Better Marijuana Stock: Cresco Labs vs. Canopy Growth

Cannabis is illegal at the federal level in the U.S. That makes it difficult for Canadian companies to expand in the market. But that hasn’t stopped domestic players from spreading their roots. Even with a limited legal market…

U.S. cannabis companies are thriving as state legalization keeps ramping up. Among them, Illinois-based Cresco Labs (OTC:CRLBF), with a market cap of $2.1 billion, is shining its way through the list of top contenders in the cannabis space.

Even though Canopy Growth (NASDAQ:CGC) is a strong company and also bigger (with a market cap of $5.3 billion), there are other factors to consider before investing. Let’s take a look at which pot stock is the right one to put your money in at the moment.

The case for Cresco Labs

With 40 dispensaries across 10 states, this pot stock is grabbing all the attention. This vertically integrated multistate operator has been consistently growing revenues by targeting key cannabis markets like Pennsylvania, Illinois, and Ohio that offer limited licenses. These states put a ceiling on how many licenses they issue and how many stores can operate in a state. This has allowed Cresco to build a loyal customer base for its popular brands like Mindy’s Edibles, High Supply, and more, which contributed to its $101 million just from retail revenue in its second quarter ended June 30. Illinois, a rather new recreational market (legalization happened in January 2020), has been seeing exceptional sales. 

The company’s total revenue came in at $210 million, a whopping 123% year-over-year increase. Cresco also reported a net profit of $2.7 million in the second quarter, versus the huge $41 million loss in the year-ago period. Cresco expects to generate $1 billion in total revenue by the end of 2021, with gross profit margins crossing 50% in the next two quarters.

We will know more of Cresco’s plan for this year and beyond when it reports its third-quarter results on Nov. 11. 

The case for Canopy Growth

Canopy Growth, a reputed name in the cannabis space, is making investors skeptical because of its delay in achieving profitability. The company is growing revenue, but the growth isn’t sufficient to bring in profits. Net revenue in its first quarter (ended June 30) came in at 136 million Canadian dollars, a 23% increase year over year. The company saw strong growth in the Canadian recreational and medical markets. Canopy’s wide array of cannabis derivatives (additional recreational products that Canada legalized in October 2019) has been a hit with consumers, driving recreational sales.

Financially, Canopy is in a safe position for now mostly because…

 

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