Green Thumb Archives - Green Market Report

Debra BorchardtJuly 27, 2021
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In Morningstar’s report from June titled “Buy American Cannabis Stocks Regardless of Federal Legalization”, the research firm believes cannabis investors should buy American and its top picks are Curaleaf (OTC: CURLF) and Green Thumb Industries (OTC: GTBIF). The analyst Kristoffer Inton acknowledges that the market seems to reward Canadian companies since the country is fully legal. However, he believes that American cannabis companies stand to experience revenue growth and rapid margin expansion even if federal legalization doesn’t happen. 

“Curaleaf and Green Thumb have strong revenue tailwinds outside of federal policy as more states legalize, new dispensaries open, and black market and new customers enter the legal market,” Inton wrote. “Unlike their Canadian peers, American MSOs have turned top-line growth into expanding profitability. Indeed, when it comes to cannabis, investors should buy American.”

Canadian Stocks Appear Blessed

Morningstar noted that Canadian stocks have moved higher than American colleagues. “From the beginning of 2021 to early February, Aurora, Canopy, Cronos, and Tilray shares rose by 33% to 161% compared with Curaleaf and Green Thumb rising just 15% and 28%, respectively. In our view, this was due to the market’s increased expectations for legalization and not operational performance, as the Canadian producers generally struggled during pandemic restrictions while American producers continued to rapidly expand profitability.”  Inton said that except for Canopy Growth and Cronos, Canadian producers’ U.S. operations are largely limited to hemp-derived CBD and alcohol. So federal legalization would carry no benefit to these companies.  

Beyond stock valuations, Inton also highlighted the contrast in profitability between U.S. and Canadian producers. “From 2017 to 2020, both groups’ revenue rose roughly 120% to 220% per year on average. However, while Americans Curaleaf and Green Thumb saw adjusted EBITDA margins expand to 20% to 30%, of the Canadians, only premerger Aphria had reached and premerger Tilray neared positive adjusted EBITDA. Aurora Cannabis, Canopy Growth, and Cronos continued to generate massive profit losses, albeit narrower than in prior years.”

Curaleaf, Green Thumb

Morningstar wrote that Curaleaf and Green Thumb already operate in the medical markets of New Jersey and New York and new adult-use legislation in these states sets them up for a future sales surge. Curaleaf has a buy rating and a $21 target price. The stock was lately selling at $12.47. The revenue for 2021 is forecast to reach $1.1 billion. Green Thumb also has a buy rating and a target price of $46. The stock was recently selling at $29. The revenue for 2021 is forecast to hit $877 million. 

In Closing

Optimism for federal legalization has risen rapidly after Biden won the presidential election. Sens. Cory Booker (New Jersey), Chuck Schumer (New York), and Ron Wyden (Oregon) have introduced new legislation to fully legalize cannabis, but it doesn’t look like the votes are in place to pass it. The chance of banking legislation is more likely and even that is tenuous. “In our discussions with banking regulatory officers, they think that a safe harbor statement might not be enough. They believe that a truly effective banking bill would need to come with a detailed and robust regulatory framework to minimize the uncertainty and risk for banks. Assuming the bill goes far enough, the benefits for U.S. MSOs could be meaningful.”

 


Debra BorchardtMarch 17, 2021
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 Green Thumb Industries Inc.  (OTCQX: GTBIF) reported its financial results for the fourth quarter and full-year ended December 31, 2020. Revenue for Green Thumb increased 133.8% to $177.2 million for the fourth quarter over the same time period in 2019 and increased 12.8% sequentially. This beat analyst’s estimates according to Yahoo Finance for $167 million.

The company also reported a positive GAAP net income of $22.5 million or $0.11 per basic and diluted share. This beat the analyst’s estimates which were $0.06 according to Yahoo Finance. The company said it was the fourth consecutive quarter of positive cash flow from operations.

The full-year revenue increased 157.2% to $556.6 million versus 2019. The company also reported a positive GAAP net income of $15.0 million or $0.07 per basic and diluted share, compared with a GAAP net loss of $59.1 million or a loss of $0.31 per basic and diluted share in the prior year.

“This was a solid quarter to top off a milestone year for the Green Thumb team. In the fourth quarter, we delivered substantial revenue growth, expanded gross margins, recorded our fourth consecutive quarter of improved operating leverage, and achieved positive GAAP net income and EPS for the second quarter in a row. The entire Green Thumb team should be proud of these full-year 2020 numbers: $557 million of revenue, $180 million of Adjusted EBITDA, $15 million of GAAP net income, 7 cents a share of GAAP EPS and over $95 million in cash flow from operations,” said Green Thumb Chairman, Founder and Chief Executive Officer Ben Kovler.

Kovler added, “To start off 2021, we completed our U.S. initial public offering and first sale of SEC-registered shares directly to U.S. investors. We view the institutional support as a vote of confidence in our proven operating model and a leading indicator of what’s to come for the industry. The capital markets are waking up to the great American cannabis growth story and the ‘Green Wave’ is picking up steam.

“November 2020 also validated that Americans across the country from all walks of life want expanded access to cannabis. The new administration has indicated strong support for advancing comprehensive cannabis reform that will focus on social equity and recognize the wellness benefits of cannabis. The Green Thumb team is more energized than ever to provide consumers with more choices for well-being, create more jobs and opportunity for communities, and continue our advocacy for social equity.

“Green Thumb is well-positioned. Our balance sheet is strong, our brands are connecting with consumers and our capital projects are on track. At the same time, we will maintain our focus on diligent execution and high-value capital expenditure allocation that will create sustainable value for all our stakeholders. The real fun is just beginning.”

As of December 31, 2020, current assets were $183.9 million, including cash and cash equivalents of $83.8 million. Total debt outstanding was $99.1 million, $342.0 thousand of which is due within 12 months.The company secured $25 million in an amended sale and leaseback transaction with Innovative Industrial Properties (“IIP”) for its Toledo, Ohio manufacturing facility to fund the construction of a cultivation facility on the property


Debra BorchardtFebruary 23, 2021
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Green Thumb Industries Inc. (OTCQX: GTBIF) announced it has raised approximately $56 million by selling 10 million of its subordinate voting shares, that was declared effective by the U.S. Securities and Exchange Commission (SEC) as of February 8, 2021.  Green Thumb said it had received and accepted offers from investors to purchase 1.6 million registered subordinate voting shares at $35.50 per share for a total of approximately $56 million.  The stock closed at $35.35 on Monday.

“The strength of investor demand suggests growing confidence within the U.S. capital markets for cannabis,” said Green Thumb Founder and Chief Executive Officer Ben Kovler. “The Green Thumb team is excited by the momentum and is proactively advocating for U.S. cannabis companies to receive access to U.S. exchanges like our Canadian peers. This access is a key step to unlock greater job creation, significantly more tax revenue and a more robust effort to right some of the wrongs caused by the war on drugs.”

The company said that the sale would close on February 23, 2021, and follows the previous sale of shares pursuant to the Registration Statement that closed on February 9, 2021, for $100 million. On February 9, Green Thumb said it received and accepted an offer from a single institutional investor to purchase approximately 3.1 million registered subordinate voting shares at $32.03 per share for a total of $100 million.  The company did not disclose the name of the buyer.

According to Yahoo Finance, six analysts cover GTI. The average price target is $34.39 with all buy ratings.

GTI is a leading cannabis consumer packaged goods company and the owner of Rise Dispensaries. In November, the company reported its earnings for the third quarter of 2020. Overall, the company’s balance sheet was strong and retained a positive cash flow for the third consecutive quarter. Green Thumb’s revenue increased 31.3% quarter-over-quarter, and year-over-year 131.% to $157.1 million. The company’s gross margin for the third quarter of 2020 was 55.4%, an increase from a 53.2% gross margin the quarter prior.

The company’s adjusted operating EBITDA increased by 50% to $53.2 million, or 33.9% of revenue for the third quarter of 2020. The prior quarter ended with an adjusted EBITDA of $35.4 million, or 29.6% of revenue. As of September 30th, 2020, Green Thumb’s current assets totaled $159.1 million and included cash and cash equivalents equaling $78.1 million. The company reported a total debt outstanding of $97.1 million, $0.3 million being due within 12 months.


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The Green Market Report focuses on the financial news of the rapidly growing cannabis industry. Our target approach filters out the daily noise and does a deep dive into the financial, business and economic side of the cannabis industry. Our team is cultivating the industry’s critical news into one source and providing open source insights and data analysis


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