Green Thumb Industries Analyst On Q1 Earnings: Cannabis Grower Has Enough Cash To Fuel Growth

Green Thumb Industries Inc. GTBIF GTII reported its financial results for the first quarter on Wednesday, revealing a 25% year-over-year increase in revenue to $243 million.

The main catalysts for the annual sales growth are increased distribution and the addition of 20 new stores, according to the cannabis company.

Still, Ben Kovler, the company's CEO, said that the "growth is not linear" and that "there will be quarter-to-quarter fluctuations depending on when new markets open to adult-use sales as well as the timing of our infrastructure investments."

Nevertheless, the company touted a ninth consecutive quarter of positive cash flow from operations, generating $55 million in the first three months of fiscal 2022.

The Green Thumb Industries Analyst

Cantor Fitzgerald's analyst Pablo Zuanic retained an Overweight rating on the company's stock with a $39 price target. 

The Green Thumb Industries Takeaways 

On April 21, New Jersey launched recreational sales, following a series of setbacks and 17 months after New Jerseyans chose to legalize the use of recreational cannabis in a ballot measure.

The state's Cannabis Regulatory Commission issued licenses to seven medical marijuana dispensaries, officially known as alternative treatment centers, including GTI.

Zuanic said in his Thursday note that the combination of benefits from the ramp-up in the Garden State and the company's expansion in Virginia and Minnesota may be "offset by macro trends and continued price deflation."

"As new restricted states like NJ add to sales, they should also be margin accretive," the analyst said. 

GTI opened two new stores in Virginia - Rise Lynchburg and Rise Christiansburg - in February.

In Minnesota, GTI purchased LeafLine Industries – one of two licenses in the state - for approximately $150 million. The deal included a cultivation facility, five open and operating retail locations in Eagan, Hibbing, St. Cloud, St. Paul and Willmar and the opportunity to open up to three additional retail locations in the state.

While the quarterly sales were "slightly better than expected," Zuanic pointed out that EBITDA margins were "400bp below market expectations," decreasing for the fourth consecutive quarter.

The analyst also said that the company seeks to achieve 50% gross margins and 30% EBITDA margins.

GTI wrapped up the quarter with $175 million in cash, mentioning that "cash is oxygen," which places it in an advantageous position compared to industry peers.

GTBIF Price Action

GTI shares were down 7.57% at $11.85 Thursday morning, according to Benzinga Pro. 

Photo: Courtesy of Yiorgos Ntrahas on Unsplash.