GTBIF Stock Forecast: A Marijuana Market Leader in the Making?

Green Thumb Industries Stock
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Green Thumb Industries and the U.S. Marijuana Market

The marijuana sector is crowded, with only the top weed companies hogging the spotlight. It’s not unjustified; they’re the biggest companies in the industry. But there is a fabulous and, for the moment, overlooked marijuana stock that operates entirely in the U.S.—and no one is talking about it.

Green Thumb Industries Inc (OTCMKTS:GTBIF, CNSX:GTII) is a cannabis producer and retailer that operates entirely within the U.S. And the marijuana market potential for the U.S is significantly higher than the Canadian market. As an early entrant into the U.S. pot market, Green Thumb Industries stock has the makings of an industry leader.

All eyes are on October 17, 2018. That’s the day recreational marijuana becomes legal in Canada. Because medical marijuana has been legal in Canada since 2001, companies operating in this industry have had 17 years to develop their infrastructure, distribution channels, and partnerships.

At least, Canadian companies have. That’s why Canadian marijuana companies are the biggest in the world and are attracting all the attention right now. Marijuana-friendly laws mean it is easy for cannabis companies to get listed on Canadian exchanges. However, there are also a handful of Canadian-based marijuana companies listed in the U.S.

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Investor euphoria in marijuana stocks is justified, it’s a billion-dollar industry that is barely in its infancy. But all of the attention has been focused on how big the pot industry is going to be in Canada. That is important in the short term, but it misses the long-term potential.

Canada has a population of almost 37 million, roughly one-tenth the size of the U.S. By 2020, it is estimated that the Canadian market potential for marijuana will reach $6.5 billion. (Source: “Canada’s appetite for legal cannabis could be almost as big as it is for wine, CIBC says,” CBC, May 9, 2018.)

The U.S. meanwhile—a country where medical marijuana is legalized in just 30 states and recreational cannabis is legal in only nine—reported cannabis revenue of $6.7 billion in 2016 and will reach at least $16.0 billion in 2020. (Source: “Marijuana Sales Totaled $6.7 Billion In 2016,” Forbes, January 3, 2017.)

By 2025, the medicinal and adult-use recreational weed market is forecast to hit $24.0 billion—that represents a compound annual growth rate (CAGR) of 16%. The Canadian market is big. But the U.S. market is massive, and the potential is even greater. (Source: “The Grass Is Only Getting Greener For The U.S. Marijuana Market,” Forbes, January 3, 2018.)

All eyes are on the Canadian weed market, but investors should also be paying close attention to cannabis stocks that are focused on the U.S. market; stocks like Green Thumb Industries.

Green Thumb Industries Stock

Chicago, Illinois-headquartered Green Thumb Industries cultivates, produces, and dispenses cannabis in the United States. The company sells a number of branded cannabis products, including flower, edibles, concentrates, and topicals. (Source: “Overview,” Green Thumb Industries Inc, last accessed October 10, 2018.)

It has eight manufacturing facilities and licenses for 59 retail locations in eight, highly regulated, U.S. markets. Its rapidly growing national chain of retail cannabis stores go by the name of RISE dispensaries.

While the recreational use of marijuana is not yet legal in the U.S., Green Thumb Industries’ rapidly growing retail brand is positioning itself to take advantage of that eventuality.

You can find RISE dispensaries in Maryland, Massachusetts, Nevada, and Pennsylvania. More are on the way.

In June, Green Thumb Industries announced that the Ohio State Board of Pharmacy awarded it licenses for five dispensaries. This is the maximum number permitted under current regulations. Green Thumb Industries will be opening its RISE dispensaries in the most populated areas of northern Ohio: Cleveland, Toledo, Lorain and two in Lakewood.

“GTI is an experienced dispensary operator with 13 dispensaries currently open and on its way to a 50-store retail chain,” said GTI Ohio, LLC partner Bobby George.

“GTI is excited to soon be a part of these Ohio communities – and it’s especially gratifying for me to have a role in providing access to this medicine for my fellow Ohioans.” (Source: “National Cannabis Company Green Thumb Industries (GTI) Awarded the Maximum Five Dispensary Licenses in Ohio,” GlobeNewswire, June 12, 2018.)

Like many small marijuana companies, Green Thumb Industries started as something else. It began trading on the Canadian Securities Exchange on June 13, 2018, following a reverse takeover of Bayswater Uranium Corp.

In July, Green Thumb Industries announced it raised CA$80.3 million (US$62.03 million) through a bought deal financing, at a price of CA$10.00 per share. The company said it would use the proceeds for business development, including the acquisition of one of the licenses in the New York cannabis market and buildout of five dispensaries in Ohio. (Source: “Green Thumb Industries Announces CAD$80.3 Million Bought Deal Financing,” Green Thumb Industries, July 12, 2018.)

In September, Green Thumb announced it raised CA$65 million (US$50.2 million) on a bought-deal basis, at a price of CA$20.00 per share. (Source: “Green Thumb Industries Announces CAD $65 Million Bought Deal Financing,” Green Thumb Industries, September 25, 2018.)

Green Thumb Industries had its initial public offering (IPO) on June 13, 2018, trading at CA$7.75 per share. Over the last four months, the company’s share price has soared 319%. After some short-term profit sharing, it is currently trading at $19.12 per share.

Green Thumb Industries Stock Financials

On August 28, Green Thumb Industries announced that revenue for the second quarter, ended June 30, 2018, increased 291% year-over-year to $13.6 million. Revenues were also up 25% quarter-over-quarter. (Source: “Green Thumb Industries (GTI) Announces Revenue up 291% in Second Quarter 2018,” Green Thumb Industries, August 28, 2018.)

At the end of the second quarter, GTBIF had operating revenue in five of its eight markets (Nevada, Illinois, Pennsylvania, Massachusetts, and Maryland). It also ramped up buildout of new markets in Florida, Ohio, and New York. The company expects these locations to be generating revenue in the second half of 2018 and into 2019.

Green Thumb Industries swung to second-quarter profitability of $392,888 or breakeven per share. During the second quarter of 2017, the company reported a loss of $1.3 million.

At the end of the second quarter, Green Thumb Industries had assets of $128.4 million, including cash and cash equivalents of $112.7 million. The company has approximately $7.9 million of total debt; $1.4 million is due within 12 months.

“The second quarter was a critical quarter for GTI. We became a publicly-traded company on June 13th. The team has been hard at work and that is reflected in the results for our first reporting period as a public company – generating solid revenue growth, raising capital, entering new markets and attracting top talent,” said Green Thumb Industries Founder and Chairman Ben Kovler.

In the second quarter, Green Thumb Industries:

  • Expanded its geographic reach to eight U.S. markets, with a total population of over 94 million.
  • Opened five RISE retail stores, bringing the total store count to 13.
  • Ended the quarter with a strong balance sheet.

Green Thumb Industries Stock Forecast

Despite the near-term volatility hitting the broader marijuana market, Green Thumb Industries stock has a lot of upside potential. For starters, the company’s operations are focused entirely in the U.S. and the U.S. marijuana market is huge.

Recreational marijuana may only be legal in nine states, but that number is growing. So too are the number of states legalizing medicinal marijuana. In fact, the U.S. may be at a tipping point when it comes to legalizing weed.

For the first time ever, the majority of Americans support legalizing the recreational use of marijuana. That majority includes both Republicans and Democrats. (Source: “Support for marijuana legalization reaches a record high — and even a majority of Republicans back it,Business Insider, October 25, 2017.)

Some are now suggesting that the U.S. could legalize the adult use of recreational marijuana in five years or less. That bodes well for weed companies like Green Thumb Industries that are already well on their way to establishing a strong foothold in states that have already approved the use of marijuana.

Where some marijuana companies are waiting for weed to become legal before making moves in the U.S., Green Thumb Industries is well ahead of the curve. When the U.S. finally approves the legalization of marijuana, Green Thumb Industries will already have an enviable distribution network, agreements, and loyal consumers.

Analyst Take

The marijuana industry is, by any measure, still young. And early-bird investors have done well investing in stocks taking advantage of the Canadian cannabis market.

Green Thumb Industries is taking a bite out of an even younger, but significantly larger market. Time will tell how well the company will do as the use of medicinal and legal recreational pot takes hold in the U.S.

If it follows the same trajectory as Canadian cannabis stocks, a double- or triple-digit move to the upside is certainly not out of the question.