In a June 2 research note, Haywood Capital Markets analyst Neal Gilmer reiterated a “Buy” rating on Cresco Labs (Cresco Labs Stock Quote, Chart, News, Analysts, Financials CSE:CL) but lowered his price target to $2.00 from $2.30, citing revised estimates following the company’s first-quarter results.
Gilmer said the adjustment reflects slightly lower expected revenue in Q2/25 and updated gross margin guidance, which management expects to rebound modestly in the second half of 2025 and into 2026. He noted that Illinois’s seed-to-sale system conversion is expected to temporarily reduce revenue and impact margins. The revised target is based on a 7x EV/2026 EBITDA multiple, discounted by 15%.
“Cresco continues to take positive steps towards optimizing its footprint and product portfolio, driving efficiencies across its operations,” Gilmer said. “Management has done a good job of reducing operating costs, which supports improved EBITDA as well as cash from operations.”
He said Cresco Labs’ Q1 fiscal 2025 results were generally in line with expectations, with management prioritizing cash generation and balance sheet improvement over short-term revenue growth.
“This was evident in 2024 as the company generated $132M in operating cash flow that year compared to the $59M generated in 2023,” Gilmer said. “That trend continued into Q1/25 with $30.5M in operating cash flow. Cresco’s vertically integrated operations in markets such as Ohio, Pennsylvania, and Florida are expected to drive growth into 2025 and beyond alongside new markets like Kentucky.”
Gilmer said Cresco is well-positioned in U.S. states with growth potential in 2025 and 2026. The company has its largest presence in Illinois and significant exposure to the medical cannabis markets in Ohio, Florida and Pennsylvania.
“Cresco has taken a consumer-packaged goods approach to the market and has developed a house of brands designed to meet all consumer segments,” he said. “The company has built brand awareness in core markets and introduces them across the states that it has operations in, building nationally recognized brands.”
Gilmer expects Cresco Labs to generate $144.8-million in Adjusted EBITDA on $671.8-million in revenue for fiscal 2025. He projects that those figures will improve to $167.5-million in EBITDA on $701.6-million in revenue in fiscal 2026.
Cresco Labs is a U.S.-based multi-state cannabis operator headquartered in Chicago, with operations in eight states. It runs several cultivation and processing facilities and 73 Sunnyside-branded dispensaries. The company focuses on branded products and distribution, offering a portfolio that includes Cresco, Reserve, FloraCal, Mindy’s, Remedi, Good News, High Supply and others.
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About The Author /
Rod Weatherbie is a journalist based in Prince Edward Island. Since 2004, he has written extensively about the Canadian property and casualty insurance landscape. He was also a founder and contributing editor for a Toronto-based arts website and a PEI-based food magazine. His fiction and poetry have been featured in The Fiddlehead, The Antigonish Review, and Juniper.
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