Cresco Labs: Cantor Lowers Price Target To $12.65

On September 3, Cresco Labs (CSE: CL) announced that they closed their acquisition of Cultivate, a vertically integrated Massachusetts operator that was acquired for $90 million, plus a potential $68 million earn-out. Cultivate currently operates roughly 42,000 square feet of active canopy with an additional 20,000 square feet of canopy available for build-out. The company has 3 open dispensaries.

Cresco Labs currently has 17 analysts covering the name with an average 12-month price target of $23.97, or a 104% upside. Out of the 17 analysts, 5 have strong buy ratings, 11 have buy ratings and 1 analyst has a hold rating. The street high sits at $34 from Stifel-GMP while the lowest comes in at $18.

Cantor Fitzgerald sent out a note last week updating their model, and with that lowering their 12-month price target to $12.65 from $13.50 while reiterating their overweight rating. On the Cultivate deal, Cantor says that they are factoring in an increase of $9 million in revenue since the deal closed earlier than expected.

Cantor says that the company has a strong presence in Illinois and Pennsylvania, with them being a #1 or #2 retailer/wholesaler in those states respectively, but according to Cantor’s channel checks, there is softness in the growth rate for Pennsylvania, California, and Illinois.

Cantor came to the price target by placing 15% on top of the MSO average 2022 EBITDA multiple. This 15% premium to the multiple has been applied for a multitude of reasons, with the biggest being “rec optionality in several states (NY and others), and a more established track record.”

In Illinois, recreational sales dropped 5% month over month, but are up 8% over the second quarter average. This is below the 24% average that the second quarter saw. In Pennslyvania, Headset data shows a 7% month over month drop, and in California, data shows a lower 2% month over month drop.

Information for this briefing was found via Sedar and Refinitiv. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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