Green Thumb Industries Inc (CNX: GTII) produces and sells medical and recreational cannabis and is headquartered in Chicago, Illinois. The company operates 15 manufacturing facilities and licenses for close to 110 retail locations spread across the US.

Key highlights

• Strong revenues in FY21: On March 1, 2022, the company announced its Q4FY21 and FY21 results, reporting an increase in its total revenue by 60.5% to USD 893.6 million in FY21 as compared to USD 556.7 million in FY20. The increase was primarily attributable to the uptick in sales of its Consumer Packaged Goods and Retail Businesses, especially in Pennsylvania and Illinois. 

• Sequential Growth in Q4FY21:For the Q4FY21 the total revenues went up by 37.4% to USD 243.6 million as compared to the USD 177.2 million in pcp. This rise was somewhere supported by the expansions done by opening up 10 fresh stores, 12 acquired stores, and the rise in footfalls of its 73 operating retail stores. Further, the gross profits for FY21 increased by 52.8% to USD 128.6 million vs the gross profit of USD 100.5 million in pcp.   

• Industry beating margins: The company worked on its profitability metrics in Q4FY21, thereby reporting an EBITDA margin of 0% as compared to the industry margin of 26.4% and a higher operating margin of 22.0% for Q4FY21 vs the Industry median of 16.3%. The improved profitability will help the company to generate organic cash which could be further utilized for expansions and strategic ties to keep its supply chain undisrupted.

Source: REFINITIV, Analysis by Kalkine Group

• Technical analysis: The prices skyrocketed from the lows of CAD 5.05 in March 2020 during the COVID-19 restrictions, and rallied to print the lifetime high of CAD 49.66 in February 2021. From there the stock was sold off at every rise and currently forming a consolidation around CAD 23 levels. One of the trend confirmation indicators: 50 DMA, is revolving around the current levels, and the trend can be seen strengthening further once the prices sustain above the 50 DMA for a substantial period.

Stock recommendation 

The company delivered a positive return of 7.87% in past one month and a negative return of 13.34% in the last three months. The recent numbers showcase a positive quarter for the company but the gross margins increased by just 0.40% on an annual basis, which raises the operational efficiency. Technically the prices on the chart are declining and trying to consolidate at current levels, which should be under the radar unless the momentum builds towards the North.

Therefore, based on the above rationale and chart pattern, we recommend a “Watch” rating at the closing market price of CAD 23.57 on March 1, 2022.  Additionally, the markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

One-Year Technical Price Chart (as on March 1, 2022). Source: REFINITIV, Analysis by Kalkine Group

Disclaimer

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