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Key Cannabis Analyst Names Green Thumb Top Pick For 2021

Published 2021-04-27, 05:57 a/m

One of the best known analysts covering marijuana stocks is Vivien Azer, a managing director with Cowen. She has been watching the cannabis industry since 2016, which is before legalization in Canada. Today, her firm offers analysis of not only Canadian, but US and global firms in the space and insights into the CBD market.

In an interview recently, she was asked about her top stock pick in the space: Green Thumb Industries (OTC:GTBIF) (CSE:GTII).

Azer likes this Chicago-based cultivator because, as she explained, it is one of only 10 companies that hold cannabis licences in New York State, which is on the verge of being a multi-billion cannabis market.

Green Thumb Daily

Shares of Green Thumb have done relatively well in 2021, gaining about 12.5% since the start of the year. In the last 12 months, however, they have increased by almost 300%. Shares were up 0.29% yesterday, and closed at $28.50 in New York and C$35.50 on the Toronto Stock Exchange.

What Azer likes about the company are its profitability and what she calls its “geographic mix,” referring to the states in which it operates.

Its strategy has been focused on developing in states with large populations and a limited number of cannabis growing licences. This includes Illinois, Massachusetts, New York, Florida and Ohio. And so far this approach has worked well, as two of these relatively large markets—Illinois and Massachusetts—have moved from allowing purely medical use of cannabis to a combination of medical and recreational use.

Green Thumb is set to reveal its first-quarter earnings results on May 12, after the close.

In Q4, its revenues increased almost 13%. For the full year, its revenues hit $556.6 million for a year-over-year gain of just over 157%.

The last quarter also represented the fourth consecutive quarter of positive cash flow from operations.

This strong balance sheet is another reason Azer likes the stock.

Cannabis Derivatives Sales Fastest Growing Segment In Canadian Market

The first full-year look at the size of the Canadian cannabis derivatives market are in, and the figures are sending an upbeat signal to the industry.

Canadians purchased C$109 million (US$87.8 million) worth of cannabis edibles in 2020, according to Statistics Canada.

Although that figure only represents a small fraction (4.2%) of the legal cannabis sales, these numbers are encouraging as inventory and product selection are expected to improve.

The important metric being eyed is the fact that growth in cannabis edibles was more significant the rest of the overall marijuana industry, according to StatsCan figures.

Canada’s regulated recreational cannabis market in 2020 was said to be C$2.6 billion. The largest part of that, just over three-quarters, came from dried cannabis sales.

One analyst said the mix of sales in Canada is very similar to what was seen in Colorado in the early stages of legalization, leading to speculation that derivative products could eventually represents about 50% of the Canadian market. Availability of cannabis-infused beverages and edibles are still relatively limited in accessibility.

Tilray Vote Rules Change

The long-awaited vote by Tilray (NASDAQ:TLRY) stockholders to approve the proposed merger with Aphria (NASDAQ:APHA) (TSX:APHA) is now expected to be held on Friday, Apr. 30.

One day after it was announced that the vote was delayed to give shareholders more time, the cannabis grower amended its bylaws to reduce its quorum requirement. The vote was originally scheduled for Apr. 16. The new quorum requirement has been lowered to 33% of shareholders, down from the previous threshold of 50%-plus-1.

Shareholders who already cast votes will not have to vote again.

Analysts have speculated that the company’s shareholder base includes many retail investors, which makes share ownership turnover more volatile.

Earlier this month, Aphria shareholders overwhelmingly voted to approve the merger deal with just over 99% of votes cast. The companies announced the US$3.9-billion (C$5-billion) merger deal in December. The new combined company, which will trade under the Tilray ticker, will be the biggest cannabis grower in the world.

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