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Cresco Labs: Analysts Revise 2020 Estimates after Earnings

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Cresco Labs (OTCMKTS:CRLBF) is one of the US cannabis companies that has been consistently performing well despite the marijuana industry’s struggles. The company started fiscal 2020 strong with an impressive first quarter. Increased cannabis demand amid the COVID-19 pandemic led to higher marijuana sales across US states where it’s legal. The spike in sales drove the company’s revenue and profitability. The stock gained close to 35% in May. Let’s take a look at what analysts expect from the company for upcoming quarters and fiscal 2020.

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Cresco Labs’ strong performance continues

Cresco Labs is the only cannabis company that has consistently reported good results despite the sector’s struggles. While Canadian peers have been profitable, the company recorded another strong start to fiscal 2020 with impressive first-quarter results. The revenue showed a drastic 215.1% YoY (year-over-year) increase to $66.4 million in the first quarter driven by growth in Illinois, Pennsylvania, and California. Meanwhile, the adjusted EBITDA was higher at $3.2 million compared to a loss of $6.1 million in the first quarter of fiscal 2019. The adjusted EBITDA also beat analysts’ estimates of $1.3 million. Cresco Labs continues with its expansion plans. Just before the earnings, the company announced expansion plans to strengthen its position in key US markets by buying four additional Ohio dispensaries. To learn more, read Cresco Labs’ Q1 Earnings: Dazzling Growth amid COVID-19.

Analysts revise estimates for Cresco Labs after earnings

Analysts expect Cresco’s revenue to rise more in the coming quarters. The revenue could be around $75.5 million in the second quarter, $97.2 million in the third quarter, and $124.3 million in the fourth quarter. The company’s profitability could also increase in the coming quarters. Likewise, the EBITDA could be around $4.7 million in the second quarter, $14.6 million in the third quarter, and $28.8 million in the fourth quarter.

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Let’s take a look at the month-over-month revisions. For fiscal 2020, analysts reduced the revenue estimates from $374 million in May to $362 million in June. Analysts reduced the revenue estimates from $656 million in May to $653 million for fiscal 2021. For fiscal 2022, analysts expect Cresco Labs to be close to the $1 billion revenue mark. They increased the revenue estimates from $860 million in May to $963 million in June. The increase might be due to more US states legalizing marijuana by then with the full development of the US CBD market.

For fiscal 2020, analysts reduced the EBITDA profit. The growing cannabis business in the US could be the driving factor behind profitability. However, analysts slightly lowered the profit estimate from $52 million in May to $46 million. Analysts expect the EBITDA profit to be around $180 million compared to an estimate of $182 million in May. For fiscal 2022, analysts estimate the EBITDA profit to be around $252 million compared to an estimate of $259 million in May.

Stock performance

Around 12 analysts cover Cresco Labs stock after the earnings. Overall, they’re bullish on the stock. Two analysts recommend a “strong-buy,” while ten recommend a “buy.” The average target price for the stock remains the same after the earnings at 11.05 Canadian dollars, which is 76% higher than the current trading price. Cresco Labs stock closed at 6.27 Canadian dollars on Tuesday.

MedMen (OTCMKTS:MMNFF) has a consensus “hold” rating on the stock. The company’s third-quarter earnings were slightly better than expected. However, the future looks uncertain. MedMen temporarily closed all of its stores nationwide due to the protests. To learn more, read MedMen Temporarily Closes Stores amid Protests. 

Curaleaf (OTCMKTS:CURLF), Green Thumb Industries, and Charlotte’s Web also reported good quarterly results. Meanwhile, Canadian peer Canopy Growth’s (NYSE:CGC)(TSE:WEED) fourth-quarter results disappointed investors and analysts. Analysts are bearish after the company’s results.

In May, Cresco Labs stock gained 34.7%, while MedMen gained 35%. Canopy Growth, Green Thumb, Curaleaf, and Charlotte’s Web’s stock gained 14%, 50%, 37%, and 5.0% at the same time.

Cresco Labs stock is trading 2.5% higher, while MedMen is up 15.5%. Canopy Growth, Green Thumb, Curaleaf, and Charlotte’s Web’s stock gained 3.0%, 2.3%, and 5.0% at the same time.

Read Will Marijuana Stocks Continue to Surge in June? to learn more.

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