Analyst Note| Kristoffer Inton |
Green Thumb’s results held up well into the third quarter, as highlighted by extended sequential improvement in both sales and EBITDA despite the continuing inflationary environment. Revenue increased 3% sequentially on continued demand growth in adult-use markets and strong retail sales in new stores, following the 5% revenue jump that solidified the second-quarter rebound. This drove adjusted EBITDA margin to 32%, compared with 28% in the first quarter. We’ve slightly trimmed our full-year revenue forecast to about $1 billion from $1.1 billion on slower-than-expected store openings in the back half of the year. However, this is immaterial to our unchanged fair value estimate of $45 for the no-moat firm. Green Thumb’s Canadian fair value estimate rises to CAD 61 from CAD 58 on a stronger U.S. dollar. Shares remain very undervalued as the market appears to underestimate the potential size of legal sales.