Green Thumb Industries Inc: Unfairly Punished U.S. Pot Stock to Gain 275%?

Green Thumb Industries Stock Down Despite Strong Financials

U.S. marijuana stocks surged in late 2020 on growing optimism that the Democrats would move to federally legalize cannabis. But like high school election promises of no homework, that hasn’t happened, despite the Democrats gaining control of the White House and Congress.

That political inaction resulted in U.S. cannabis stocks mostly selling off throughout much of 2021. Rising interest rates, soaring inflation, and the war in Ukraine have added more volatility to the stock market.

One unfairly punished U.S. pot stock that is expected to come roaring back over the coming quarters is Green Thumb Industries Inc (CNSX:GTII, OTCMKTS:GTBIF).

GTBIF stock is one of the most interesting marijuana stocks going, so I’ve been following it since 2018. It looked great back then, and it looks significantly better now.

A multistate marijuana consumer packaged goods company, Green Thumb Industries Inc has six brands that are well known among U.S. cannabis consumers. And thanks to the growing demand for legal pot, the company continues to report stellar financial results.

Despite this, investors have sent Green Thumb Industries stock deep into the red. As of this writing, GTBIF stock is down by:

• 30% year-to-date
• 45% over the last six months
• 48% year-over-year

Although Green Thumb Industries stock is down, it’s certainly not out. The political, economic, and geopolitical tensions wreaking havoc on virtually the entire stock market will pass. And when it comes to cannabis stocks, GTBIF stock should be one of the biggest winners.

Wall Street is on board with Green Thumb Industries Inc. Of the analysts providing a 12-month price target, their average forecast is $40.30 per share and their high estimate is $57.00. This points to potential gains of 165% and 273%, respectively. Even the low estimate of $30.00 implies a potential gain of 96% from Green Thumb Industries stock.

Chart courtesy of StockCharts.com

About GTBIF Stock

Chicago-based Green Thumb Industries Inc is a national cannabis consumer packaged goods company and retailer. It manufactures and distributes the cannabis brands “Beboe,” “Doctor Solomon’s,” “Dogwalkers,” “Good Green,” “incredibles,” and “RYTHM.” (Source: “Investor Presentation,” Green Thumb Industries Inc, last accessed March 11, 2022.)

The company also owns and operates a rapidly growing national retail cannabis chain called “Rise.”

Green Thumb has 17 manufacturing facilities, 75 open retail locations, and operations in 15 U.S. states. (Source: “Green Thumb Industries Reports Fourth Quarter and Full Year 2021 Results,” Green Thumb Industries Inc, March 1, 2022.)

In December 2021, Green Thumb Industries Inc entered the Minnesota market through its acquisition of LeafLine Industries. (Source: “Green Thumb Enters Minnesota Through Acquisition of LeafLine Industries,” Green Thumb Industries Inc, December 30, 2021.)

LeafLife is one of only two licensees in the Minnesota medical cannabis market. The company is licensed to grow, process, and dispense cannabis directly to patients.

The acquisition of LeafLine Industries includes a cultivation facility and five operating retail locations. Green Thumb also acquired the opportunity to open up to three additional retail locations in Minnesota.

Q4 Earnings & Revenue Beat

For the fourth quarter ended December 31, 2021, Green Thumb announced that its revenue increased by 37.4% year-over-year and 4.2% sequentially to $243.6 million. (Source: Green Thumb Industries Inc, March 1, 2022, op. cit.)

Wall Street had been looking for fourth-quarter revenue of just $237.7 million. The big increase was fueled by growth in the company’s consumer packaged goods and retail business.

Green Thumb Industries Inc’s gross profit for the fourth quarter of 2021 was $128.6 million, or 52.8% of its revenue. That’s compared to $100.5 million, or 56.7% of its revenue, in the fourth quarter of 2020.

The company’s fourth-quarter net income was up slightly at $22.8 million, or $0.10 per share, compared to fourth-quarter 2020 net income of $22.4 million, or $0.11 per share. Analysts were calling for fourth-quarter earnings of $0.07 per share. This represents the company’s sixth consecutive quarter of positive net income.

Green Thumb Industries Inc’s earnings before interest, taxes, depreciation, and amortization (EBITDA) were $75.6 million, or 31.0% of its revenue, compared to $61.3 million, or 34.6% of its revenue, in the fourth quarter of 2020.

Moreover, this was the company’s eighth consecutive quarter of positive cash flow from operations.

For full-year 2021, the company’s revenue rallied by 60.5% to $893.6 million. Wider distribution of Green Thumb’s branded products, new store openings, acquired stores, and increased retail traffic were responsible for the high year-over-year revenue growth.

For the full year, Green Thumb Industries Inc’s gross margin was $491.9 million, or 55.1% of its revenue. That was a year-over-year increase of 40 basis points.

The company’s net income for full-year 2021 was $75.4 million, or $0.34 per basic share and $0.33 per diluted share. In 2020, Green Thumb reported net income of $14.9 million, or $0.07 per basic and diluted share.

Green Thumb Industries Inc’s EBITDA for the full year was $283.3 million, or 31.7% of its revenue.

The company ended 2021 with cash and cash equivalents of $230.4 million and an outstanding debt of $239.9 million.

Analyst Take

The projected market opportunity for the U.S. cannabis industry rivals those of the U.S. alcohol and tobacco industries, and is expected to experience massive growth over the next decade.

Green Thumb Industries Inc is poised to capitalize on this opportunity. The company is expanding its U.S. footprint through strategic acquisitions.

In the fourth quarter, Green Thumb Industries Inc delivered its sixth consecutive quarter of net income and eighth consecutive quarter of positive cash flow from operations. On a full-year basis, the company’s revenue advanced 61%, its net income more than quadrupled, and its adjusted earnings expanded by 71%.

Temporary industry headwinds aside, what’s not to love about Green Thumb Industries stock?