Cannabis stocks have been extremely volatile since Election Day, and that volatility continued for Green Thumb Industries Inc. GTBIF on Thursday.
The Numbers: Green Thumb reported third-quarter earnings on Wednesday afternoon. The company confirmed Adjusted Operating EBITDA of $53.2 million, up 50.2% from a year ago. Third-quarter revenue was $157.1 million, up 31.3% from the second quarter and 131.1% year-over-year. Gross margins expanded from 53.2% in the second quarter to 55.4% in the third.
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Cantor Weighs In: On Thursday, Cantor Fitzgerald analyst Pablo Zuanic reiterated his Overweight rating for Green Thumb and raised his price target from $29 to $35.
Green Thumb’s third-quarter numbers suggest “at least 20% upside” to analysts’ 2021 revenue estimates, he says.
Given Green Thumb has rallied 33% in the month leading up to earnings, Zuanic thinks investors should keep near-term expectations in check. However, the stock has “significant upside” in the medium-term.
“Our 12-month PT of $35 (up from $29) takes 20x EBITDA on our forward estimates (Dec’20 to Nov’21), and adds $3.50/share for optionality (conservatively, we estimate our 2024 sales estimates could be 33% higher if NY/PA/MD went rec; we take 50% probability,” Zuanic added.
Green Thumb already trades at the high end of the valuation range among US multi-state operators, but Zuanic says that valuation is justified given the company’s track record of profitability, growth potential and franchise strength.
Benzinga’s Take: Cannabis legalization in five states coupled with a Joe Biden victory on Election Day is good news for MSOs in the near-term. However, the ultimate price for cannabis stock investors is US federal legalization, which Zuanic said is likely still at least two to four years away.
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