Green Thumb Industries manufactures and distributes branded cannabis products. They operate through wholesale and retail segments. The wholesale segment includes cultivation, production, and sales of cannabis via retail stores. The retail segment consists of getting cannabis to patients and consumers. Today, the company scored #1 on our trusted CanninBot algorithm – but why is Green Thumb Industries a Strong Buy?
Let’s take a closer look at the fundamentals and technicals for Green Thumb Industries to see why this cannabis stock is a strong buy.
Green Thumb Industries Fundamentals
HQ: Chicago, IL, USA
Symbol: GTII (CNSX), GTBIF (OTC)
Company Focus: Strong
GTI is a multi-state US seed-to-sale cannabis grower, producer and retailer. It has a wholesale business (its Consumer Package Division, selling its brands to third party dispensaries) and a retail business (selling its own and third party brands through its own dispensaries). They are licensed for 97 dispensaries across at least 12 states. They produce and sell flower, concentrates, edibles, and topicals.
Though they currently wholesale a lot of their harvest, and are expanding their cultivation, GTI has said they may not choose to be a large wholesale grower in the long term if price compression becomes an issue with that model. If that happens that will focus on creating brands and operating dispensaries.
Green Thumb Company Size: Strong
Market Cap: US $6.27 Billion
Enterprise Value: US $6.44 Billion
# of employees: 2,223
Majority Subsidiaries: KSGNF, LLC; NCA Nuclear Inc; Advanced Grow Labs, LLC; Fiorello Pharmaceuticals, Inc; MC Brands, LLC; Compassionate Organics; For Success Holding Company
Green Thumb Company Management: Neutral
CEO: Ben Kovler (Founder)
CFO: Anthony Georgiadix
CSO: Jennifer Dooley
CIO: Swadheen Sehgal
Green Thumb Industries Branding: Strong
GTI brands include: Rhythm, Dogwalkers, the Feel Collection, BeBoe, incredibles, and others. Dogwalkers are a small tin of mini-joints designed to be big enough to enjoy “while you are walking your dog.” TGI is also planning a brand aimed at woman, because they feel women are under-served and there is a market.
GTI is creating a distinctive, branded consumer experience in their RISE dispensaries. According to GTI, RISE is an award-winning retail chain delivering a high level of customer service through: “high-engagement consumer interaction; a consultative, educational selling approach; and an affordable variety of cannabis products.” They create an uplifting environment… “like a bar or a café”, and strive to produce customer loyalty. They claim their RISE dispensaries have large market share.
Company Valuation: Strong
Current share price: US $28.20
52 week high/low: $5.46-39.11
Price to Sales: 10.89
Green Thumb Financing: Neutral
On May 22, 2019, GTI completed another private placement, of $105.5 million, in three-year senior secured promissory notes—and paid off the notes issued on April 12, 2019. It can raise an additional $44.5 million under this credit facility within 180 days. It can also extend the financing an additional twelve months. The notes pay interest of 12.0%.
Since this, they have sold and leased back many properties to Innovative Industrial Properties (IIP) in Ohio, Illinois, and Pennsylvania.
Risks of Investing in Green Thumb Industries: Neutral
The risks of investing in any cannabis company is currently high given the volatility of the market. The risks of investing in this company do not seem to have more risk than other cannabis companies given their revenue and cash flow. If the feds do find them guilty of pay to play, the risk in their stock price dropping is real.
Bottom Line: Why is Green Thumb Industries a Strong Buy?
There are a lot of reasons to like GTI as an interested observer. They are vertically integrated, with a focus on building brands, and creating a unique and attractive retail experience that builds loyal visitors. In fact, this supports their bid to preserve strong margins in an industry that will likely eventually experience price compression and falling margins.
They are diversified, having both a strong wholesale and retail businesses, and addressing both medical and recreational clientele. This supports them if, for example, price compression makes the wholesale side of the business less profitable. However, in this scenario, they could focus more on the retail side, where they own dispensaries and will be able to control retail price and shelf space in their locations.
Lastly, they have pretty strong financials. Q4 2020 ended with revenue at $177.2 million, up 133.8% YoY. Their EBITDA was also up at $65.4 million which was up 374% YoY (37% margins). In fact, this was their 4th consecutive quarter of positive cash flow. Total revenue for all of 2020 was $556.6 million!
The Future of Green Thumb Industries Stock in 2021
All this is promising news. But ts it too late to buy Green Thumb Industries Stock? Well, hold on. They may currently be under investigation by the feds for a pay-to-play allegation in Illinois licensing deals if the Chicago Tribune is to be believed. If true, this would be catastrophic (the stock dropped 14% on this news). So – the management team has some work to do and some trust to gain back.
They do have cash at $84 million with debt at $99 million but this isn’t as bad as most of their competitors. Given all this we still currently rate the stock as a Strong buy for 2021.
Why is Green Thumb Industries a Strong Buy?
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