Cresco Labs keeps “Buy” rating at Beacon

Its third quarter results are in the books and Beacon Securities analyst Russell Stanley still thinks there is money to be made on Cresco Labs (Cresco Labs Stock Quote, Chart, News, Analysts, Financials CSE:CL).

On November 8, CL reported its Q3, 2024 results. The company posted Adjusted EBITDA of $51.0-million on revenue of $179.8-million, down from $184.4-million in the same period a year prior.

“Our focus remains the same, win in strategic markets with a brand portfolio consumers love, provide best-in-class retail operations and maintain a relentless pursuit of financial strength. Our Q3 results underline the success of this strategy with $180-million in revenue at 29-per-cent adjusted EBITDA margin and, most importantly, $49-million of operating cash flow, our highest ever,” said CEO Charlie Bachtell. “So far this year, we’ve generated $103-million in operating cash flow, enabling us to reinvest in our core, and to explore new markets and growth verticals, all while improving our balance sheet and paying down debt. While we’re disappointed that the Florida initiative didn’t reach the super majority threshold it needed to pass, we still saw substantial bipartisan majority support at 56 per cent for cannabis legalization. For the first time ever, we had two presidential candidates that both supported broad federal cannabis reform. We look forward to working with the incoming administration to follow through on its commitment to developing a commonsense approach to cannabis laws including the passage of SAFE banking, rescheduling and the fact that no one should be arrested for personal cannabis use.”

Stanley summarized a quarter he described as “light” but reminded that the stock is still cheap compared to its peers.

“Cresco recently reported Q3 results that were light v. consensus though net neutral relative to our forecast. Cresco now trades at 5.0x our F2025 adj EBITDA forecast, representing a 12% discount to the 5.8x average amongst the other four major MSOs,” he wrote.

In a research update to clients November 12, Stanley maintained his “Buy” rating and price target of $6.00 on Cresco Labs, impying a return of 266% at the time of publication.

The analyst thinks CL will post Adjusted EBITDA of $202.0-million on revenue of $720-million in fiscal 2024. He expects those numbers will improve to Adjusted EBITDA of $205-million on a topline of $732-million in fiscal 2025.