Cresco Labs (CRLBF) stock has fallen by 12 percent in the last five trading sessions. The stock is down significantly after the marijuana company announced its fourth-quarter earnings results on March 25. However, the stock is up 22 percent YTD and 300 percent over the last year. What’s the forecast for CRLBF stock in 2021? Is it a good stock to buy or should investors stay away?
Founded in 2013, Cresco Labs is a vertically integrated cannabis and medical marijuana company. The company’s brands include Reserve, Remedi, Mindy’s Edibles, Good News, High Supply, and Wonder Wellness Co.
Cresco Labs' competitors
Cresco Labs is one of the strongest players in the marijuana space compared to its Canadian peers. In the fourth quarter, the company reported sales of $162.3 million, which represents a growth of 292 percent YoY and 5.9 percent sequentially.
Green Thumb Industries is also giving Cresco Labs a tough fight. Green Thumb Industries is set to open its 56th retail store in Pennsylvania on March 31. The company reported a YoY increase of 133.8 percent in its revenue growth in the fourth quarter. Meanwhile, Aurora Cannabis and Canopy Growth reported revenue growth of 11 percent and 23 percent YoY in the December ended quarter, respectively.
Is Cresco Labs a good marijuana stock?
Cresco Labs is a good marijuana stock. It has rapidly become one of the biggest marijuana companies in the U.S. Currently, the company operates 24 dispensaries in nine states. Cresco Labs has 15 processing and manufacturing plants and almost 29 marijuana retail store licenses. The company has already achieved high sales growth and positive EBITDA.
Cresco's growth outlook could be much brighter soon. After the U.S. presidential election in November 2020, a total of 15 states and the District of Columbia have legalized recreational marijuana use, while 35 states and D.C. allow marijuana use for medical purposes. New Jersey and Virginia have also voted to legalize the recreational use of marijuana.
California, the oldest and largest legal marijuana market in the U.S., reported sales of $4.4 billion in 2020 compared to $1.4 billion in 2018. Cresco is reaping the benefits of its strategy to invest in major markets like California and Illinois.
CRLBF’s stock forecast
According to estimates compiled by TipRanks, analysts' consensus target price is $20.12 for CRLBF stock, which is 67.1 percent above its current price. Among the eight analysts tracking CRLBF, seven recommend a buy and one recommends a hold. None of the analysts recommend a sell. The highest target price of $28.59 is 137 percent above the stock's current price, while the lowest target price of $14.30 is 18.8 percent above the stock's current price. On March 26, Stifel reduced its target price on CRLBF stock to $34 from $36.
CRLBF stock looks like a good buy.
CRLBF trades at an NTM EV-to-revenue multiple of 5.1x, which looks attractive compared to other marijuana stocks. Aurora Cannabis and Canopy Growth are trading at an NTM EV-to-revenue multiples of 7.4x and 19.5x, respectively.
Cresco Labs' top line could get a boost in the next decade since marijuana use might get legalized at the federal level. The global legal marijuana market is expected to reach $84 billion by 2028, which represents a growth of 241 percent from $24.6 billion in 2020. CRLBF stock looks like a buy based on the valuations and strong growth prospects.