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Stone Fox Capital Advisors is a registered investment advisor founded in 2010. The firm offers portfolio management with a focus on opportunistic stocks providing secular growth trends at an affordable value. An emphasis is placed on fundamental analysis though charts are used for timing entry and exit points. Mark Holder graduated from the University of Tulsa with a double major in accounting & finance. Mark has his Series 65 and is also a CPA. Invest with Stone Fox Capital's model Net Payout Yields portfolio on IB Asset Management as he makes real time trades. The site allows followers to duplicate the model portfolio in their own brokerage accounts. You can find the portfolio and more details here: Follow Mark on twitter: @stonefoxcapital

Cannabis Stock Cresco Labs (CRLBF) Worth Another Look Following Earnings

The stock market doesn’t appear excited with the Q1 results from Cresco Labs (CRLBF), but the numbers were another big step forward for the stock. The U.S. cannabis company is the midst of becoming a major player in the expanding domestic sector without a large market valuation like the Canadian LPs.

Q1 Numbers

For the quarter ending March, Cresco Labs reported that revenues grew 24% sequentially to $21.1 million. Due to constant legalization of new states and expansion into new areas, the most useful metric is sequential growth where the company increased revenues from only $17.0 million in Q4. What happened a year ago isn’t meaningful to investors.

With annualized revenues reaching $100 million, Cresco Labs is becoming a sizable company that is mostly unknown by the stock market. The addition of Origin House (ORHOF) and VidaCann will allow the company to take the next major step forward.

The company forecasts pro-forma revenues of $33.9 million when assuming the revenues of these and other acquisitions that haven’t closed yet.  For its part, Origin House reported Q1 revenues of C$11.2 million or ~$8.3 million. The acquisition to obtain a distribution and delivery platform focused on California accounts for the majority of the additional revenue related to the mergers.

Due to rapid expansion and the pending acquisitions, the operating results aren’t very useful at this point. Cresco Labs did report a small adjusted EBITDA profit so investors don’t have to fret about the company burning a lot of cash during this rampant expansion period.

Strategic Positioning

Cresco Labs is set to distinguish the cannabis company from the market with a focus on entering the most populous markets as opposed to trying to supply every cannabis market whether in the U.S. or Canada or the world. The company now claims access to 11 states with a focus on 7 of the 10 most populous states in the country.

The acquisition of VidaCann gives them access to Florida while Origin House offers a more strategic entry into California. Along with new licenses in Michigan, Cresco Labs has substantial growth opportunities from further entering these major states on top of Q1 revenue mostly accounted for by revenue in 2 states: Illinois and Pennsylvania.

The company predicts that proposed legislation in Illinois for legalizing adult-use cannabis is headed towards approval. The legislation allows Cresco Labs to double retail licensees to 10 dispensaries along with three cultivation facilities providing an immediate access to a much larger market.

The strategic focus on the bigger states should help the company drive efficiencies once all of the mergers are incorporated and new markets like Arizona, Michigan and Ohio are entered. Both deals should close by Q3 so investors are going to need to wait until Q3 and likely Q4 numbers to see how the combined financials workout from an operational standpoint.


The key investor takeaway is that Cresco Labs is quickly swelling into a company with a reasonable revenue goal topping $1 billion by 2021. The stock has a market value in the $2-3 billion range once all of the transactions are complete making an extreme bargain typical of the multi-state operators in the U.S.

To read more on the nitty gritty of what’s going on in the rising cannabis industry, click here.


Disclosure: The author has no positions in Cresco Labs stock.

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