Stocks in the cannabis sector have had a tough time over the course of the past year or so, and many of the best-known stocks have recorded a significant decline. In that regard, Cresco Labs Inc (CSE:CL) (OTCQX:CRLBF) has not been an exception. However, it could well be one of the more compelling long term opportunities for investors at this point in time.
Key Factors to Watch
Investors who are looking to invest in a marijuana stock in June could consider having a closer look at the pros and cons of the Cresco Labs stock. There are certain risks involved with all stocks, and Cresco is no different in that regard.
Hence, it is important for investors to be aware of those. Marijuana is legal in only a few states in the U.S., and the company needs to operate in those states. Additionally, due to interstate restrictions, Cresco might need to set up cultivation and processing facilities in numerous states, thereby driving up costs.
Raising capital is also an issue, and most of the U.S. based multi-state operators have had to liquidate their own stock in order to raise more cash. Thirdly, the company is heavily dependent on the California market, and although it is a lucrative market, the higher levels of taxes on pot products have hurt many operators.
While there are challenges in the U.S. market, there is no doubt that it is the most valuable marijuana market worldwide, and Cresco has become one of the major players in the country. Hence, it could be worthwhile to focus on a company that operates in the vastly superior American market. The acquisition of Origin House is also another major positive for Cresco. It gives the company indoor cultivation facilities and, in addition to that, a well oiled wholesale distribution network. Origin House also holds a cannabis distribution license for the state of California.
Last but not least, the company also has access to capital and has access to a $100 million senior credit facility, which has a mutual option to be doubled if need be. The company has also shown an inclination to enter into a sale-leaseback agreement in order to raise more cash. It should also be noted that Cresco is on target to hit the magical $1 billion sales figure and hence, become the first American multistate operator to do so. Sign Up below for breakout alerts on $CRLBF and other fast-moving stocks.