Inflation Pressure Weakens in Green Thumb’s Q2; Continued Share Price Decline Unwarranted

Inflation pressure weakened in Green Thumb’s second quarter, leading to stabilization in sales and margins compared with the contraction in the first quarter. Revenue was up 5% sequentially, buoyed by sequential comparable growth of 10%. This compares with flat first-quarter sequential revenue growth and a 6% decline in sequential comparable sales as inflation pressured cannabis’ share of wallet. Adjusted operating EBITDA margin recovered nicely to 31%, after having shrunk massively to 28% during the first quarter. We’ve made slight adjustments to our forecasts, but not enough to change our U.S. dollar-denominated fair value estimate of $45 per share for no-moat Green Thumb. Our Canadian dollar-denominated fair value estimate rises to CAD 58 from CAD 57 on exchange rate changes.