Green Thumb’s Profitability Grows in Q3 Despite Macroeconomic Headwinds; Shares Still Attractive

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.