According to Fortune Business Insights, the global cannabis market is poised to grow at a CAGR rate of 32.04% between 2021 and 2028, reaching $197.74 billion in the terminal year. Increasing cannabis legalization pace around the world should support this fast-growing industry. 

The cannabis market has experienced massive fluctuations in 2021 due to investors’ concerns regarding completion and profitability. As a result, the ETFMG Alternative Harvest ETF (MJ) started the year on a high note and rose to as high as $34.58, but it gave back those gains since then, plunging 20% year-to-date (YTD). Hence, contrarian investors have an opportunity to scoop up cannabis stocks on the dip. 

With this in mind, I am going to analyze two promising cannabis stocks: Green Thumb Industries Inc. (GTBIF - Get Rating) and Verano Holdings Corp. (VRNOF - Get Rating), which Wall Street analysts expect to double in 2022. 

Green Thumb Industries Inc.

Green Thumb Industries, which is based in Chicago, Illinois, produces, markets, and sells a variety of cannabis-related products in the US.

YTD, shares of Green Thumb Industries are down 14%.

Recent Quarterly Performance

On November 10th, Green Thumb Industries announced its third-quarter earnings results. Its total revenue increased 48.7% year-over-year to $233.68 million in Q3, beating Wall Street estimates by $1.3 million. Also, GTBIF reported GAAP EPS of $0.08, slightly missing expectations by $0.02.

Green Thumb’s net income rose 110.42% to $20.2 million from its year-ago value of $9.6 million. The company’s Adjusted Operating EBITDA came in 52.6% higher year-over-year at $81.2 million.  

Liquidity Position

Green Thumb ended the third quarter with cash on hand of $285.8 million. What is more, the company reported a seventh consecutive quarter of positive cash flow from operations, generating $82.8 million YTD. Consequently, there’s no need for additional funding at the moment. 

Analysts’ Estimates & Valuation

Wall Street expects GTBIF’s earnings to decrease by 25% in the fourth quarter of 2021 to $0.08 per share. However, its Q4 sales should increase 34.77% to $238.85 million. Also, its bottom and top line are estimated to increase 358.44% and 59.85% to $0.32 and $889.66 million in FY2021, respectively. 

When it comes to Forward P/S, the stock’s 5.51x is 20.87% lower than the 6.96x sector median. Also, the company’s FWD EV/EBITDA multiple of 15.39x trades with a small discount compared to the sector’s median of 15.84x. 

Wall Street analysts have rated GTBIF as a “Strong Buy”, establishing an average price target of $49.36.

Verano Holdings Corp.

Founded in 2017, Verano Holdings Corp. is a vertically-integrated cannabis company that produces and sells its cannabis products in the United States. 

Over the past sixth month, shares of Green Thumb Industries have fallen about 26%. 

Recent Developments

On December 28th, the company announced the completion of its acquisition of Caring Nature LLC and Connecticut Pharmaceutical Solutions Inc. Under the terms of the deal, Verano received a dispensary in Waterbury, Connecticut, and a 216,532 sq. ft. state-of-the-art cultivation and production facility in Rocky Hill, Connecticut. This move should help Verano expand its presence on the East Coast, which can improve its top and bottom line in the coming quarters. 

Recent Quarterly Performance

On November 16th, Verano Holdings reported earnings for the third quarter of 2021. In Q3, its total revenue rose 105.7% year-over-year to $206.83 million. However, the company missed Wall Street revenue estimates by $12.87 million. Its net income came in at $103.72 million, up from its year-ago figure of $81.61 million.

The company’s Adjusted EBITDA grew to $111 million, representing a solid year-over-year increase of 98%.

Liquidity position

As of September 30th, 2021, the company had total cash of $56.94 million and total debt outstanding of $215.72 million. Besides, VRNOF generated a positive cash flow from operations and free cash flow of $68 million and $35 million, respectively. Based on that, Verano Holdings looks well-financed with no need for additional financing. 

Analysts’ Estimates & Valuation

For the fourth quarter, analysts expect VRNOF’s EPS to stand at $0.24. Moreover, analysts forecast that its Q4 revenue should rise 389.40% to $299.39 million.

Let’s take a look at some valuation metrics. In terms of Forward P/E, the stock’s 14.34x is 38.73% lower than the 23.40x sector median. Also, the company’s FWD EV/EBITDA multiple of 13.32x looks discounted to the sector’s median ratio of 15.84x. 

Analysts have established a “Strong Buy” rating for VRNOF, with an average price target of $32.16.

GTBIF shares were trading at $21.09 per share on Thursday morning, down $0.16 (-0.75%). Year-to-date, GTBIF has declined -13.92%, versus a 29.59% rise in the benchmark S&P 500 index during the same period.

About the Author: Oleksandr Pylypenko

Oleksandr Pylypenko has more than 5 years of experience as an investment analyst and financial journalist. He has previously been a contributing writer for Seeking Alpha, Talks Market, and Market Realist. More...

More Resources for the Stocks in this Article