Green Thumb Industries is a cheap pot stock with U.S. exposure, Beacon says

Expansion plans at Green Thumb Industries s (Green Thumb Industries Stock Quote, Chart CSE:GTII) have Beacon Securities analyst Russell Stanley maintaining his “Buy” rating on the company’s stock.

This morning, GTII announced it will open a second retail operation, called Rise Pinellas Park in Florida. The store is the company’s 16th U.S. location.

“Rise provides exceptional customer care and we’re honoured to begin serving the people of Pinellas Park and look forward to being active members of the community,” CEO Ben Kovler said. “We are also thrilled to offer high-quality cannabis products as an alternative to opioids in support of people exercising their right to wellness.”

Stanley applauds the move by Green Thumb, noting that he believes the Florida market remains under penetrated versus states such as Arizona. He says the company’s stock is cheap, trading at a 64 per cent discount to similarly-sized peers.

“GTII is now trading at 13x our 2020E EBITDA estimate,” the analyst says. “This represents an 37% discount the 21x at which the broad peer group trades, and an 64% discount to the 37x average amongst companies with a C$1B+ market capitalization. Our 12-month target price represents a potential return-to-target of 115%, making this a compelling entry point for investors. Potential catalysts include the closing of the acquisitions in Nevada (Essence) and New York, the forthcoming Q1/19 results in May, and additional progress on the retail buildout.”

In a research update to clients today, Stanley maintained his “Buy” rating and one-year price target of (C) $44.00 on GTII, implying a return of 115 per cent at the time of publication.

Stanley thinks the company will post Attr. EBITDA of $38.8-million on revenue of $226.5-million in fiscal 2019. He expect those numbers will improve to EBITDA of $195.9-million on a topline of $523.5-million the following year.