Investing in marijuana stocks now might be the smartest decision you could make. The industry is still a nascent one with tremendous space to grow both nationally and internationally. U.S. cannabis stocks could…
get a boost once the drug is federally legalized, a development many see as inevitable. In anticipation of that day, the marijuana sector provides a fruitful opportunity for investors to grow their wealth five to 10 years down the line (and beyond!).
That said, it is a common myth that you need a truckload of money to invest in the stock market. Starting small is easier and safer. If you have $1,000 left after paying all your bills, consider growth stocks like Illinois-based multi-state operator and pure-play cannabis company Cresco Labs (OTC:CRLBF), which saw an outstanding revenue jump of 271% year over year in 2020 to reach $476 million.
The business had a strong start to 2021, as well. The company is not profitable yet, but it has consistently reported positive earnings before interest, tax, depreciation, and amortization (EBITDA). It is set to report its second-quarter results (ended June 30) on Aug. 13. Analysts expect this quarter to be profitable. Here are three reasons to consider buying the stock on the dip now.
1. Smart growth strategies could play out well this year for Cresco
After an outstanding 2020, Cresco started 2021 on a strong note with 168% growth in revenue for Q1 (which ended March 31) from the year-ago period. The company’s strength is its wholesale segment, which contributes 54% of total revenue. This segment grew 151% year over year to $96 million, while retail revenue also saw growth of 193% to $83 million from just 24 stores. Retail revenue includes medical and recreational cannabis sales in the U.S. and vape sales in Canada. The company has added to its operations since that report and now operates 33 stores in 10 U.S. states.
Even though the revenue growth didn’t manage to bring in profits, it did provide the company with another quarter of positive EBITDA. This came in at $35 million, up from $16.5 million in the year-ago period.
A few acquisitions that Cresco Labs completed in the first quarter could contribute to Q2 revenue. One, Verdant Creations, allows the company access to four dispensaries in Ohio, bringing its total to five in the state. It also acquired Massachusetts dispensary chain Cultivate Processing, which operates two dispensaries in that state with plans to open a third soon.
In addition, Cresco completed the acquisition of Bluma Wellness, a vertically integrated operator in Florida, in April. This acquisition marked its entry into the Sunshine State, where hometown player Trulieve Cannabis (OTC:TCNNF) is dominating the market with 87 operating dispensaries and a 50% market share. Bluma operates eight dispensaries in the state with plans to open seven more. Florida hasn’t legalized recreational cannabis, but establishing a strong footing now could be beneficial for Cresco in the longer term.
2. Cresco’s second quarter could bring in profits
Another reason investors shy away from cannabis stocks is because most of them are not profitable yet — Canadian stocks in particular. However, Wall Street analysts expect Cresco Labs’ bottom line to improve this quarter. According to estimates, Cresco Labs could report a triple-digit revenue jump of 106% year over year to $194 million. For full-year 2021, analysts expect revenue to be…
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