Green Thumb Industries (Green Thumb Industries Stock Quote, Chart, News CSE:GTII) is a solid bet to ride out the COVID-19 pandemic, according to Echelon Wealth Partners analyst Andrew Semple, who provided an update to clients on GTI on Tuesday where he reiterated his “Buy” rating and C$20.00 target.
Chicago-based Green Thumb is a multi-state operator with retail cannabis stores under the Rise and Essence names, a number of brands, 13 manufacturing facilities and licenses for 96 retail locations across 12 US markets.
In comparison to other sectors of the economy, Semple said US cannabis is likely to do fairly well, for a number of reasons. First, in contrast to other businesses, US regulators in many states have allowed cannabis stores to stay open through the COVID-19 crisis, with some states like Pennsylvania, Massachusetts and New York deeming medical cannabis an “essential” service while in others like California, Nevada and Illinois adult-use stores have so far been allowed to stay open despite the closure of “non-essential” businesses.
Furthermore, Semple argued that first impressions are that cannabis is seeing an uptick in demand during the crisis, which is good for the pot companies, although it’s unclear at this point whether the increase is due mostly to stockpiling or a rise in demand related to more use-occasions and higher anxiety levels during the pandemic.
Of the companies in his coverage universe, Semple said Green Thumb is his best US cannabis play.
“Within the US cannabis industry, we would place our bets on GTI. The Company is fully funded for its expansion plans with access to $100 million-plus of capital and no pending M&A,” Semple wrote.
“We like that the Company’s operations are diversified, having achieved meaningful scale in several large markets (NV, IL, PA, CT, MA, MD), with operations in a total of 12 states. We believe GTI is generating operating cashflow today, reducing the risk that it will require the capital markets in this volatile time. We also believe the pandemic may shake out some of the weaker hands in the cannabis industry, leaving GTI even better positioned once it emerges from the crisis,” he wrote.
With the update, Semple reaffirmed his forecast for Green Thumb, calling for fiscal 2020 revenue and adjusted EBITDA of $441.5 million and $102.3 million, respectively. His C$20.00 target at press time represented a projected 12-month return of 179 per cent. (All figures in US dollars except where noted otherwise.)
As far as other US cannabis names go, Semple again said that access to capital is a priority, and thus, aside from from GTI, the analyst likes Trulieve Cannabis and Cresco Labs. Cresco gets the nod (although with a higher risk profile) due to likely upside in its share price, while Trulieve is praised for generating positive cash flow, although because much of TRUL’s interests currently reside in the one
state of Florida, Semple prefers the diversity coming from Green Thumb. The analyst said the diversification is especially warranted during the current crisis where some jurisdictions could be turned off quickly by a decision at the state level.