It is hard to put your faith and money in stocks from industries that aren’t profitable yet. Marijuana is one such industry that is still in its nascent stage. With inflation fears gripping the market now, investors are more skeptical of marijuana stocks. But that doesn’t make them bad investments. U.S. marijuana stocks can offer excellent long-term prospects.
One such company is Illinois-based multistate operator (MSO) Cresco Labs (CRLBF 4.20%). The company doesn’t operate a large number of dispensaries nationwide but has some smart strategies up its sleeve that could take it to great heights in the long run. Let’s dig in.
A new merger leads to a new cannabis leader
Mergers and acquisitions (M&A) are pretty common in the cannabis industry. Many U.S. and Canadian cannabis companies have consolidated in the last few years. With the boom in the U.S. state cannabis markets, many MSOs are expanding aggressively and minimizing competition through M&A.
The merger news that shook up the industry this year was Cresco Labs acquiring New York-based peer MSO Columbia Care (CCHWF 4.12%). The deal is estimated at an enterprise value of $2 billion and could close by the fourth quarter of this year. Upon regulatory approvals, Cresco will acquire all the issued and outstanding shares of Columbia Care. Cresco operates just 50 stores nationally now. But with Columbia’s assets in its portfolio, it will own more than 130 dispensaries in 18 states.
A force to be reckoned with
Cresco already plays it smart by targeting limited license markets. Since cannabis is illegal federally, state regulators are selective of the number of licenses they issue and to whom. By targeting these markets, Cresco has garnered a loyal customer base that keeps boosting its financials. Its recent first-quarter results are proof of that.
The first quarter’s revenue surged 20% to $214 million from the prior-year quarter. Cresco also has been consistently profitable from an operational…
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