RKT Stock – Green Thumb Beats Expectations but Stock Still Falls
While the U.S. Congress grinds through its deliberations on opening American financial markets to federally-illegal cannabis businesses, Green Thumb Industries and its peers are posting some of the highest growth numbers of any U.S. industry.
Green Thumb (ticker: GTBIF) reported another quarter of high sales growth and solid profits late Wednesday. March-quarter revenue rose 90% at the 12-state chain, to $194 million, topping Wall estimates by 4%.
It was the ninth consecutive quarter in which Green Thumb beat expectations, notes Stifel GMP analyst Andrew Partheniou in a Thursday note, and the third with positive net income. Earnings were $10 million, or five cents a share.
With its industry barred from big exchanges due to weed’s federal illegality, Green Thumb stock trades on the Canadian Securities Exchange and the U.S. over-the-counter market, where its shares were falling 3.3%, at $28.49, in recent trading. While down from a February peak of $39, Green Thumb stock is still up more than 250% in the past year.
prides himself on the strength of the company’s cash flow and balance sheet. March-quarter earnings before interest, taxes, depreciation, and amortization, or Ebitda, were $71 million (adjusted for noncash and one-time charges), or 37% of revenue. Free cash flow of $40 million, on top of stock sales and debt placements, left the company with more than $300 million in cash to grow its business.
Kovler tells Barron’s that cannabis industry sales are growing at an almost manic pace, while federal policy is moving in slow motion on freeing companies like Green Thumb to access U.S. capital markets, or even the U.S. banking system.
“We’re talking to the [Securities and Exchange Commission], the NYSE, and the Nasdaq. We’re ready to list,” Kovler says. “It doesn’t really sit well with American investors that American cannabis companies can’t list on American stock exchanges.”
Stifel’s Partheniou expects Green Thumb to show somewhat muted growth in the current June quarter, with revenue just above $200 million. Production expansions in Ohio, Pennsylvania, and New Jersey will kick in during the year’s second half, allowing the company to reach his forecast for $860 million in 2021 year revenue. As adult-recreational sales begin in New Jersey, New York, and Virginia, 2022 revenue could approach $1.1 billion, with adjusted Ebitda above $400 million. He has a Buy rating on the stock and a target price of $59.
Cantor Fitzgerald analyst
also rates Green Thumb a Buy, but noted Thursday that the market has derated U.S. cannabis operators in the past three months, with the
AdvisorShares Pure US Cannabis
exchange-traded fund (MSOS) sliding 22% from its February peak. American pot producers now trade at 13.3 times 2022 Ebitda. Even though Green Thumb trades at a premium of 13.9-times Zuanic’s forecast, he’s nudging down his price target on the stock from $46 to $43.
Meanwhile, Kovler says that whatever happens in Congress or Wall Street, Green Thumb will play the cards it has. “One day, the markets are going to wake up,” he says.
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