California Cannabis Stock on Sale by 45%

State of California

After getting off to a slow start, the California legal cannabis industry is thriving.

The latest evidence?

California just revealed that it collected $817 million in legal cannabis taxes in fiscal 2020-2021, up an eye-popping 55% from the previous year. Tax revenue for the fourth quarter totaled $212 million, topping the 3-month average since legalization rolled out.

This is the latest sales and tax data available on California’s cannabis industry. It demonstrates that the California cannabis industry is on fire.

California’s Cannabis Industry is Just Budding

More importantly, the California cannabis industry is still in its early stages and should continue to grow at an impressive pace for many years. The industry is set to benefit from a wave of new retail and cultivation permits that are being handed out in 2021 and 2022.

Here are some more details from mjbizdaily.com.

Scores of cities and counties are preparing to issue marijuana business permits or are writing ordinances in order to award licenses, according to Los Angeles-based consultant Hirsh Jain, the founder of Ananda Strategy.

By Jain’s count, 18 cities across California already have begun handing out retail permits since the November election, in which more than 30 local jurisdictions approved pro-marijuana business ballot measures. And, he said, at least another 18 jurisdictions are poised to do the same.

“There are 745 dispensaries in California right now,” Jain said (not including licensed delivery services or microbusinesses). “On a per-capita basis, there should be between 4,000 and 5,000.” He said he believes that will become a reality, but not until about 2025.

One of the best ways to play the California cannabis market is with one of the largest cannabis companies in the state.

Cresco Labs (CSE: CRLB, OTC: CRLBF) is an early leader in the high-growth, U.S. cannabis industry. Headquartered in Chicago, Illinois, Cresco has a market cap of $2.5 billion and one of the best national footprints in the industry.

  • 10 states with operations
  • 18 cultivation and production facilities
  • 44 retail licenses
  • 37 owned dispensaries

While Cresco is a broad play on the U.S. cannabis industry, it is also a targeted play on California.

Back in January of 2020, Cresco became one of the largest cannabis companies in the state through its acquisition of Origin House for around $400 million.

When the deal closed in January of 2020, Origin House was wholesaling its cannabis products into 575 California cannabis dispensaries, which was about 65% of retail locations at the time.

More recently, Cresco continues to expand in California and gain market share. Cresco’s California revenue more than doubled from Q1 to Q4 in 2020.

Cresco Labs Down 45% from the 52-Week High

After surging higher in 2020, Cresco shares have been weak in 2021 and are currently down about 45% from the 52-week high.

2-Year Chart Cresco Labs (CSE: CRLB, OTC: CRLBF)

Despite this weakness, I remain optimistic about Cresco Labs and expect strong sales to drive shares higher in the long run.

The Big Picture on California and Cresco Labs

The California cannabis market is thriving as the state issues more retail and cultivation permits.

The market should continue to grow at an impressive clip for the next couple of years and Cresco Labs is in a position to capitalize. Cresco is one of the biggest players in the state after closing on a $400 million acquisition in early 2020.

Despite Cresco’s sharp drops from the 52-week high, we expect strong sales growth to support shares in the long run.

*Author Michael Vodicka owns shares of Cresco Labs (CRLBF).


About the Author & Cannabis Stock Trades

Michael Vodicka is an equity analyst with more than 20 years of experience trading and investing. His research has been featured in some of the industry’s most respected publications. He has been investing and leading investors in the cannabis sector since 2013.

Michael Vodicka

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