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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 Thrusts Into the Spotlight

Though Cresco Labs (CRLBF) just reported Q4 results at the end of April, the U.S. multi-state operator (MSO) is running full speed ahead. The U.S. cannabis companies might appear far behind the Canadian industry leaders, but a few MSOs like Cresco Labs are about to gain the market spotlight throughout 2019.

Solid Q4

For Q4, Cresco Labs reported quarterly revenues of $17.0 million for growth of 411% over the same period last year. The company projects that pro-forma revenue was $22.5 million in the quarter for an annual run rate of $90.0 million and we’re still talking about 2018 numbers.

Unlike the Canadian players that have reported large quarterly losses, Cresco Labs has kept operating expenses in check. For the quarter once excluding share-based compensation and costs for stock listing and acquisitions, the company had reasonable operating expenses of $8.7 million.

The end result is that adjusted EBITDA reached $13.7 million, up from a $3.1 million loss last year. Investors are cautioned to not extrapolate too much on these numbers as several major state expansions and acquisitions will completely change the financials by the time 2019 ends.

Big Upside

This revenue run rate doesn’t include substantial mergers like VidaCann in Florida that provides access to operate 35 dispensaries and the large C$1.1 billion deal for Origin House (ORHOF) that opens up the California market. As well, Cresco Labs has made substantial advancements in markets like Illinois, Pennsylvania, Ohio, Michigan and Nevada since the start of the year.

The end result is that analysts forecast Cresco Labs has the deals already on the table that will lead to 2021 revenues topping $1 billion with very high EBITDA margins. In a matter of quarters, the Chicago-based company will go from reported quarterly revenues below $20 million to revenues far in excess of $100 million.

The company will soon have operations in 11 states with 23 facilities and more than 1.5 million square feet of cultivation space. Cresco Labs will have licenses to operate 51 retail dispensaries and access to over 725 dispensaries to sell their brands across the U.S.

The company lists 295 million shares outstanding that places the market cap at nearly $4 billion. The stock has already nearly doubled this year, but the valuation is below a Canadian company like Tilray (TLRY) that only reported $15.5 million in Q4 and lacks the same level of acquisitions in the pipeline for substantial revenue boosts in 2019.


The key investor takeaway is that Cresco Labs is on a fast pace to create a national cannabis brand in the U.S market. The stock rallied about 7% following the Q4 results that beat analyst revenue estimates.

The company has an estimated market valuation in the $4 billion range assuming all of these listed deals close. Cresco Labs is in the race to become the first cannabis company to generate $1 billion in annual revenues. The market has yet to fully appreciate this aspect with the Canadian LPs grabbing all of the headlines with large investors and global expansion plans.

This U.S. company is actually creating a real national brand in the largest cannabis market. The stock market will eventually catch on and reward shareholders with a larger valuation.

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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