GMP Securities analyst Robert Fagan is sticking with his thesis on Green Thumb Industries (Green Thumb Industries Stock Quote, Chart CSE:GTII), which just released its first quarter numbers. Fagan thinks Green Thumb’s operational strength and disciplined M&A deployment distinguishes it as one of the top cannabis companies in the US.
GTII reported its first quarter ended March 31, 2019, on Thursday, with record sales of $27.9 million, a 155-per-cent year-over-year increase, a great start to the year, says CEO and founder Ben Kovler. (All figures in US dollars unless noted otherwise.)
“We saw accelerated organic growth across both our consumer products and retail businesses, continued execution of our store build-out with four new openings year-to-date, and further expansion of our consumer products business with the closing of the AGL and Beboe transactions,” Kovler said. “Integral Associates, Nevada’s top cannabis operator, is on track to close in the second quarter, which will significantly scale our branded products and retail footprint in the western US”
Fagan notes that the top line of $27.9 million was in line with his forecast at $27.1 million and the consensus at $27.4 million. The analyst estimates the company’s adjusted EBITDA at negative $0.7 million, which was better than last quarter’s loss of $3.7 million and ahead of his forecast of negative $1.9 million.
Fagan says that he came away impressed with management’s ability to execute and achieve break even profitability. He estimates that Green Thumb has about $130 million of cash ready to deploy on M&A which could be targeted at new brands or retail opportunities.
“Despite some initial media pessimism on Illinois’ recreational cannabis Bill, GTI was quite bullish on the prospects of passage during the Q1 call. This would present a strong catalyst for GTI’s shares, given we estimate an Illinois rec market in its first year could generate ~20–30 per cent upside to our 2020 sales forecast and potentially translate to ~$3–4/share of upside to our target. In our view, GTI’s strong execution recently has differentiated the company as one of the premier operators in the industry,” says Fagan in a client update on Friday.
The analyst is calling for fiscal 2019 revenue and EBITDA of $221.5 million and $51.3 million, respectively, and fiscal 2020 revenue and EBITDA of $470.8 million and $184.3 million, respectively. Fagan is maintaining his “Buy” rating and C$32.00 target, which represents a projected return of 107.5 per cent at the time of publication.