Green Thumb Industries is cheap compared to other Canadian pot stocks, Echelon says

Ahead of its second quarter financials which are due tomorrow, analyst Russell Stanley of Echelon Wealth Partners is reiterating his “Speculative Buy” rating and 12-month target price of C$20.00 for Green Thumb Industries (Quote, Chart CSE:GTII), representing a projected return of 86 per cent at the time of publication.

Cannabis company Green Thumb owns and operates cannabis cultivation, production and retail businesses in the United States. With interests currently in eight states (representing an aggregate population of 94 million), Green Thumb’s wide coverage sets it apart and gives it “the most diversified platform amongst companies focused on the US market,” says Stanley, in a note to clients on Monday. “And given that each state’s regulations continue to evolve, we believe diversification has real value to investors.”

For GTII’s Q2, the analyst is expecting quarter-over-quarter revenue growth of 19 per cent for $13.0 million (in line with the consensus estimate) along with an EBITDA loss of $3.0 million (versus the consensus loss of $1.6 million. (All figures in US dollars unless noted otherwise.)

Along with the numbers, Stanley says he’ll be looking for an update on Green Thumb’s expansion efforts, particularly with respect to its planned acquisitions in New York and Florida as well as its plans to add more states.

“The EV/C2019E EBITDA multiple discount for US operators relative to Canadian ones has reached 62 per cent (relative to a 38 per cent average),” says Stanley. “This is the highest proportional discount since December 2017 (when it reached 68 per cent) and the highest absolute multiple discount (at 20.5x) in our tracking history.”