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Forget Bitcoin: This Cannabis Stock Is a Better Buy

By Keith Speights - Updated Feb 12, 2021 at 6:55AM

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There are several reasons why.

It seems as if everybody and their mother has jumped aboard the Bitcoin (BTC 0.95%) bandwagon. From big companies to small investors, the cryptocurrency is sizzling-hot right now.

Can Bitcoin go even higher? Sure. However, I don't think it's the best place for investors to park their cash. There are alternatives that have more solid prospects. Forget Bitcoin -- there's a cannabis stock that's a better buy. That stock is Cresco Labs (CRLBF 2.76%).

Red Bitcoin symbol in a trash can.

Image source: Getty Images.

A leader in the U.S. cannabis industry

Cresco isn't a household name like Bitcoin is. However, the company ranks as one of the top leaders in the U.S. cannabis industry.

When Cresco was founded in 2013, cannabis wasn't nearly as accepted throughout the country as it is now. Today, the company operates in nine states. These include Cresco's home state of Illinois and the biggest legal cannabis market of all -- California. Combined, the markets that the company serves comprise 60% of the current total addressable market for cannabis in the U.S. 

Pick a key component of the cannabis supply chain, and Cresco is probably in it. The company is a major cannabis producer, with 604,000 square feet of cultivation space. It's the leading cannabis wholesaler of branded products in the cannabis industry. Cresco owns and operates 19 retail cannabis stores. A total of more than 830 dispensaries nationwide carry its products. 

The company continues to deliver impressive growth. In the third quarter of 2020, Cresco generated record revenue of over $153 million, up 63% from the previous quarter. That marked the multistate cannabis operator's third consecutive quarter of revenue growth of more than 40%.

Cresco is already profitable. In Q3, it reported net income of $4.9 million. The company also posted all-time high adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $46.4 million. 

Multiple potential catalysts on the way

Even Bitcoin fans would probably admit that its price is likely to fluctuate wildly. While the cryptocurrency could very well move higher this year, there aren't any clear milestones to look forward to that would cause upward momentum. Cresco, on the other hand, has multiple potential catalysts on the way.

Some of these catalysts are rock-solid. For example, Cresco recently won a license in Arizona to sell recreational marijuana. The company already runs medical cannabis dispensaries in the state. Cresco should be on a path to become one of the leaders in Arizona's recreational pot market.

Other potential catalysts aren't slam dunks just yet, but should be good bets. New York appears to be headed toward legalizing recreational marijuana this year. Cresco currently operates in the big state's medical cannabis market. Its shares would almost certainly pop if New York were to legalize recreational pot as well.

Perhaps the biggest news for Cresco, though, might come at the national level. With Democrats in control of both chambers of the U.S. Congress and Joe Biden in the White House, the likelihood of major cannabis reform seems more likely than ever.

There's a good chance that marijuana will be decriminalized at the federal level. Although that's not the same thing as full marijuana legalization throughout the U.S., it would make it federally permissible for individual states to enforce their own cannabis laws. Most important, decriminalization would set the stage for Cresco to list its shares on a major U.S. stock exchange -- making its stock more widely available to many more investors.

Better than Bitcoin

It's practically impossible to know what Bitcoin should be worth. But with Cresco, there's a really strong case to be made that its stock should be worth more than its current price. Cresco's Q3 revenue was in the same ballpark as three of its major U.S. rivals. However, its market cap is currently between 38% and 71% lower than the market caps of these other companies. 

Cresco's shares have soared more than 60% year to date. By comparison, Bitcoin is up around 50%. Cresco has been better than Bitcoin in 2021 thus far. I think it will be better than Bitcoin going forward, too.

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Stocks Mentioned

Cresco Labs Inc. Stock Quote
Cresco Labs Inc.
$4.09 (2.76%) $0.11
Bitcoin Stock Quote
$29,620.70 (0.95%) $278.37

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