Is CL stock a buy right now?

Following the company’s first quarter results, Haywood analyst Neal Gilmer has raised his price target on Cresco Labs (Cresco Labs Stock Quote, Chart, News, Analysts, Financials CSE:CL).

On May 15, CL reported its Q1. 2024 results. The company posted Adjusted EBITDA of $53-million on revenue of $184-million.

“I want to thank the Cresco team for taking our learnings from the Year-of-the-Core, making them a part of our DNA and producing such a strong start to 2024, CEO Charles Bachtell said. “The continued development of our teams’ capabilities and our relentless focus on efficient execution is leading to very strong performance across our retail and branded product business resulting in a 10x increase in operating cash flow year-over-year. This is just the start, with upcoming adult use catalysts in Ohio and potential catalysts in Florida and Pennsylvania we have the ability to generate significant operating leverage and additional cash flow going forward.”

Gilmer says this was clearly a positive development.

“Cresco previously reported Q1/24 financial results that were above expectations as the margin improvement achieved in Q4 continued into the most recent quarter,” he wrote. “The operational efficiencies implemented in 2023 are clearly being reflected in the financials as the Company positions itself for adult-use conversion in Ohio and potentially Florida and Pennsylvania.”

In a research update to clients May 21, the analyst maintained his “Buy” rating on CL, but raised his price target on the stock from $3.75 to $4.00, implying a return of 35% at the time of publication.

Gilmer thinks CL will post EBITDA of $200.1-million on revenue of $751.1-million in fiscal 2024. He expects those numbers will improve to EBITDA of $209.5-million on a topline of $783.0-million in fiscal 2025.

“Following our review of the financial statements and considering management’s commentary, we have made some adjustments to our estimates, particularly on the margins given the levels achieved the past two quarters,” he concluded. “Our revenues forecast is relatively unchanged, but the higher margins boost EBTIDA. We are reiterating our Buy recommendation and increasing our target price to C$4.00 (from $3.75) based on a 10x EV/2025 EBITDA multiple discounted by 15%.”