Since the beginning of 2019, shares of Cresco Labs (CSE:CL) (OTCQX:CRLBF) have been on an upward trajectory, climbing from $9 CAD in January, to the current price of $16.20 CAD. Two major acquisitions have played a big part here, and now, we could be looking at the US's biggest cannabis play.
With estimations of $1 billion in revenue by 2021, is Cresco Labs about to break out further?
Cresco Labs: $1 Billion by 2021
According to Seeking Alpha, Cresco Labs reported Q3 revenues of $12 million. With a market cap of $616 million, Cresco is a mid-tiered company, and that revenue return is apt.
But now, "it is now on a path to revenues exceeding $1 billion by 2021." How is a relatively small cannabis company going to churn out figures akin to the largest cannabis players?
The reason is two-fold. First, with the pending acquisition of Origin House (CSE:OH), Cresco won't be mid-tiered for much longer... it will be far bigger.
And secondly, the American market in which it operates is far bigger than the Canadian market, thus offering a much greater return.
"The market may not know this company yet, but [Cresco] is on pace to become one of the largest global cannabis players with a relatively cheap market valuation of around $4.1 billion."
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Cresco Labs/Origin House Acquisition
Earlier this month, Cresco announced the deal to buy Origin House. Paying out $820 million USD, the acquisition, effectively, should turn Cresco into a global cannabis behemoth.
The important part of this deal is the access Cresco now has to the California market. Taking over Origin House means a distribution network in the state inclusive of "500 dispensary partners and over 50 brand relationships." This is big because the California market alone is roughly the same size as the entire market in Canada. For perspective, ArcView Market Research has estimated it will near the $8 billion mark by 2022.
In tandem with Cresco Lab's acquisition of VidaCann only a month earlier, the company now has access to "11 states and licenses to 51 retail locations."
Covering Florida, New York, and California, among others, puts Cresco in the heart of the biggest cannabis markets in the US. Investors must consider the potential these shares are offering as a result.
"[Cresco Labs] will easily provide a better opportunity than the Canadian LPs that are looking at global expansions to expand beyond the relatively small market size in Canada."
What do you think? Do US companies offer investors a much greater opportunity than Canadian?
Is Cresco Labs on your radar?
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