This company is ready to grow in new markets

The wait for early federal legalization of marijuana could be at the heart of what is keeping the stock prices of major multi-state cannabis operators contained. Some investors just aren’t willing to invest their money in these stocks without a nudge towards more promise.

But for long-term investors eyeing market growth right now, that wait may not be necessary. Top Marijuana Companies Like Green Thumb Industries (GTBIF 3.84%) drive revenue and revenue growth. And after its share price lost nearly three-quarters of its value in the past 18 months, now could be a good time to harvest stocks.

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Revenue growth in his home state

Green Thumb is a leading multi-state operator and benefits from being headquartered in Illinois, where July adult marijuana sales for all retailers reached $135 million, sales highest monthly sales recorded for the state this year and the second highest monthly sales since the state launched the adult use market.

The company is known for focusing on building relationships in its operating states, including its home state, by giving back to the community with proceeds from day one sales when opening new dispensaries. This has allowed the company to earn the trust of the buying community through its products and relationships, helping to support revenue generation and the ability to expand its footprint. Green Thumb now has 10 retail stores in Illinois and plans to continue expanding.

New markets generate new revenues

Outside of Illinois, Green Thumb is seeing growth thanks to new markets that have recently started selling recreational marijuana.

The biggest winner of the quarter for Green Thumb for new markets is New Jersey – which is expected to be a $2 billion market. New Jersey sales began on April 21, resulting in adult cannabis sales of $24 million at just 12 stores opened in the quarter. A quarter of these stores are owned by Green Thumb, one of which opened its doors to customers who began queuing before dawn, helping to boost the company’s total quarterly revenue by 15% to over $250 million. It also helped the company end the quarter with net earnings of $0.11 per share.

In 2023, Green Thumb could expect to see those revenue numbers start to increase dramatically with the activation of recreational sales in three new states, including Connecticut, Rhode Island and populous New York, a state where total marijuana market sales are expected to be worth more than $7 billion by 2025. 2024 is expected to bring greater revenue growth to the company as Virginia brings sales online.

As a result of strategic acquisitions and expansions, Green Thumb has enhanced growth potential, having established retail stores in these four states. CEO Ben Kovler estimates the total legalized marijuana industry will be worth three times the current $25 billion, with the majority of the growth coming from new states activating sales for adult use.

Why buy now?

Positive second quarter earnings news in which Green Thumb beat street estimates for both revenue and earnings, supported by expansion in current markets and growth in new markets, helps drive Green Thumb a top marijuana company for the future, and it could be overtaking federal legalization as a key investment factor on investors’ minds. It comes after a broader market decline, combined with a lack of federal progress on legalization, sent the stock price plummeting from a high of $37 just 18 months ago in its current price of $10.

The excitement of a new administration has given way, but now a new excitement underpinned by revenue and revenue growth is setting in. Long-term investors might consider this a blessing in disguise. The company is growing with retail operations in 15 US markets, total market value is growing and more states are going online. All of this should lead to positive results in the years to come for investors.

If analyst price targets are any indication of future potential, long-term investors would be wise to jump on Green Thumb as the stock price is down but far from exhausted. Analysts currently have a 12-month average price target of $31 per share, a potential gain of 200%. Some investors have already noticed this, driving the stock up 10% over the past month.

Jeff Small has positions in Green Thumb Industries. The Motley Fool fills positions and recommends Green Thumb Industries. The Motley Fool has a disclosure policy.

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