Not A Bullish Start To Q2 Earnings Season Despite Sales Beat, Analyst Explains Why Green Thumb Remains Among His Top Cannabis Picks

As another earnings season heats up, Cantor Fitzgerald's analyst Pablo Zuanic shared some insights in his recent note after one of his top picks in the cannabis MSO group, Green Thumb Industries Inc. GTII GTBIF, reported financial results for the second quarter ended June 30, 2022.

Even though the company reported a roughly 5% sequential and 15% year-over-year increase in sales, which amounted to $254.3 million, beating FactSet consensus, the analyst said it's not a "bullish start to the MSO 2Q earnings season," with sales being below his estimates.

The Analyst

Zuanic retained an Overweight rating on the company's stock while cutting his price target to $31 from $39 on sectoral derating and reduced estimates.

The Thesis

The company identified the New Jersey recreational cannabis market as a key growth driver. However, with $24 million reported by the state in the first month of sales, the company is not entirely optimistic when it comes to its "explosive growth."

"The company sounded cautious about the near-term market outlook and implied that the NJ rec market ramp may need to wait for more stores," the analyst said, even though it "sees the market growing by a factor of 7x over the next few years."

For other (recreational) marijuana markets poised to launch soon, such as Rhode Island, Connecticut, and Virginia, the  company foresees "meaningful growth."

Touching on the recreational market in New York, the analyst said that the company is more "cautions" given the regulatory environment with rules still in the making and a sizeable illicit market.

Still, Green Thumb is an established name with depth in several markets where it's vertically integrated as credible franchise strength and "attractive footprint."

"Geen Thumb fits all those criteria and has the rec optionality in the eastern part of the US," Zuainc said.

GTBIF Price Action

Green Thumb's shares traded 1.65% higher at $9.87 per share at the time of writing on Thursday morning.

Benzinga Cannabis Capital Conference

Come and meet Pablo Zuanic in person at the Benzinga Cannabis Capital Conference on September 13-14 in Chicago. 

Get your conference tickets HERE. Book your room in the historic Palmer House Hotel HERE.  See you in Chicago!

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