Cresco Labs (OTCMKTS:CRLBF), one of the most interesting US cannabis stocks, is trading 1.8% higher as of 9:44 AM ET today. The company announced that it received a provisional processing license by the state of Ohio. Cresco Labs already operates four dispensaries in Ohio. The company reported stellar results for the first quarter of fiscal 2020 last month, which drove its stock price higher. Let’s take a look at how the processing license in Ohio will benefit the company.
Cresco Labs receives Ohio provisional processing license
The Ohio provisional processing license allows Cresco Labs to extract oils and manufacture cannabis products. The company can sell all of its House of Brands products in Ohio. The products include vape pens, concentrates, and edibles for medical patients. There’s a huge demand for Cannabis 2.0 products in the US, which is evident from the rise in cannabis sales since the pandemic started.
Talking about the license, Charlie Bachtell, the CEO and co-founder of Cresco Labs, said, “With the grant of this License, our operations are now fully vertically integrated in Ohio. The expansion of our cultivation and production facility, along with the closing of four additional operating dispensaries, sets up an exciting year for Cresco Labs in Ohio in 2021.”
Vertical integration allows Cresco Labs to control its supply chain. The company has control over its raw materials, suppliers, distributors, and retail locations. The control prevents the company from any factors that could impact its supply chain, like the COVID-19 crisis. Many cannabis companies said that the pandemic impacted their supply chains, which also impacted their revenue. In comparison, Cresco Labs reported a stellar first quarter. The company recorded dazzling revenue growth of 215% YoY (year-over-year) to $66.4 million in the first quarter. The company attributed the revenue growth to rising sales in Illinois and Pennsylvania and operational improvements in California. Cresco Labs also reported positive profitability of $3.2 million compared to a loss of $6.1 million in the first quarter of fiscal 2019.
Expansion in Ohio
Just before the first-quarter results, Cresco Labs announced that it will acquire four additional Ohio dispensaries with the help of Verdant Creations. The deal needs approval from the Ohio Board of Pharmacy. Notably, the deal could close by the fourth quarter of 2020. Once approved, Cresco Labs will run five dispensaries in the state and hold a strong footprint. An expansion in the Ohio market with a wide range of Cannabis 2.0 products will likely drive the company’s revenue. Ohio is still working to legalize recreational cannabis in the state.
So far, most US cannabis companies have done well. Green Thumb Industries (OTCMKTS:GTBIF), Curaleaf (OTCMKTS:CURLF), and Charlotte’s Web (OTCMKTS:CWBHF) also performed well in their first quarter. Green Thumb Industries, Curaleaf, and Charlotte’s Web stocks gained 49.7%, 37%, and 26%, respectively, in May. Meanwhile, the Horizons Marijuana Life Sciences ETF gained 20% in May.
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