Why Cresco Labs shares jumped 24.37% on Thursday

What happened

Shares of the Multistate Cannabis Operator (MSO) Cresco Laboratories (CRLBF 24.37%) rose 24.37% on Thursday. The stock closed at $2.65 on Wednesday and opened at the same price on Thursday. Its shares hit a late afternoon high of $3.60 before closing at $3.29. The stock is down more than 31% this year.

So what

Cresco Labs and other cannabis stocks were rocked late in the day when President Biden said he was pardoning all previous federal offenses for simple possession of marijuana. The idea is that this decision is only the beginning of public attention on the federal legalization of marijuana. This would open doors for current cannabis businesses and obviously make it more likely that individual states will follow by legalizing marijuana sales for medical and adult use. This is especially good news for MSOs such as Cresco, as it will allow them to transport products across state lines, giving them better inventory control while reducing costs.

Cresco wasn’t the only MSO to be affected by the news as Green Thumb Industries increased by 30.33%, Trulieve Cannabis increased by 36.02%, Curafeuille Holdings increased by 33.12%, and canopy growth jumped 22.15%.

Now what

It has been a while since there has been good industry-wide news for cannabis operators. In the short term, expect some investors to take the opportunity on Friday to sell their stocks on the news as prices are rising. In the long run, President Biden’s decision only means anything to cannabis operators if it helps the country move towards federal legalization of cannabis or at least the passage of the SAFE Banking Act, which would allow companies to cannabis to obtain financing from banks more easily.

Cresco Labs is relatively sound financially, according to its second quarter report in which it reported revenue of $218.2 million, up 1.7% from the prior quarter and 4% year over year. The company said it lost $8.3 in net income, but had adjusted earnings before interest, tax, depreciation and amortization (EBITDA) of $51 million, up 11% from the second quarter of 2021.

Cresco is buying Care British Columbia for $2.1 billion and said it expects to complete the deal by the end of the year. The combined company would make Cresco the largest MSO by revenue, with $347.8 million in revenue in the second quarter.

Jim Halley has no position in the stocks mentioned. The Motley Fool holds positions and recommends Cresco Labs Inc., Green Thumb Industries, and Trulieve Cannabis Corp. The Motley Fool has a disclosure policy.

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