Many industries are continuing to struggle even as the markets have reopened in several geographies following pandemic-led lockdowns. However, cannabis demand continues to be strong amid the pandemic…
As per New Frontier Data, US states, which have legalized cannabis, are seeing an average rise in spending per consumer of 23% since the beginning of this year. And August expenditures per user were 17% higher on an average Y/Y though there was a slight drop from the initial spike in 2Q.
We will discuss how cannabis companies Green Thumb and Hexo are positioned currently and use the TipRanks’ Stock Comparison tool to see which stock offers a better investment opportunity.
Green Thumb Industries (GTBIF)
Chicago-based Green Thumb Industries is a leading US cannabis grower. It has 13 manufacturing facilities and owns licenses for 96 retail locations and operations across 12 US markets. It sells branded cannabis products through its retail cannabis stores –Rise and Essence. Green Thumb is among the few cannabis companies that are generating operating profit.
The company is benefiting from the rising demand for medical and recreational cannabis in the US with its revenue in the first half exceeding its full-year 2019 revenue.
Second-quarter revenue surged 16.6% sequentially and 167.5% Y/Y to $119.6 million driven by strength from the consumer packaged goods and retail businesses, mainly in Illinois and Pennsylvania. Adjusted operating EBITDA surged 38.6% sequentially and about 145% Y/Y to $35.4 million.
Expansion efforts continue to boost Green Thumb’s performance. In July, the company completed construction at its Toledo Processing Facility in Ohio and is on track to complete its Illinois and Pennsylvania expansion projects in the third quarter. These three facilities will roughly double the company’s capacity in those markets.
Moreover, the company added six retail stores in the second quarter, thus operating 48 stores in 10 states by end of the quarter. Green Thumb is also investing in its e-commerce platform and enhancing its digital storefront.
On September 2, Cantor Fitzgerald analyst Pablo Zuanic increased the price target for Green Thumb to $29 from $27 and maintained a Buy rating. In a research note to investors, Zuanic explained that deregulation “tailwinds” and “constructive” sales stats in the months ahead should continue to push up multi-state operator stocks.
The analyst believes that Green Thumb has the best profitability among his Buy-rated names and “has the complexity risk of scale and deal integration.” He also thinks that sustained profitability of over 30% EBITDA margins combined with franchise strength in key states will drive EBITDA multiples over time to at least 20 times. (See GTBIF stock analysis on TipRanks)
The Street mirrors Zuanic’s optimism with a…
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