labs works with are Reserve, Remedi, Mindy’s Edibles, Good News, High Supply, and Sunnyside. All of these brands take a different approach to the cannabis industry, allowing Cresco Labs to tackle different areas of consumer demand. Moreover, the wholesale section and retail footprint give Cresco Labs the opportunity to reach new markets with ease. Consumer demand for cannabis has increased along with favorable legislation changes, boosting Cresco Labs to the forefront of up-and-coming companies to watch.
The Current Situation of Cresco Labs
Now onto the important stuff: How is Cresco Labs Inc stock performing as an investment? After their reverse takeover in November 2018, Cresco Labs became a publicly traded company. The reverse takeover approach gave Cresco Labs access to the public market without having to comply with all the initial public offering requirements. Despite promising outlooks, the share price has steadily decreased since peaking in 2021. In February of 2021, the share price reached a max of nearly $16 per share, however, by February of 2022, the share price was bouncing between $6 and $7 per share.
Looking at the history of the Cresco Lab’s share price since inception, both bull and bear phases can be seen. In March of 2020, the trading price of Cresco was a mere $3. A few short months after that, Cresco Labs saw a significant increase, reaching their max share price in February of 2021. Keep in mind that Cresco Labs is a fairly new company on the over-the-counter market, meaning there are few key data points to compare trading price to. However, the trends since inception show a clear ebb and flow movement.
Cresco Labs clearly states on their website that they aren’t expecting to pay a dividend in the near future. Does this deter some investors? Absolutely. Nevertheless, the dividend paying opportunities should not be the only factors considered. Cresco Labs is in a growth industry, meaning any profits that they will likely be directly reinvested back into the company to continue growing. As a result, dividends are on the backburner. The innovative consumer-packaged goods and wholesaler approach may translate to a promising outlook for shareholders. Moreover, the buy low sell high strategy has proven successful for countless investors. If you buy Cresco Labs at the low point, then you may be able to trade the shares for a profit when the stock price moves higher.
Comparison to top industry competitors in the cannabis industry shows that Cresco Labs follows the same ebbs and flows in share price. However, unlike some competitors, Cresco Labs has been generating a net loss each year. However, the company posted positive operating income for the years ending 12/31/2020 and 12/31/2021. Furthermore, operating income grew 57% year over year. Non-operating expenses have been the cause of the net loss each year, with a particularly large charge of over $305,000,000 in 2021 for 'Write-off'. Highlights from Q4 2021 include:
- Revenue of $218 million representing a 34% year-over-year increase
- Wholesale revenue of $101 million
- Same-store-sales increase of 28% year-over-year
- Record cash flow from operations of $38 million
The Future of Cresco Labs Inc
Taking all these factors into consideration, is now the time to invest? Well, looking at historical data, Cresco Lab’s stock price could see increases over the coming weeks and months to follow past trends. Coupling the historical price movement with the announcement of a new brand portfolio out of Florida and improving revenue and profitability, investors have good reasons to believe Cresco Labs will be a long term player in the cannabis industry. Due to the new nature of Cresco as a publicly traded company, there is limited information available to help investors decide on the growth and return on investment outlook. However, plans for expansion support Cresco Lab’s positive outlook for growth and profitability.
Should You Invest in Cresco Labs?
Cresco Labs is one of many potential cannabis investments. If you believe the outlook is good for companies that both produce and distribute cannabis then you might consider Cresco Labs. However, their lack of earnings might be a red flag that pushes you towards other investment options in the industry. Overall, your decision may ultimately be based on how confident you are that this company can be profitable based on their ability to execute on their ambitious plans and produce and distribute at the wholesale and retail levels.