New Trade for October 11th, 2023

As the cannabis industry awaits updates on potential classification rescheduling, investors are closely monitoring the cannabis sector, and one notable development is the remarkable surge in shares of Canada-based Canopy Growth (TSX: WEED), which have risen by almost 90% since late August. 

However, despite these gains, Canadian cannabis producers continue to face substantial challenges. Amid this shifting landscape, the company featured in today’s trade alert is better suited to benefit from potential rescheduling…

Green Thumb Industries (GTBIF) 

In contrast to their Canadian counterparts grappling with various issues, multi-state operators like Green Thumb are fortifying their profit margins and positioning themselves to capitalize on economies of scale, particularly if marijuana legalization gathers momentum. 

Green Thumb, with a market capitalization of $3.5 billion, strategically focuses on limited-license markets in the U.S., where competition is constrained to a select few. This strategy has enabled Green Thumb to cultivate a dedicated customer base and consistently achieve positive GAAP results for 11 consecutive quarters, setting it apart from other players in the cannabis industry. During the second quarter (Q2), Green Thumb reported sales of US$252 million, a GAAP net income of US$13 million, and an adjusted EBITDA of US$76 million, demonstrating a robust 30% margin. The company’s strong operating cash flow of US$93 million and cash reserves of US$149 million at the end of Q2 underscore its financial stability. With plans to expand its Rise retail stores, Green Thumb is projected to achieve an 18% increase in sales, reaching $1.36 billion in 2023, and a 16.3% rise in revenue to $1.6 billion in 2024. Analysts anticipate adjusted earnings to grow from $0.44 per share in 2022 to $0.57 per share in 2024, despite macroeconomic challenges. With a price-to-forward-sales ratio of 2.2 and a price-to-forward-earnings ratio of 25.6, GTBIF stock presents an enticing valuation, trading at a substantial discount to consensus price target estimates.

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