Green Thumb Industries (is a Chicago-based cannabis consumer packaged good company as well as a retailer. It cultivates, manufactures, distributes, and sells different cannabis products for medicinal purposes in the United States. The company operates across 10 states and has more than 56 stores, and opened 11 new dispensaries in 2020. While the company continues to show promise we’re not convinced it’s a strong buy. But should you buy Green Thumb Industries Stock?
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Currently, Green Thumb Industries has 13 manufacturing facilities, 52 retail locations in 12 states, along with 97 retail licenses and while the company is only seven years old, it ranks number three in terms of market capitalization of cannabis stocks and has diversified its product selection into – vapes, edibles, pre-rolls, CBD health, dried flowers as well as beauty products.
Green Thumb’s Steady Growth
Green Thumb Industries had a rather ‘green’ 2020, managing to become the first US cannabis company to exceed $100 million in revenue in the first quarter of the year itself. Its third-quarter saw a revenue of $157.1 million wherein it witnessed year-over-year growth of 131.1% along with a net income of $9.6 million, compared to a loss of $14 million during the same quarter in 2019. Its adjusted EBITDA also increased to $53.2 million – showing an increase of 50% year-over-year.
For Q4 of 2020, revenue increased 12.8% sequentially and 133.8% year-over-year to $177.2 million. Green Thumb grew its sales by a whopping 157% in 2020 to $556.6 million. It was also able to reverse its $59.1 million net loss of 2019 to a profit of $15 million in 2020. Adjusted operating EBITDA grew 546.9% to $179.6 million accounting for 32.3% of revenue.
As of December 31, 2020, Green Thumb had cash and cash equivalents of $83.8 million while the total debt outstanding was $99.1 million, out of which $342,000 is due within 12 months.
Controversy Surrounding Green Thumb Industries
At the end of March, a Chicago Tribune report said that Green Thumb “is under federal investigation for possible pay-to-play violations during its push for coveted state licenses.”
The report said, “Investigators have been scrutinizing campaign donations and other steps Green Thumb Industries took as it sought to secure growing and distribution licenses in Illinois and several other states, sources told the Chicago Tribune.”
Alternatively, a company spokeswoman said Green Thumb Industries was not aware of any probe. “Green Thumb takes compliance very seriously and operates with the highest standards of ethical business conduct,” spokeswoman Linda Marsicano said in an emailed statement. “We are not aware of any such investigation.”
Green Thumb stock has fallen from $34.49 on March 15 to $28.1 on April 12th. That’s a drop of over 18.5%. However, the company seems to have shrugged the news off.
What Next for GTBIF Investors?
As of now, medical cannabis is allowed in 36 states in the US while recreational cannabis is allowed in 16 states. The 97 retail licenses that Green Thumb owns will hold it in good stead as more states legalize cannabis or if a nod for legalization comes at the federal level. These licenses will allow it to open at least 43 more stores in the US.
In February, Green Thumb announced that it raised $56 million selling approximately 1.6 million shares in the US. The company said, “…the principal purposes of this offering are to increase Green Thumb’s capitalization and financial flexibility.”
The company’s focus on its home state of Illinois is expected to pay heavy dividends in 2021. This report says, “Illinois dispensaries are on pace to sell more than $1.5 billion worth of cannabis in 2021 after retailers across the state combined to sell nearly $145 million of adult-use and medical marijuana in March.”
Bottom Line: Should You Buy Green Thumb Industries Stock?
According to data from the Illinois Department of Financial and Professional Regulation (IDFPR), which oversees dispensary licensing, adult-use cannabis, total dispensary sales for the first three months of 2021 are a record $279 million. With such a substantial market size, this provides an excellent opportunity for Green Thumb Industries.
Analysts have given the stock a target of $45.44, an upside of almost 62%. Smart investors should snap this stock up when it’s below $30 – as long as the recent Federal Probe doesn’t kill the company, that is.
Should You Buy Green Thumb Industries Stock?
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