US cannabis giant Green Thumb scores price target boosts as earnings top expectations

Zack Guzman
·Senior Writer
0

Another quarter of financial metrics from U.S. cannabis company Green Thumb Industries topping Wall Street expectations was marked with at least two price target upgrades Thursday.

The Chicago-based cannabis giant which operates in 12 states, reported a 134% year-over-year jump in fourth-quarter revenue Wednesday to top $177 million while adjusted operating EBITDA also topped expectations to come in at $65.4 million.

Analysts at Piper Sandler and Cowen both reacted positively to the beats by boosting their respective Green Thumb (GTBIF) price targets. Piper raised its target to $40 a share from $35, while Cowen boosted its forecast to $45 a share from $30. Green Thumb shares closed Thursday at $35.

Green Thumb CEO Ben Kovler told Yahoo Finance Live that the company's 157% revenue growth for the full 2020 calendar year wasn't just due to more locations, but also due to larger customer transactions.

"We're seeing growth from American consumers choosing more cannabis," he said. "It's really pretty universal and it's really sweeping across the country."

HOLYOKE, MA - JANUARY 31: Jonell Santiago works at Green Thumb Industries cultivation center in Holyoke, MA on Jan. 31, 2019. Green Thumb Industries, a Chicago-based cannabis company, invested $10 million to create a cultivation center in a former Holyoke mill building. Massachusetts is home to dozens of old textile and paper mills that once thrived, making the state a manufacturing powerhouse. By the 1950s, those industry jobs moved south and the mill buildings deteriorated from decades of neglect. Many have been repurposed as apartments or smaller businesses. Some have been torn down. But one unlikely industry is bringing them back: cannabis. Since the legalization of medical and recreational cannabis in 2012 and 2016, cannabis companies have been buying and leasing these relics of industrialization. There are a few reasons why: quicker profits, availability, and the negative stigma that surrounds weed. (Photo by Jonathan Wiggs/The Boston Globe via Getty Images)
Jonell Santiago works at Green Thumb Industries cultivation center in Holyoke, MA on Jan. 31, 2019. Green Thumb Industries, a Chicago-based cannabis company, invested $10 million to create a cultivation center in a former Holyoke mill building. (Photo by Jonathan Wiggs/The Boston Globe via Getty Images) (Boston Globe via Getty Images)

The company also recently announced an exclusive partnership with cannabis beverage company Cann to roll out cannabis drinks in its markets beginning with Illinois in the spring. That partnership is expected to expand to Green Thumb's other operating states later in the year. Canadian cannabis giant Canopy Growth is also eyeing Illinois for the U.S. debut of its cannabis drinks this summer. Kovler explained that the partnership stemmed from the success Cann has so far displayed in attracting new customers through its drinks.

"What our business is at the core is branded consumer products that are going to develop a relationship with the American consumer," he said, adding that Green Thumb's national scale will allow it to move quickly to leverage what has worked on one coast to another.

In funding all its growth, Piper Sandler noted that the company along with other profitable peers have seen costs of capital fall precipitously. That had earlier been a pain point in an industry plagued with fundraising issues due to federal restrictions on cannabis. Before its profitable days, Piper noted that Green Thumb took out debt at a 12% interest rate. Canopy Growth announced it secured a new $750 million term loan financing deal Thursday at Libor plus 8.5%.

"I've talked about for a while that the access to capital was limited and now the cost of capital is going down," Kovler said. "This is good for shareholders, this will create a lot of equity value because the investments that we can do into the business and into the market... that return on invested capital is very good."

Zack Guzman is an anchor for Yahoo Finance Live as well as a senior writer covering entrepreneurship, cannabis, startups, and breaking news at Yahoo Finance. Follow him on Twitter @zGuz.

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