A blowout first quarter for Green Thumb Industries (Green Thumb Stock Quote, Chart, News CSE:GTII) has Stifel GMP analyst Robert Fagan feeling bullish about the stock.
In an update to clients on May 15, Fagan reaffirmed his “Buy” rating and upped his target price from C$32.00 to $34.00, which at press time represented a projected 12-month return of 206.3 per cent.
Chicago-based GTI is the owner and operator of a retail network with stores and manufacturing facilities across 12 US markets and licenses for 96 retail locations. The company released its first quarter 2020 ended March 31 financials on May 14, featuring total revenue up 267.6 per cent year-over-year and up 35.4 per cent sequentially to $102.6 million. (All figures in US dollars unless where noted otherwise.)
Green Thumb founder and CEO Ben Kovler said the company continues to execute as it launched adult use sales in Illinois, which just opened the market in January. Kovler said GTI is seeing strong consumer demand even in the face of COVID-19.
“We achieved a major milestone by breaking $100 million in quarterly revenue along with substantial EBITDA growth. These factors helped contribute to our positive free cash flow from operations. We believe that our operational strength and resilience, supported by a strong balance sheet, continue to differentiate and position us for long-term success, especially during these challenging times,” said Kovler in a press release.
By comparison with the $103 million in revenue, Fagan was calling for $92 million, which the company’s own guidance was in the $90 – $95 million range. Fagan said the company’s EBITDA was equally strong at $25.5 million, up 80 per cent sequentially and ahead of his forecast at $18 million and the consensus $19 million, based on growing operating leverage (the analyst pointed out that SG&A was only up five per cent from the previous quarter).
“We continue to have high conviction in GTII’s growth outlook as wholesale platforms in IL, PA, NJ, and OH are set to ramp up in H2/20, headwinds in MA and NV are either temporary or mitigated by favourable positioning, and COVID is likely to boost retail throughput in other states. Combined with good liquidity of ~$70 million, and all major CAPEX projects fully funded, GTII is poised to execute on its strategically positioned platform in several high growth states,” Fagan said.
With his update, Fagan has raised his 2020 sales forecasts to reflect the stronger performance in Illinois in the quarter, while offset by lower growth in MA to reflect a longer closure of the recreational market there. For Green Thumb’s Nevada operations, the company’s predominantly local customer base is expected to drive sales. The analyst has upped his 2020 revenue forecast to $484 million from $468 million and raised his EBITDA estimate to $146 million from $131 million. For 2021, Fagan is calling for revenue of $730 million on EBITDA of $261 million (previously $719 million and $250 million, respectively).
After dropping by more than half over the first three months, Green Thumb’s share price is now up one per cent for the year.