Despite a sharp decline in cannabis stock prices following recent election results, Green Thumb Industries Inc. (GTBIF), one of the largest legal cannabis companies in the U.S., remains confident about its future and isn’t altering its strategy. CEO Ben Kovler emphasized that while the cannabis sector has seen a significant dip in valuations, particularly after Florida’s failure to pass a referendum on adult-use cannabis and the presidential election results, Green Thumb’s long-term growth trajectory remains unchanged.
Cannabis Stocks Take a Hit
The cannabis sector experienced notable losses after Florida voters rejected a referendum on recreational cannabis, while Kamala Harris — a prominent advocate for cannabis reform — lost her presidential bid to Donald Trump. This sent cannabis stocks tumbling, with some of the largest players in the industry seeing substantial declines:
- Green Thumb Industries: Down 12% this week, including a 4% drop on Friday.
- Cresco Labs Inc.: Lost 13% in value.
- Trulieve Cannabis Corp.: Saw a dramatic 34% drop.
- AdvisorShares Pure U.S. Cannabis ETF: Fell 23%.
Despite these drops, Kovler remains unfazed, telling analysts that Green Thumb has been operating under the assumption that significant federal cannabis legalization remains unlikely in the short term. “We don’t really care about the short-term voting,” he said, expressing confidence in the company’s ability to thrive in a regulated, legal cannabis market without depending on swift federal changes.
Green Thumb’s Strategy Moving Forward
Kovler is optimistic about the future of the cannabis industry, predicting that the legal U.S. cannabis market — currently valued at around $31 billion — is poised to double. This projection is supported by Green Thumb’s expansion efforts, including a unique partnership with Magnolia Bakery, which now offers THC-infused cupcakes and other desserts to customers 21 and over. These products are derived from hemp, which remains legal under federal law.
Q3 Financial Results
For the third quarter of 2024, Green Thumb posted revenue of $287 million, which exceeded analysts’ expectations of $282.9 million, reflecting a 4% year-over-year increase. However, the company’s net income of $8.62 million (or 4 cents per share) fell short of the expected 6 cents per share. This marked a significant decline from the $20.7 million (or 9 cents per share) profit in the same quarter of the previous year.
While the company’s earnings missed expectations, Green Thumb remains focused on expanding its market share and improving operations in both established and emerging cannabis markets.
Broader Cannabis Industry Struggles
Canopy Growth Corp., a major Canadian cannabis producer, also faced challenges, posting a 5.8% drop in its stock price after missing analyst estimates for its second-quarter loss and revenue. The Canadian company reported a loss of C$128.3 million (about $92.3 million), though this was an improvement compared to the C$310 million loss reported a year earlier. Revenue for Canopy Growth declined by 9% to C$63 million, falling short of the C$64 million anticipated by analysts.
Despite the rough financial results, Canopy Growth did report some bright spots, including stronger-than-expected performance in Canadian medical cannabis and a vaporizer unit, as well as an impressive gross margin performance.
Green Thumb Industries continues to focus on long-term growth, even amid recent market challenges and political hurdles. While the cannabis industry faces volatility, particularly in the wake of recent elections, companies like Green Thumb are positioning themselves to capitalize on the expanding market and evolving consumer demand for cannabis-based products. With a diversified portfolio and strategic partnerships, Green Thumb is committed to navigating through difficult times and growing its business in the years to come.
