Our Green Thumb Industries Stock Prediction In 2019 (Buy or Sell?)
The marijuana market is growing exponentially but compared to its long-term potential, “canna-business” remains in its infancy, akin to the computer industry in the 1980s.
Imagine having been able to invest in Apple (NSDQ: AAPL) during its formative years in the go-go Eighties, when visionary founder and Chief Executive Steven Jobs was just a bearded kid in a garage, rolling up his sleeves and getting started. You’d be very rich.
These days, investors are looking for “the next Apple” of marijuana. Green Thumb Industries (CSE: GTII, OTC: GTBIF), an operator of marijuana dispensaries, might fit the bill. Below, I take a look at whether Green Thumb is a buy in 2019 — or just another flash-in-the-pan that gets undeservedly hyped on CNBC.
For investors, the potential gains in marijuana are enormous.
Before marijuana legalization started to gain traction in the 1990s, the federal government’s anti-marijuana propaganda war had done a good job of demonizing pot. Officials had convinced most citizens that marijuana was the “devil’s weed,” as depicted by the infamous 1936 movie Reefer Madness.
And today? Society has pulled a 180-degree turn.
About 62% of Americans think marijuana should be legalized. In the United States, marijuana remains outlawed at the federal level, but increasing numbers of states are legalizing pot for medicinal as well as recreational use.
Medical marijuana has been legal in Canada since 2001. In October 2018, the country legalized on the federal level the possession and use of recreational marijuana. The move is expected to create an industry with $4 billion in annual sales in Canada.
The most striking cultural development regarding marijuana is the fast emergence of retail dispensaries. Depending on the laws where they live, millions of consumers currently have the ability to walk up to a retail outlet and legally buy marijuana, as if they were buying aspirin or a pack of gum.
Cannabis dispensaries are local government regulated physical locations, typically inside a retail storefront, in which a person can legally buy marijuana and marijuana-related products for medical or recreational use.
Green Thumb is a major marijuana dispensary operator that’s rapidly expanding its retail footprint. Is the company a shrewd bet or a fad stock? Let’s take a look.
What Is Green Thumb Industries?
With a market cap of $2.4 billion, Green Thumb Industries manufactures and sells a broad variety of marijuana products in the U.S. The company’s cannabis products include flower, concentrates for dabbing and vaporizing, edibles, and topicals.
Based in Chicago, the company markets its products through third party retailers. The company currently owns and operates a chain of 73 retail stores under the RISE name.
Founded in 2014, Green Thumb went public in Canada in June 2018 through a reverse takeover and trades on the Canadian Securities Exchange (CSE) under the ticker symbol GTII and Over the Counter (OTC) under GTBIF.
How Has Green Thumb Stock Performed?
Since going public on June 13, 2018, GTII has gained 83.1% compared to a loss of 6.4% for the S&P 500.
Who Are Green Thumb Rivals?
The marijuana retail dispensary market is getting more competitive, as cannabis becomes a mainstream consumer product. Green Thumb’s three chief rivals are the following public companies:
Curaleaf Holdings (CSE: CURA, OTC: CURLF)
Curaleaf Holdings, based in Wakefield, Mass., operates an integrated network of medical and wellness cannabis facilities throughout the U.S.
Curaleaf cultivates, processes, markets, and dispenses marijuana products in a range of forms, including flower, pre-rolls and flower pods, dry-herb vaporizer cartridges, concentrates for vaporizing, concentrates for dabbing, tinctures, lozenges, capsules, and edibles.
Multiple product formats provide an array of administration options, including inhalation, ingestion, sublingual, and topical.
With a market cap of $3.5 billion, Curaleaf also provides non-cannabis management and consultative services to licensed cannabis operators, to assist with cultivation, extraction, production, and retailing.
Founded in 2010, Curaleaf currently operates a network of 34 dispensaries, 12 cultivation sites, and 10 processing sites in 12 states.
MedMen Enterprises (OTC: MMNFF)
Based in Culver City, California, MedMen cultivates, produces, distributes, and retails recreational and medicinal cannabis. Founded in 2010, the company recently has expanded beyond its initial markets of California, Nevada, and New York.
With a market cap of $1.4 billion, MedMen currently operates 69 dispensaries and 17 cultivation and production facilities, all licensed, across 12 states.
Trulieve Cannabis (OTC: TCNNF)
Based in Quincy, Florida, Trulieve cultivates, distributes, and retails medical cannabis in the U.S.
With a market cap of $961.9 million, the firm offers a suite of Trulieve branded products, including nasal sprays, capsules, concentrates, syringes, and cannabis flower in containers for vaporizers, topical creams, tinctures, and vape cartridges. The company distributes its products to 21 Trulieve branded dispensaries in Florida.
Will Green Thumb Go Up In 2019 (Should You Buy)?
Marijuana’s transformation from high-times rebellion to Main Street capitalism seems to hold an enduring fascination with investors.
Dispensary operators are booming throughout the country, as cannabis retail outlets sprout up in downtown America.
Green Thumb Industries has recently gained enthusiastic media coverage, for good reason. The company is seen as a major factor in legitimizing the marijuana business, as this video shows:
Investors are particularly excited that Green Thumb is in expansion mode. The company in January 2019 signed a definitive agreement to acquire Connecticut’s Advanced Grow Labs in a deal valued at roughly $80 million.
Advanced Grow Labs owns a 41,000-square-foot manufacturing facility in West Haven and a 46% stake in a soon-to-open marijuana dispensary in Westport.
By acquiring Advanced Grow Labs, Green Thumb will have 12 manufacturing facilities and licenses for 85 retail shops in 11 states.
Green Thumb also has posted robust operating results. The company’s revenues reached $17.2 million in the third quarter of 2018, an increase of 344% compared to the same quarter a year ago.
The top-line jump wasn’t sufficient to offset a net loss of $3.3 million, or a loss per share of 2 cents for the quarter. However, as Green Thumb expands and simultaneously works to reduce costs, the bottom line should improve.
Will Green Thumb Go Down In 2019 (Should You Sell)?
When considering any investment, it’s always prudent to give the bear case a full hearing.
The marijuana dispensary business is particularly risky. Many well-meaning entrepreneurs have found in recent years that they’ve put all of their eggs into the wrong basket while trying to open a marijuana dispensary.
Faced with confusing state laws, unfair and burdensome tax laws and local governments that pass ordinances severely restricting or outlawing marijuana cultivation and sales (sometimes years after dispensaries have opened their doors), dispensary owners that start retail outlets without gathering sufficient political and regulatory intelligence risk losing their investment.
And remember, marijuana remains outlawed in the U.S. on the federal level. Increasing numbers of states are legalizing pot, but Uncle Sam still bans it. The feds have left it to the states to come up with their own laws regarding pot, which has created a hodgepodge of regulations.
What’s more, the Trump administration remains avowedly anti-pot. Despite vague assurances by the U.S. Department of Justice that banking regulations will achieve clarity when it comes to cannabis, it’s still unclear that banks may or may not be allowed to work with marijuana businesses.
The lack of access to standard banking services has been an impediment for marijuana dispensaries.
Another caveat is the rising incidence of penny stock fraud and dubious investments in the marijuana realm. The “green rush” has become a magnet for pump-and-dump schemes.
An adverse change in the regulatory climate always lurks as a possibility, which would clobber companies such as Green Thumb.
Overall Green Thumb Forecast And Prediction For 2019
Now the bull case, which is overwhelming.
Yes, the political climate could always change. However, despite posturing from marijuana prohibitionists, the normalization of marijuana laws is an unstoppable trend.
There’s simply too much money at stake and, at the end of the day, the Trump administration is pro-business. You can expect plenty of anti-pot rhetoric from the White House, but scant tangible action. Regulatory impediments still exist but they’re on an inexorable path toward extinction, just like alcohol Prohibition in the 1920s.
Green Thumb Industries has set the table for future growth. The company has posted reassuring operating results and made smart strategic acquisitions. The firm also is a possible takeover target by larger rivals, perhaps even a mainstream consumer food and beverage company. A buyout would prove a boon for Green Thumb shareholders.
Green Thumb Industries is distinct from many of the shaky marijuana penny stocks that are likely to go bust in 2019. If you’re looking for “the next big thing,” Green Thumb is a compelling candidate.
John Persinos is the managing editor of Investing Daily.