Seeing it as one of the top players in the cannabis sector on execution, revenues and profitability, Canaccord Genuity analyst Matt Bottomley thinks Green Thumb Industries Inc. continues to warrant a premium valuation after another quarterly beat.
The Chicago-based company reported revenue for the fourth quarter of 2020 of US$177.2-million, up 12.8 per cent from the third quarter and exceeding Mr. Bottomley’s US$173.5-million projection. Adjusted EBITDA of US$65.4-million also topped his forecast (US$61.6-million), due largely to higher sales and margins.
“Once again, the company’s leading positions in both Illinois (a market that has already grown to run-rate sales of US$1.4-billion) and Pennsylvania were the primary growth drivers for the period,” the analyst said. “Although quarter-over-quarter same-store growth came down to 6 per cent (from 18 per cent in Q3), this was largely to be expected given the seasonally slower Q4 months, substantial rebounds in NV and MA in Q3, and steadily increasing COVID-19 cases during the period. However, the company saw its branded wholesales increase by 31 per cent quarter-over-quarter (in line with 33 per cent in Q3), which once again helped drive its overall top line to an all-time high. Green Thumb ended the quarter with 51 retail locations in operation (with three store openings so far in Q1/21) and is generating revenues from all 12 of its existing markets.”
Mr. Bottomley emphasized that Green Thumb’s exposure in Illinois is “is one of the most material value drivers for the company at this time.”
“We estimate that GTI is competing for the #1 spot in the market with a current share of more than 20 per cent and 100-per-cent wholesale penetration in a market that is already operating at an annualized revenue run-rate of US$1.4-billion,” he added. “Of particular note, during the earnings call, management noted that state tax collections for cannabis for the month of February surpassed that of alcohol for the first time as legal adult-use marijuana continues to meaningfully transition out of illicit channels and into Illinois’ regulated framework.”
Maintaining a “speculative buy” rating for its shares, Mr. Bottomley hiked his target to $52 from $47 after increasing his 2021 and 2022 earnings and revenue expectations. The average target on the Street is $51.64.