Core markets continue to be the growth drivers for US cannabis company Cresco Labs (Cresco Labs Stock Quote, Chart, News CSE:CL). That\u2019s according to Echelon Capital Markets analyst Andrew Semple, who reviewed Cresco\u2019s latest quarter in a report to clients on Thursday. Chicago-headquartered Cresco Labs is a vertically-integrated multi-state cannabis consumer packaged goods company with product manufacturing, branding and distribution to medical and recreational markets and a national chain of Sunnyside-branded dispensaries. The company reported third quarter financials on Wednesday, featuring $153.3 million in revenue compared to $36.2 million a year earlier and $94.3 million just the quarter before, representing a 63-per-cent sequential growth rate. Adjusted EBITDA was $46.4 million compared to $3.1 million a year ago and $16.5 million for the second quarter. (All figures in US dollars except where noted otherwise.) CEO Charles Bachtell said in the quarterly press release that Cresco entered the Q3 firing on all cylinders in terms of revenue, profitability and cash flow. \u201cWe remain the number one operator in the industry focused on, and delivering results in, the wholesale distribution of branded products,\u201d Bachtell said. \u201cOur retail is outperforming and we are generating substantial operating leverage. The investments we made to support growth are paying off, and as a result our profitability has grown dollar for dollar with gross profit.\u201d Cresco\u2019s cash flow from operations hit a record $17.8 million, while the company ended the quarter with cash and equivalents of $57.7 million. Semple called Cresco\u2019s third quarter a blowout, with beats on revenue ($153.3 million versus Semple\u2019s estimate of $115.3 million and the consensus estimate $116.2 million) and on adjusted EBITDA ($46.4 million versus Semple\u2019s $23.3 million and the consensus $19.6 million). The analyst noted that wholesale revenues grew by 65 per cent sequentially to $90.5 million of the total Q3 revenue, putting Cresco as \u201cthe largest supplier of branded cannabis products in the industry.\u201d \u201cThis is the third consecutive quarter with sequential growth exceeding 40 per cent, and we note that growth accelerated in the third quarter. The principal contributors continue to be the core markets of Illinois, Pennsylvania, and California,\u201d said Semple. The analyst said Cresco\u2019s wholesale and CPG operations benefitted from a nearly full quarter of contribution from increased capacity in Illinois and Pennsylvania along with strong growth from branded products in California, where they were up 66 per cent sequentially, although Semple predicted a more moderate growth rate in the upcoming fourth quarter. \u201cCresco\u2019s developing markets also have a bright outlook for the quarters ahead as new production comes online. In addition, there is the potential to see progress towards adult-use legalization in Cresco\u2019s markets such as Pennsylvania and New York in 2021,\u201d he wrote. Semple said by turning free cash flow-positive at $17.7 million in CFO, Cresco\u2019s operations are showing they\u2019re capable of supporting the company\u2019s organic growth, thus making it less reliant on the capital markets. Semple said Cresco should remain FCF-positive going forward aside from possible exceptions involving abnormally large working capital or capex investments. Looking ahead, the analyst has revised his estimates on the back of the stronger than expected third quarter numbers. He is now calling for 2020 revenue and adjusted EBITDA of $478.2 million and $116.2 million, respectively, and for 2021 revenue and adjusted EBITDA of $838.8 million and $274.6 million, respectively. With the new report, Semple has introduced 2022 figures, estimating revenue and adjusted EBITD of $998.8 million and $343.2 million, respectively. \u201cIn 2021, on the retail side, we look for new store openings in Pennsylvania, a transition to adult-use retail sales in Massachusetts and Arizona and organic same-store-sales growth across the Company\u2019s retail network to generate growth,\u201d Semple wrote. \u201cRegarding our 2021 wholesale outlook (discussed in detail above), we expect new third- party dispensary openings, capacity expansion opportunities in PA, and capacity coming online in developing markets (MA, OH, MI, AZ) to support robust growth ahead. Our revisions to our 2021 EBITDA forecasts are particularly notable (up to $275 million from $172 million), as we recalibrate our model to account for the Company\u2019s higher sales and margin profile,\u201d Semple added. Cresco has a good year in the markets, as well, with the stock currently up 34 per cent for 2020, but Semple thinks CL\u2019s valuation is still \u201cvery reasonable.\u201d \u201cWe believe Cresco\u2019s strengthened positioning in Illinois and Pennsylvania, which we would characterize as some of the most attractive cannabis markets in the world, deserves increased consideration from investors,\u201d the analyst wrote. The analyst estimates Cresco to be currently trading at 12.6x his 2021 EBITDA estimate (16.3x consensus 2021E EBITDA). With the update, Semple has reaffirmed his \u201cBuy\u201d rating and raised his target on Cresco from C$10.50 to C$14.50, which at press time represented a projected one-year return of 22.3 per cent. \u201cThough shares have experienced solid gains recently, our estimates have risen even faster, and the valuation multiple has compressed since we last published (previously 16.3x our 2021 EBITDA estimate). For a vertically integrated business that offers high-margin consumer staples\/medical products, with non-cyclical demand characteristics and a long runway for growth, we continue to see ample room for upside to this multiple and our valuation parameters,\u201d Semple said.