TLRY vs. CRLBF: Will Tilray Or Cresco Labs Grow More By 2022?

Cannabis investment novices and aspiring market investors have quite a bit of sifting through as the myriad of potential investment opportunities continually grows.

Two of the more frequently discussed cannabis stocks are Tilray Inc TLRY and Cresco Labs Inc CRLBF, with several people asking about the short-term growth potential of each company.

To help answer the question, several leading cannabis investors told Benzinga what investors may want to consider about each stock and their growth potential through 2022.

Legalization Concerns Could Give Cresco The Edge

Tilray made waves in August when it acquired 75% of U.S. MSO Medmen Enterprises Inc MMNFF 's outstanding secured convertible notes as part of a $165.8 million deal.

Similar to the agreement made between Canopy Growth Corp CGC and Acreage Holdings Inc ACRHF, the completion of the deals hinge on U.S. cannabis legalization and other parameters.

With investors skeptical of U.S. legalization in the short term, they mostly gave the edge to Cresco.

Jason Wilson, cannabis and banking expert at ETFMG, the issuer of ETFMG Alternative Harvest ETF MJ, believes that Cresco is more likely to see revenue grow more through 2022.

Wilson expects Cresco to benefit as a U.S.-based multi-state operator with a strong product portfolio and a retail presence across ten states.

"Cresco should continue to experience strong revenue growth in the foreseeable future as its brand recognition strengthens and the markets Cresco operates in continue to develop and mature," Wilson forecasted.

Matt Hawkins, managing partner at Entourage Effect Capital, believes that the only bill with any potential to pass in the next six to nine months is the SAFE Banking Act. He clarified that he isn't confident of its passage either.

Even if SAFE Banking were to pass, Hawkins said the Tilray deal isn't certain to progress. "None of us really know if that's going to be the catalyst to trigger these transactions," he said. On the other hand, Hawkins sees Cresco continuing to perform well with or without federal legalization.

"It's a non-event," Hawkins said, adding that Cresco is well-supplied with capital.

If the Tilray-MedMen deal doesn't commence, Hawkins sees the Canadian leader struggling to reach its stated revenue goals as it contends with U.S. MSO's and its struggles, including a 6.37% stock decline during Q4 2021.

"I think they perhaps overpaid for MedMen," Hawkins added.

Considering More Than Legalization

Legalization is just one critical component investors should consider when selecting between the two stocks, including the trajectory and focus of each company.

Pablo Zuanic, Cantor Fitzgerald's managing director, called the comparison of the two companies an apples to oranges scenario.

Zuanic said the U.S. market seems to have better growth momentum than Canada, allowing Cresco to grow organically at a faster pace. He added that the speed of acquisitions and the opening of overseas markets will also help determine the more prominent company by 2022.

Tilray may look like a different company depending on its M&A activity, he posited. Meanwhile, Zuanic expects Cresco to focus on expanding its cultivation footprint rather than continuing its M&A momentum from the past three years.

Tilray's Potential Extends Beyond Recent M&A

Cresco may have the edge, according to responding analysts. However, both companies show immense promise through 2022 and beyond.

Wilson added that the company's model diversity offers potential beyond Cresco's. He noted that Tilray's footprint in North America and Europe through various channels show great promise.

"Tilray is becoming more of a CPG company that offers a broad selection of both cannabis and cannabis-related products," he said, rather than a traditional MSO.

Investor's Call Wins Out

While Cresco seemingly has the edge, investors mention that nothing is certain.

Zuanic did not offer a clear answer, instead leaving the decision to the investors.

"We believe investors should consider both stocks to gain exposure to the global cannabis industry, but for very different reasons," Zuanic said.

 

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