Amongst the leading MSOs (multi-state operators), Green Thumb Industries (GTBIF) doesn’t generate the highest revenue or have the largest footprint – these feats are reserved for Curaleaf (CURLF). Nor, like Trulieve (TCNNF), is it the leader as far as cash flow generation or operating efficiencies are concerned.
“What Green Thumb does have, in our view,” says Needham’s Matt McGinley, “Is an efficient asset base capable of sustaining high growth rates, and a record of prudently deploying capital ahead of major market inflections. As such, we see GTI as the most well-rounded MSO and the best pound-for-pound fighter in the ring.”
McGinley’s praise comes ahead of the Chicago-based cannabis producer’s 1Q21 results, slated for release next Wednesday (May 12, AMC).
The company has been growing at an accelerated rate over the last few years, but as a stalwart of the rising U.S. cannabis industry, the growth story is set to continue. With a clean balance sheet and plenty of cash in the coffers – McGinley estimates over $400 million to go toward capex or M&A this year – the 5-star analyst thinks “substantial investment in NY and NJ could double spending in ’21.”
The opportunity in New York is particularly attractive, its cannabis market could be worth over $5 billion “at steady-state.”
However, until the regulators define the market structure (dispensary counts and cultivation caps), McGinley says it’s hard to gauge how big the opportunity is, although he believes production could reflect the company’s present size in IL or PA.
So, what to look out for in Q1? McGinley thinks early Q1 sales were affected by “adverse weather.” In March, however, most markets displayed an “inflection in demand.”
“Between stimulus, an improving economic outlook, easing COVID restrictions, and recovery in tourism-driven markets like NV, we believe the outlook for the remainder of year is strong,” the analyst opined.
That strength should become more apparent in the second half of the year, as cultivation expansion in PA, IL, and NJ (and possibly OH) will likely begin generating revenue.
And while the shares have climbed by 362% over the past year, McGinley still does not believe the company’s “current valuation reflects the strength of its operating model or the opportunity for multi-year growth.”
As such, McGinley rates GTBIF a Buy and has a $47.25 price target for the shares. Investors could be pocketing gains of 49%, should the analyst’s thesis play out accordingly. (To watch McGinley’s track record, click here)
Green Thumb has the Street’s unequivocal backing. All 12 recent reviews are to Buy, naturally resulting in a Strong Buy consensus rating. The average price target is a touch above the Needham analyst’s, and at $48.13, suggests 12-month upside of 52%. (See GTBIF stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.