Green Thumb Analyst Says Stock Deserves Premium, Sees Better Value Elsewhere In Cannabis

Cannabis retailer Green Thumb Industries Inc. GTBIF posted $75.8 million in fourth quarter revenue — a 265% year-over-year spike.

The Chicago-based company released its financial results Thursday for the full year and fourth quarter. 

For the fourth quarter, Green Thumb posted a net loss of $13 million, or a 6-cent-per-share loss, and EBITDA of $8.4 million.

The Green Thumb Industries Analyst

Cantor Fitzgerald’s Pablo Zuanic reiterated a Neutral rating on Green Thumb Industries and lowered the price target from $13 to $9.60.

The Green Thumb Industries Thesis

Green Thumb Industries’ fourth-quarter sales were up 11% quarter-over-quarter with contributions from all 12 markets, Zuanic said in a Thursday note. (See his track record here.) 

While the company hasn’t offered further guidance, it did make some forward-looking comments, such as an expectation for 20-25% sales growth in the first quarter of 2020, the analyst said. 

Green Thumb should become free cash flow positive during 2020, with operating cash flow being enough to support any store openings, he said. 

Many factors, such as positive EBITDA, the road to positive FCF, reliable capital allocation and good funding stand behind the stock’s valuation premium, Zuanic said. 

Among other attractive factors are the company’s solid capitalization, with this year’s production plans already financed; its potential for EBITDA margins to jump; its well-constructed portfolio of states; and no risk of pending acquisitions, the analyst said. 

Taking these factors into account, Zuanic said he wouldn’t hesitate to confirm the stock’s attractiveness in the longer-term, but in the short term the analyst said he recognizes better value elsewhere.

Cantor lowered its price target due to "overall sector valuation compression." 

GTBIF Price Action

Green Thumb shares were down 4.36% at $6.30 at the time of publication Friday. 

Photo courtesy of Green Thumb Industries.