CRLBF Is a Solid Pot Stock
“If you want a piece of the action in the fast-growing cannabis industry, Cresco Labs Inc (OTCMKTS:CRLBF, CNSX:CL) stock deserves a serious look.”
That’s what I told readers of Profit Confidential about Cresco Labs stock earlier this year. In that piece, I explained why the Chicago-based pot company could be offering a big opportunity.
When that article was published on March 13, CRBLF stock was trading at $2.72 per share. Today, it’s at $7.00, marking a gain of 157%. The best part is, the opportunity might not be over just yet.
Despite Cresco Labs Inc trading over the counter in the U.S. (it’s listed on the Canadian Securities Exchange), the company could churn out growth rates that allow investors to keep liking Cresco Labs stock.
You see, even though the company is not listed on a major U.S. stock exchange, it is actually one of the larger vertically-integrated multi-state cannabis operators in the country, with a presence in nine states.
According to the company’s latest investor presentation, Cresco Labs has 15 production facilities, 29 retail licenses, and 18 owned dispensaries. (Source: “Cresco Labs,” Cresco Labs Inc, last accessed August 12, 2020.)
Many of the company’s brands, such as “Cresco,” “High Supply,” “Mindy’s Chef Led Artisanal Edibles,” and “Remidi,” are well-known among pot consumers nationwide. More than 770 dispensaries carry Cresco Labs’ products, helping the company reach 58% of the U.S. addressable market.
One of the main reasons I liked CRLBF stock back in March was the growth potential of the legal cannabis market in Illinois. In the U.S., there are 11 states and D.C. where pot is legal for recreational use, and Illinois was the latest state to join the club.
Sales of recreational pot began in Illinois on January 1, 2020, and the market has been booming.
In July, Illinois’s recreational marijuana sales totaled almost $60.0 million, representing a 28% increase from June’s $47.6 million. Note that, since February, the state’s recreational pot sales have increased every single month. (Source: “Illinois Marijuana Sales Break Another Record, With $61 Million Sold In July,” CBS Chicago, August 3, 2020.)
In other words, while many businesses were struggling due to the impact from the COVID-19 pandemic, the legal cannabis industry in Illinois was firing on all cylinders.
And as I expected, Cresco Labs Inc was right there to capitalize on the surging demand.
Earlier in August, the company announced the opening of a new dispensary, “Sunnyside Shaumburg,” marking its ninth dispensary in Illinois. (Source: “Cresco Labs Announces the Opening of Sunnyside Schaumburg, Creating the Largest Retail and Cultivation Footprint in Illinois,” Cresco Labs Inc, August 6, 2020.)
The new dispensary is located next to the Woodfield Mall, which is the largest shopping mall in the state, with more than 27 million visitors annually.
With this new dispensary opening, Cresco Labs now has the largest retail footprint in the state of Illinois. And it’s not just the number of stores that make the company stand out.
According to Cresco’s co-founder and Chief Executive Officer Charlie Bachtell, the company is “taking more share both at an individual store level and by opening more stores than any other operator in the state.” (Source: Ibid.)
Since January, Cresco Labs Inc’s retail share of Illinois’ recreational cannabis market has almost doubled.
And remember when I said that Cresco is vertically integrated? Well, other than being the leader in retail, the company also has the largest cannabis cultivation footprint in Illinois. Furthermore, Cresco has a growing wholesale distribution business with sales to every dispensary across the state.
Now, keep in mind that Illinois is still a very new pot market, and judging by the statistics, its supply is yet to catch up with demand. The state should continue to act as a catalyst for Cresco Labs Inc, to say the least.
While the pot company is yet to report second-quarter results at the time of this writing, we can already see how Illinois has boosted Cresco’s financials from its first-quarter earnings report.
In the first quarter of 2020, the company generated $66.4 million of revenue, a 60% increase sequentially. Cresco attributed the top-line growth to “increased cultivation and retail efficiency in Illinois and Pennsylvania, along with operational improvements in California.” (Source: “Cresco Labs Announces First Quarter 2020 Results,” Cresco Labs Inc, May 28, 2020.)
Cresco Labs Inc (OTCMKTS:CRLBF) Stock Chart
Chart courtesy of StockCharts.com
The chart above shows that Cresco Labs stock has skyrocketed since I told investors to check out the company. However, I should point out that pot stocks are very, very volatile, and even if the upward momentum is strong, they can still have big swings to either side.
Ultimately, I believe that fundamentals matter. And although the pot industry still faces uncertainty, Cresco Labs Inc could come out as one of the winners in the long run.