More Upside Ahead?
To most American investors, the ticker “GTBIF” probably won’t ring a bell. But the few people who invested in this pot stock at the right time made some serious profits recently.
That ticker belongs to Green Thumb Industries Inc (OTCMKTS:GTBIF, CNSX:GTII), a marijuana company that trades over the counter in the United States and on the Canadian Securities Exchange north of the border.
Due to the fact that legal marijuana is still a rather new industry to American investors, and Green Thumb is not listed on a major U.S. stock exchange, it doesn’t receive that much investor attention.
But over five recent trading sessions, GTBIF stock went from $8.10 to $9.98, marking a gain of 23.2%.
Green Thumb Industries Inc (OTCMKTS:GTBIF) Stock Chart
Chart courtesy of StockCharts.com
To see why Green Thumb Industries stock soared recently, and to figure out whether the rally will continue, let’s first take a look at its business.
Headquartered in Chicago, Green Thumbs Industries Inc is a cannabis consumer packaged goods company and retailer.
It manufactures and distributes a portfolio of branded cannabis products including “Rythm,” “Dogwalkers,” and “The Feel Collection.” The company also owns and operates retail pot stores under the names “Rise” and “Essence.” (Source: “About Green Thumb Industries,” Green Thumb Industries Inc, last accessed November 25, 2019.)
At the time of this writing, Green Thumb Industries had 13 production facilities, six product brands, 33 operating stores, and 96 licenses for retail locations. (Source: “Investor Presentation | November 2019,” Green Thumb Industries Inc, last accessed November 25, 2019.)
The main catalyst behind GTBIF stock’s latest rally was an earnings report released on November 20.
The report showed that, in the third quarter of 2019, Green Thumb Industries generated $68.0 million of revenue, which represented a 52% increase quarter-over-quarter and a whopping 296% increase year-over-year. (Source: “Green Thumb Industries (GTI) Reports Increased Third Quarter Revenue of $68 Million and Adjusted Operating EBITDA of $14.1 Million,” Green Thumb Industries Inc, November 20, 2019.)
Of course, the cannabis industry is known for delivering high growth rates. But the numbers that Green Thumbs Industries just posted are impressive, even by industry standards.
The good news doesn’t end at the top line. In the third quarter, Green Thumb Industries Inc’s adjusted operating earnings before interest, tax, depreciation, and amortization (EBITDA) came in at $14.1 million, up from $5.0 million in the second quarter.
That means, in the third quarter of 2019, the company’s adjusted operating EBITDA margin was 20.7%. This represented a substantial sequential improvement because, in the prior quarter, its adjusted operating EBITDA margin was 11.3%.
And according to management, things are about to get even better. Ben Kovler, founder and Chief Executive Officer of Green Thumb Industries, said the following:
Our brand portfolio is now produced, distributed and sold in eight markets, a significant improvement from our position just one year ago, and yet this is just the beginning. To meet growing demand in key markets such as Illinois, Pennsylvania and Massachusetts, we continue to expand our cultivation and manufacturing capacity.
He added, “Our stores are delivering same store sales that exceed our expectations. We are well positioned to end 2019 on a strong note and expect to generate over $200 million in total revenue for the year as planned.”
Speaking of stores, the company recently announced the opening of a new one.
On November 22, Green Thumb Industries announced that it would be opening “Rise King of Prussia,” its eighth Rise location in Pennsylvania, on November 26. With this new store, the company will have 34 cannabis retail locations in the country. (Source: “Green Thumb Industries (GTI) to Open Rise King of Prussia, Its Eighth Retail Location in Pennsylvania and 34th in Nation, on November 26,” Green Thumb Industries Inc, November 22, 2019.)
If the company’s business continues to grow as planned, it could give market participants a reason to continue warming up to Green Thumb Industries stock.
Surging share prices is one of the main reasons why investors like pot stocks, and companies like Green Thumb Industries Inc have delivered oversized capital gains from time to time.
However, it’s important to keep in mind that, because the legal marijuana industry is still in its early stage, uncertainty could be a major factor going forward.
Therefore, it’s of utmost importance for investors to do their homework before putting their hard-earned money into pot stocks.