Green Thumb Earnings: Cutting Fair Value as Price Compression Hits Growth but Shares Are Undervalued

Price compression continued to weigh on top-line growth in no-moat Green Thumb’s first quarter, as revenue fell 4% sequentially to $249 million. This accelerated from the fourth quarter’s 1% decline as challenging economic conditions and a stubborn illicit market continue to pressure prices. Inflation has been a particular challenge, not just from a cost perspective but from cannabis’ competition for consumers’ share of wallet. On the bright side, Green Thumb sold more volume through more dispensaries as the legal cannabis market expands. Additionally, profitability remained intact with adjusted EBITDA margins virtually unchanged from the fourth quarter at roughly 31%.