Year over year revenue growth backed by an aggressive acquisition drive are some of the factors that affirm Green Thumb Industries Inc. (OTCMKTS:GTBIF) growth metrics. A strengthened balance sheet means the company is well financed and positioned to pursue organic growth in addition to financing its strategic initiatives.
Green Thumb Industries Piece Analysis
Despite the company posting solid financial results, the stock has continued to edge lower in the market in unclear circumstances. Over the past two months, the stock has shed more than 50% in market value. While the steep pullback is a point of concern, the stock appears to be closing in on a strong support level.
Any sell-offs should experience strong support at the $6 a share level, from where the stock rallied to record highs of $25. A breach of the critical support level could leave the stock susceptible to further declines.
While nothing has changed fundamentally, Green Thumb Industries could bounce back after the steep pullback. Any rallies after the recent pullback would experience strong resistance at the $12 a share level.
A rally followed by a close above the critical resistance level could open the door for the stock to make a run for the $15 a share level, the next resistance level. The stock would have turned bullish on rallying and stabilizing above the $15 a share level.
Green Thumb Industries is a cannabis-focused company that manufactures and sells a wide array of cannabis products across the United States. Its product line includes flower, concentrates for dabbing as well as vaporizers as well as edibles and topical.
Green Thumb Industries is due for a major bounce back given that the steep pullback has come at the backdrop of strengthening underlying fundamentals. For starters, the company is fresh from posting stellar financial results that affirm robust growth phase.
Revenue for the three months ended September 30, 2018, was up by 344% to $17.2 million. However increased spending as the company sought to strengthen its business empire resulted in a wider than expected net loss of -$3.4 million, from a net income of $0.4 million in the second quarter.
“This was another quarter of solid financial and operational results as we build our foundation for the future. We have been focused on expanding wholesale capacity to meet increasing demand, opening new RISE™ stores and are unwavering in our diligent effort building a world-class team,” said CEO Ben Kovler.
Increased spending went towards expanding retail operations as well as sales and marketing. The company also moved to expand its cannabis footprint in Florida with the acquisition of KSGNF. With the acquisition, the company is now on track to more than double its footprint in the limited license adult use market.
Green Thumb Industries acquisition drive has also seen it capture Integral Associates. With the acquisition, the company is set to gain access to Integral’s Essence retail brand that includes a dispensary along the Las Vegas Strip. The company will also access Integrals cultivation and processing facility Desert Grown Farms. The deal is valued at $290 million.
Acquisition of Integral Associates is a big coup given that the company operates in one of the most popular tourist destinations.
“This acquisition is immediately accretive and an important milestone as we position GTI to scale in one of the only limited license adult use markets,” said Mr. Kovler.
In addition, Green Thumb Industries balance sheet has received a significant boost on the company announcing the closing of a CAD$101.66 million bought deal financing. A good chunk of the financing came from a syndicate of underwriters led by GMP Securities, Beacon Securities Limited and Cormark Securities Inc.
What Next for Green Thumbs Industries
Green Thumb Industries has taken a significant hit on investors reacting to its widening net loss. While the net loss Is a point of concern, most of it has come about, on the company spending big to strengthen its retail and sales operations.
Robust revenue growth is an achievement that attests to the company’s growth potential that will go a long way in offsetting net loss going forward. The company has also embarked on an acquisition drive as it looks to expand its operations into key cannabis markets.
That said it is clear that nothing has changed fundamentally to justify the recent sell-off. In our view, the stock is due for a major bounce back, on investors taking note of the underlying solid fundamentals.
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Disclosure: We have no position in GTBIF and have not been compensated for this article.