Is This Profitable Pot Stock a Buy Before Q2 Earnings?

In 2020, this Illinois-based multistate operator (MSO) rode the ongoing cannabis boom to a successful and profitable year. This company is rapidly emerging as one of the top contenders in the U.S. marijuana industry, and even amidst a pandemic, it was able to continue expanding…

After a rocking 2020, Green Thumb Industries’ (OTC:GTBIF) market cap is nudging up against that of one of the biggest Canadian players, Canopy Growth — which boasts an investment from U.S. beverage giant Constellation Brands shoring up its balance sheet. Green Thumb now holds a market cap of $7.1 billion to Canopy’s $7.5 billion. Note that Green Thumb is also profitable, while Canopy is not. So far this year, Green Thumb’s stock is up 32%, compared to Canopy’s fall of 22%. Meanwhile, the industry benchmark, the Horizons Marijuana Life Sciences ETF, has gained 20% over the same period.

After establishing a strong footing in its home state, Green Thumb is looking to spread its roots in some hot new cannabis markets. It is set to report the earnings from its second quarter (ended June 30) tomorrow, Aug. 11. Here’s why investors may want to consider getting in now.

A strong start to 2021, and the full year could turn out even better

Green Thumb makes medical and recreational cannabis products under brand names including Beboe, Dogwalkers, and Dr. Solomon’s. When its home state of Illinois legalized recreational marijuana last year, Green Thumb took off, and in Q1 earnings results, management reported prominent growth in Pennsylvania and Illinois as well. Total revenue for the quarter surged 89.5% year over year to $194.4 million.

The Illinois market alone has already generated $753 million in recreational sales through July, and the state could easily surpass $1 billion in 2021 sales of recreational cannabis alone if this trend continues. Green Thumb operates nine dispensaries in Illinois.

For the first quarter, the company reported  positive earnings before interest, tax, depreciation, and amortization (EBITDA) and marked its third consecutive quarter of profits. Adjusted operating EBITDA climbed to $71 million from $25.5 million in the year-ago period, while net profits came in at $10 million compared with a net loss of $4.2 million in Q1 2020.

Green Thumb knows how to strike while the iron is hot. It recently entered the Virginia cannabis market by acquiring 100% of cannabis grower and producer Dharma Pharmaceuticals. Virginia made recreational cannabis legal in July, but retail sales won’t begin until Jan. 1, 2024. This acquisition gave the company access to one of five vertical licenses in the state, which includes an operating production facility and a retail store. 

The company is also set to take advantage of hot markets in New York and New Jersey, both of which recently legalized recreational marijuana this year. The company has two dispensaries in New Jersey and plans to open another in the coming months. It also operates a medical dispensary in New York and is turning a former federal prison in New York into a cannabis facility.

Will Green Thumb report another profitable quarter?

Note that Green Thumb’s Q1 performance was from its 56 operating dispensaries in 12 U.S. states. There has been much expansion since; on Aug. 2, the company opened its second store in Virginia. The company also acquired two vertically integrated cannabis businesses in Rhode Island. These include an operating production facility and an open retail location and give it access to one of only three vertical licenses in the state. Developments are ongoing in the state to legalize recreational marijuana. 

This acquisition brings Green Thumb’s national presence to…

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