How are energy investors positioned?
On Tuesday, Canaccord Genuity analysts downgraded Cresco Labs stock (CSE:CL) (OTC:CRLBF) from Buy to Speculative Buy. The decision came alongside a reduction in the price target to Cdn$1.50 from Cdn$2.50. The stock, currently trading at $0.60, has declined nearly 11% in the past week and 46% over the last six months, according to InvestingPro data.
The analysts cited increased competition in Cresco’s core markets as a significant factor in the downgrade. Additionally, Cresco’s strategic decision to collaborate with more creditworthy customers in its wholesale business has impacted its outlook for the remainder of the year. Despite these challenges, InvestingPro data shows the company maintains a healthy liquidity position with a current ratio of 2.75, indicating strong ability to meet short-term obligations.
Another factor influencing the downgrade is a regulator-driven change in seed-to-sale traceability systems. This change is expected to defer some sales into the second half of 2025, affecting Cresco’s near-term growth visibility.
The analysts noted, "Higher competition in core markets, the strategic decision to work with more creditworthy customers in its wholesale business, and a regulator-driven decision to change seed-to-sale traceability systems all underpin Cresco’s muted outlook for the balance of the year."
Cresco Labs is anticipated to recoup sales in the latter half of the year due to the seed-to-sale system change, but near-term growth prospects remain uncertain.
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