The wait for anticipated marijuana legalization at the federal level may be at the core of what's keeping leading multistate cannabis operator stock prices contained. Some investors are simply not willing to put their money into these stocks without a nudge toward more promise.
But for long-term investors looking at the growth of the market right now, that wait may not be necessary. Top marijuana companies like Green Thumb Industries (GTBIF 0.54%) are cranking out growth in revenue and income. And after its stock price has lost nearly three-fourths of its value over the past 18 months, now could be a great time to harvest shares.
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Growing revenue in its home state
Green Thumb is a leading multistate operator and has the benefit of being headquartered in Illinois, where adult-use marijuana sales in July for all retailers hit $135 million, the highest monthly recorded sales for the state this year and the second-highest monthly sales since the state launched the adult-use market.
The company has been known to focus on building relationships in its states of operation, including its home state, through giving back to the community with proceeds from first-day sales at new dispensary openings. This has allowed the company to gain the trust of the buying community through its products and relationships, helping support revenue generation and the ability to expand its footprint. Green Thumb now has 10 retail stores in Illinois, with plans to further its expansion.
OTC: GTBIF
Key Data Points
New markets bring new revenue
Outside of Illinois, Green Thumb is experiencing growth from new markets that have recently begun recreational-use marijuana sales.
The biggest winner of the quarter for Green Thumb for new markets is New Jersey -- projected to be a $2 billion market. New Jersey sales began on April 21, resulting in $24 million in adult-use cannabis sales from just 12 open stores during the quarter. One-fourth of those stores are owned by Green Thumb, one of which opened its doors to customers who began lining up before dawn, which helped boost the company's year-over-year total quarterly revenue by 15% to over $250 million. That also helped the company end the quarter with $0.11 per share in net income.
In 2023, Green Thumb could expect to see those revenue numbers begin to grow dramatically with recreational-use sales being turned on in three new states, including Connecticut, Rhode Island, and the heavily populated New York, a state where the total market for marijuana sales is expected to have a value of over $7 billion by 2025. 2024 should bring more revenue growth to the company as Virginia comes online with its sales.
As a result of strategic acquisitions and expansion, Green Thumb has set itself up for optimized growth potential, having established retail stores in all four of these states. CEO Ben Kovler believes the total legalized marijuana industry will carry a value worth three times the current $25 billion, with a majority of growth generated by new states turning on adult-use sales.
Why buy now?
Positive second-quarter earnings news in which Green Thumb beat the street estimates on the top and bottom lines, supported by expansion in current markets and growth in new markets, is helping make Green Thumb a top marijuana company for the future, and it could be overtaking federal legalization as a key investment factor in investors' minds. This is coming after a broader market decline, combined with a lack of progress at the federal level on legalization, has driven the stock price down from a high of $37 just 18 months ago to its current $10 share price.
The excitement of a new administration has given way, but now a new excitement supported by revenue and income growth is taking hold. Long-term investors could be looking at this as a blessing in disguise. The company is growing with retail operations across 15 U.S. markets, the total market value is growing, and more states are coming online. All of that should lead to positive results in the coming years for investors.
If analyst price targets are any indication of future potential, long-term investors would be wise to jump on Green Thumb while the stock price is down but far from out. Analysts have a current 12-month average price target of $31 per share -- a potential 200% gain. Some investors have already taken notice, driving the stock up by 10% in the past month.
