Cresco Analyst Says President's Resignation Part Of 'Natural Progression' For Cannabis Company

Over the last six months, Cresco Labs Inc CRLBF shares have fallen 55.83%.

On Tuesday, the company announced the resignation of its president and co-founder Joe Caltabiano, and shares closed the market session 9.59% lower.

The Cresco Labs Analyst

Cantor Fitzgerald analyst Pablo Zuanic reiterated an Overweight rating on Cresco with a $12 price target. 

The Cresco Labs Thesis

Caltabiano’s resignation is part of the “natural progression of co-founders/serial entrepreneurs stepping aside and letting more professional management take the reins,” Zuanic said in a Wednesday note. (See his track record here.)

This will boost the company’s validity in connection to its Origin House and Tryke acquisitions and in supporting its expansion efforts in Illinois and Pennsylvania, the analyst said. 

Zuanic named several key factors for Cresco investors to watch this year. 

First, the integration of Origin House, which will dilute margins and enable Cresco to widen its distribution footprint across California, the analyst said. It "will also expand capacity to allow for partial backwards integration at OH,” he said. 

Second, the company’s entrance into other states through acquisitions or organic expansions.

“Yes, integration risk is part of the story with recent acquisitions (esp OH and Tryke) more than doubling the sales base,” Zuanic said. 

Cresco is better-positioned than Curaleaf Holdings Inc CURLF, the analyst said.

Cantor "conservatively [values] Cresco at 5x our sales estimates, in line with our valuation of Curaleaf; this approach yields a 12 mo price of ~$8.70," he said. 

CRLBF Price Action

Cresco’s shares were trading 3.67% higher at $4.24 at the time of publication Wednesday. 

Photo courtesy of Cresco Labs.