Buy Green Thumb Industries for a double, says Beacon Securities

Legal weed made its adult-use debut in the state of Illinois this week and US multi-state operator Green Thumb Industries (Green Thumb Industries Stock Quote, Chart, News CSE:GTII) is right in the mix with a number of new store openings.

In a new update to clients Thursday, analyst Russell Stanley of Beacon Securities called the event a continuation of GTI’s retail success.

Stanley reiterated both his “Buy” rating and C$24.00 target price, which at press time represented a projected 12-month return of 97 per cent.

Recreational cannabis became a reality in Illinois on Wednesday, ushering in a new era for the sixth-largest state in the United States, with a population of 12.7 million. The state becomes the second-largest adult-use market in the US after California and also the first state to implement adult-use legislatively rather than through a voter ballot initiative.

For Green Thumb, which has interests in 12 states including 13 manufacturing facilities, 40 operating dispensaries and licenses for a total of 96 retail locations, the new market in Illinois now includes four adult-use stores with a fifth expected to open within several days. The four opened to “very strong demand,” according to Stanley.

“Green Thumb’s 40 stores give it the second largest dispensary footprint amongst MSOs in the United States, positioning the company to continue executing on its distributing-brands-at-scale strategy,” Stanley wrote.

GTI’s Rise Joliet store became the company’s first adult-use only store in the state in comparison to other outlets which are mixed rec and medical stores. GTI Founder and CEO Ben Kovler called the opening historic for his company, which now has a total of six locations in Illinois.

“Our stores that sell to all adults 21+ – Rise Mundelein, Rise Canton, Rise Joliet and 3C Joliet – have served thousands of people so far and the energy and enthusiasm from new customers has been overwhelming,” wrote Kovler in a press release.

“2020 is going to be another big year and we look forward to serving guests at our stores and enabling well-being through cannabis with our branded products such as Dogwalkers, incredibles, Rythm and The Feel Collection available at stores throughout the state,” Kovler said.

In his update, Stanley also pointed to Ohio, where Green Thumb recently opened its fourth location in Lakewood, a suburb of Cleveland, making 46 stores in total in Ohio and the company’s 20th retail location opened in 2019 — representing the high end of management’s guidance, Stanley noted. In December, GTI also opened a second dispensary in Connecticut.

Looking ahead, Stanley thinks that GTI will generated fiscal 2020 revenue and Attributable EBITDA of $471 million and $127 million, respectively, and fiscal 2021 revenue and Attributable EBITDA of $760 million and $263 million, respectively.

“At current levels, the stock now trades at approximately 7.3x our F2021 EBITDA forecast, representing a six-per-cent premium to the 6.9x average for US operators, and a 46-per-cent discount to the broad peer group average of 13.4x,” Stanley wrote.