Green Thumb Industries has a 163 per cent upside, Beacon Securities says

Green Thumb Industries (Green Thumb Industries Stock Quote, Chart CSE:GTII) has closed on its acquisition of Connecticut-based Advanced Grow Labs, a move which analyst Russell Stanley of Beacon Securities says has significant growth potential. In a research update on Tuesday, Stanley has reiterated his “Buy” recommendation and C$44.00 target price for GTII.

Chicago-based Green Thumb, which operates cannabis cultivation, production and retail operations across 11 states, announced the closing of the Advanced Grow Labs deal on Tuesday, an $80-million acquisition involving $15 million in cash and $65 million in stock. Advanced Grow Labs operates a 41,000 sq. ft. manufacturing facility in West Haven, CT, and has a 46 per cent stake in one of nine newly issued dispensary licenses in Connecticut’s medical-only market. (All figures in US dollars unless otherwise noted.)

Stanley points out that state governor Lamont has said that adult-use legalization is a priority for his administration, while in January, House Democrats introduced a legalization bill, thus making CT ripe for “significant growth potential,” according to Stanley.

On February 5, Green Thumb announced an agreement to acquire California cannabis brand company Beboe, with Stanley now noting that luxury retailer Barneys New York has announced that its flagship store in Beverly Hills will feature an exclusive partnership with Beboe and its luxury line of vape pens, pastilles and CBD products, an event which the analyst takes as “strong validation of the brand’s luxury status and market potential.”

“We continue to view Green Thumb as a compelling investment opportunity given its strong and growing presence in attractive US states, and demonstrated success in both acquisitions (such as AGL) as well as organic growth (via de novo licensing wins in New Jersey and Pennsylvania). Potential catalysts include closing of the acquisitions in Nevada (Essence) and New York, additional licensing wins, and the Q4/18 results in April,” says Stanley.

The analyst says GTII is still trading at a 71 per cent discount to its similarly-sized peers. He is expecting the company to generate Attr. EBITDA of $62.1 million in 2019 on revenue of $229.5 million and Attr. EBITDA of $192.0 million in 2020 on a top line of $523.5 million. His C$44 target represents a projected return of 163 per cent at the time of publication.