Cresco Labs (Cresco Labs News, Stock Quote, Chart CSE:CL) acquisition targets are appealing, but investors should not sleep on the company’s core assets.
That’s the message from Beacon Securities analyst Russell Stanley, who on Thursday reiterated his “Buy” rating and one-year price target of $24.00 on the pot stock, representing a return of 91 per cent at the time of publication.
While much attention is paid to Cresco’s acquisition pipeline, we believe the company’s current core markets –Illinois and Pennsylvania – warrant some renewed attention from investors,” the analyst says. “Last month, Illinois became the only state to successfully legalize a comprehensive adult-use program via the legislature (efforts in several other states, notably New York and New Jersey, fell short). CL will thus be allowed to double its dispensary footprint from its current legal maximum of 5, with all 10 locations allowed to serve both the adult-use and medical markets. CL will also be uniquely positioned to build on its 28% share of the wholesale market, given it already has three cultivation/manufacturing facilities operating. In Pennsylvania, one of the fastest growing medical markets in the US, Cresco already has a 25%+ share of the wholesale market, with three retail locations open and another three under license. Finally, management expects to begin wholesale operations in Michigan later this year. MI has the 2nd largest registered patient base in the US (after California), and it recently released emergency (i.e. temporary) rules governing its adultuse market, which should open in early 2020.”
Stanley thinks Cresco will post EBITDA Net NCI of negative $1000 on revenue of $145-million in fiscal 2019. He expects those numbers will improve to EBITDA of positive $209-million on a topline of $732-million the following year.