Green Thumb Industries (GTI), which operates as GTBIF in the stock market, has seen significant growth since early 2023. However, it is faced with tough competition from its cannabis industry peers and shows a slower-than-expected growth rate. GTI will release its Q4 report on Tuesday afternoon amidst growing concerns over its valuation and prospects. Although its performance has been impressive, competitors in the cannabis sector have offered better returns.
Revenue and Profitability Growth in Question
Analysts expect GTI to generate revenue of $270 million, representing a 4% increase from last year’s figures. The company posted third-quarter revenues of $275 million, marking a 5% annual increase, and an adjusted EBITDA of $83 million, which fell 2%. This suggests that the outlook for GTI is rather bleak, showing slower revenue growth and profitability growth compared to a year ago and down sequentially. At the end of Q3, GTI reported debt at $299 million alongside cash reserves of $137 million. Interestingly, the company has significantly lower income tax payables compared to its peers, while its current ratio of 2.1X is far superior to most competitors.
An In-Depth Look at GTI’s Outlook
In December, analysts projected that GTI’s revenue would grow by 7% to $1.116 billion in 2024, generating an adjusted EBITDA of $331 million (up by 6%). These projections have since changed slightly, with analysts now predicting marginally lower revenues of $1.115 million and adjusted EBITDA of $329 million (up by 6%). The outlook for revenue growth in 2025, as projected by seven out of seventeen analysts, was set at $1.231 billion with an adjusted EBITDA of $379 million. Current forecasts have slightly increased these figures, estimating revenues of $1.237 billion (up 11%), paired with an adjusted EBITDA of $381 million (up 16%). Provided cannabis is rescheduled, GTI could witness significantly improved cash flows due to lower taxation rates.
GTI’s Uncertain Future Amidst Rescheduling Speculation
Although the rescheduling of cannabis seems like an imminent possibility, it remains uncertain when or if this will actually happen. GTI’s revenue projections assume that cannabis will remain unscheduled, meaning there is potential room for adjustment should this change. Overall, GTI has demonstrated a decent performance over recent periods but has lagged behind its Tier 1 MSO peers.
GTI’s Performance in Focus
The stock prices for Green Thumb Industries closed on Friday at their highest level since late 2022. However, trading volumes have decreased since peaking in September. There appears to be resistance around $15 per share with support between $9 and $10. In August, the stock posted a new post-peak low yet remained well above its 2050 low below $1.5. GTI is the only Tier 1 MSO that hasn’t reached a new all-time low since 2053, indicating some stability amidst its relatively weaker performance compared to industry counterparts.
A Big Owner That Raises Concerns
One big worry for investors lies with the AdvisorShares Pure US Cannabis ETF, which has significantly expanded its shareholding in GTI over the past few months. This surge of buying activity led to a 23% increase in shares outstanding since the year’s end, which is aligned with portfolio inflows. However, potential downside risks may arise if rescheduling does not materialize and these shareholders decide to sell their holdings. In such scenarios, ETF selling may adversely impact the MSO space.
Valuation Fears: Is GTI Facing Underperformance?
While the valuation of GTI isn’t dramatically out-of-line with its peers, it is relatively expensive on some metrics, primarily due to its weaker stock performance among Tier 1 MSOs. Compared to top-tier competitors, GTI boasts an enterprise value-to-projected adjusted EBITDA ratio of 11.0X for 2024, making it the second most expensive option.
As investors speculate about GTI’s prospects, one thing remains clear: Green Thumb Industries must remain competitive amidst challenging conditions in a rapidly evolving market. While recent years have painted an impressive growth trajectory for the company, the true test lies in whether or not it can continue to adapt and ultimately outperform its competitors in the long run.
Rita Ferreira
Rita is a seasoned writer with over five years of experience, having worked with globally renowned platforms, including Forbes and Miister CBD. Her deep knowledge of hemp-related businesses and passion for delivering accurate and concise information distinguish her in the industry. Rita's contributions empower individuals and companies to navigate the complexities of the cannabis world, and her work remains a valuable resource for those seeking a deeper understanding of its potential.
