Green Thumb Industries Stock: Leading Pot Stock Down 58%; Time to Consider It?

Beaten-Down GTBIF Stock Worth a Look

Marijuana stocks continue to battle a bearish bias that saw the ETFMG Alternative Harvest ETF (NYSEARCA:MJ)—a broad measure of the leading pot stocks in the U.S. and Canada—decline by 58% in 2022. That was after major selling in 2020 and 2021. 

In 2020, the COVID-19 pandemic hurt cannabis stocks, as the majority of stores had to close. Even with the reopening of the economy, marijuana companies face demand challenges.

If you adopt a longer-term view, there are reasons to be optimistic. More states have been legalizing recreational pot, and I expect this trend to continue as we wait for U.S. federal legalization. Moreover, many cannabis companies have been running leaner operations, cutting their costs, and delivering profitability and positive earnings before interest, taxes, depreciation, and amortization (EBITDA).

I view the current price weakness of marijuana stocks as an aggressive, contrarian, long-term opportunity.

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One of the leading pot stocks with a focus on the U.S. pot sector is Green Thumb Industries Inc (CNSX:GTII, OTCMKTS:GTBIF). Green Thumb Industries stock is one of my favorite marijuana stocks.

The vertically integrated cannabis company has a market cap of almost $2.0 billion. Green Thumb Industries Inc does everything in the supply chain, including research and development, cultivation, processing, and retailing. Its products are sold in the company’s own stores and by third parties.

At the end of 2022, the company operated 18 manufacturing facilities and 77 retail locations in 15 U.S. markets. (Source: “Investor Relations,” Green Thumb Industries Inc, last accessed January 27, 2023.)

Chart courtesy of StockCharts.com

Green Thumb Industries Inc Reaches $1 Billion in Revenues

Green Thumb Industries has been rapidly ramping up its revenues—to the point that the company is now profitable.

Green Thumb Industries’ revenues have risen in its last two reported years. The company reported revenues of $556.6 million for 2020 and $893.6 million for 2021. Source: “Green Thumb Industries Inc. (GTBIF),” Yahoo! Finance, last accessed January 19, 2023.)

Analysts estimate that the company’s revenues were $1.0 billion in 2022 and that they will grow by 12% to $1.1 billion in 2023. That means Green Thumb Industries Inc is trading at an attractive 1.7 times its consensus 2023 revenue estimate. This is a compelling valuation.

The company reported adjusted earnings per share (EPS) of $0.34 for 2021. Analysts estimate that this slightly declined to $0.32 in 2022 and that it will decline further to $0.30 in 2023. I’m not concerned about the drops in EPS, as this is normal for growth companies.

The company delivered positive free cash flow in two of its three reported quarters in 2022.

Another major plus is Green Thumb Industries Inc’s manageable balance sheet, which has cash of $147.3 million and debt of $515.3 million. Accounting for the cash and debt, the company’s ratio of enterprise value to consensus 2023 revenue estimate is quite reasonable at 2.1.

Analyst Take

Investing in marijuana stocks entails risk, but there are opportunities. As mentioned earlier, GTBIF stock has plummeted by 57% over the past year, despite the company having stronger fundamentals than before.

Green Thumb Industries Inc’s financials and valuation suggest an attractive risk/reward trade-off. Yes, there will likely be more price weakness from marijuana stocks, including Green Thumb Industries stock, so investors might want to consider accumulating small positions on price weakness.