Replies to post #1138 on Green Thumb Industries Inc (GTBIF)

[FUNMAN]

Analysts Are Forecasting a Cannabis Comeback in 2020, These Pot Stocks Could Lead the Charge

Note, these are in Canadian dollars.


JANUARY 16, 2020
By: SAM H.

https://www.thecannabisinvestor.ca/analysts-are-forecasting-a-cannabis-comeback-in-2020-these-pot-stocks-could-lead-the-charge/?fbclid=IwAR0FJJyl5aaAwTiloVb7-VPzxivem7CPFpSRD_WXSmRei2SnSzgdrSZvvPM

After 2019’s Market Shakeout, Analysts Says the Right U.S. and Canadian Cannabis Stocks Will Rise in 2020

These Pot Stocks Received BUY Recommendations and Bullish Price Targets Up to 185% Above Market

2019 was an ill-fated year for many North American cannabis stocks and their shareholders. High-fliers such as Canadian licensed producers (LPs) Aurora Cannabis (TSX: ACB) (NYSE: ACB) (FRA: 21P) and Canopy Growth (TSX: WEED) (NYSE: CGC) (FRA: 11L1) were assaulted by headwinds including a botched rollout of retail cannabis operations in Ontario. Numerous American multi-state operators (MSOs) such as Cresco Labs (CSE CL) (OTCQX: CRLBF) (FRA: 6CQ) and the recently acquired Origin House were beset by the difficulty of dealing with a patchwork of laws including the U.S DOJ holding up mergers with antitrust reviews.

Missouri-based brokerage and investment bank Stifel along with its newly acquired Canadian affiliate GMP Capital is calling a loud ‘Buy’ on a range of cannabis stocks that its analysts think can stand apart and deliver major gains by taking advantage of their financial position and competitive edge in 2020. This helps Stifel and GMP separate itself from the pack of brokerage houses and U.S. banks that, as we’ve mentioned in the past, have been late in understanding the dynamics of the burgeoning cannabis industry.

First, let’s take a look at which companies Stifel thinks will do well in the U.S. marketplace—the golden prize of the North American continent and indeed the world, despite Canada’s lead on national legalization. Importantly, these shares of American MSOs are all traded in Canada since the federal status of marijuana makes trading its shares illegal on major U.S. exchanges such as the NYSE and NASDAQ.

Below are a few of the Stifel analyst’s U.S. MSO price targets:

*Prices are in CDN Dollars. Source: Bloomberg Terminal

Trulieve Cannabis (CSE: TRUL) (OTCQX: TCNNF)
Rating: BUY
Price Target: $32
Today’s Price: $14.18
Implied Upside: +125.67%


Cresco Labs (CSE CL) (OTCQX: CRLBF) (FRA: 6CQ)
Rating: BUY
Price Target: $20
Today’s Price: $8.23
Implied Upside: +143.01%


TerrAscend (CSE: TER) (OTCQX: TRSSF)
Rating: BUY
Price Target: $9
Today’s Price: $3.16
Implied Upside: +184.81%


iAnthus Holdings (CSE: IAN) (OTCQX: ITHUF)
Rating: BUY
Price Target: $5
Today’s Price: $2.22
Implied Upside: +125.23%


Harvest Health (CSE: HARV) (OTCQX: HRVSF)
Rating: BUY
Price Target: $7.50
Today’s Price: $4.36
Implied Upside: +72.02%



Two MSOs, in particular, received the most attention from Stifel: Green Thumb Industries (CSE: GTII) (OTCQX: GTBIF) (FRA: R9U2) and Curaleaf Holdings (CSE: CURA) (OTCQX: CURLF).

Stifel expects Green Thumb to rise from today’s closing price of $13.25 and reach a Price Target of $32 per share. The analyst also anticipates an upswing on shares of Curaleaf which closed at $9.51 today and projects that CURA will reach a Target Price of $24. Both GTII and CURA stock received BUY ratings from Stifel and as of today offer investors, an implied upside of 141.51% and 152.37%, respectively. Stifel isn’t the only analyst that’s bullish on these two MSOs. Ten analysts are calling GTII and CURA a BUY, but Stifel’s targets are the most bullish.

GTI reported stellar Q3 earnings in late November 2019, with revenue increasing by nearly 300%. The company is booking revenue in roughly a dozen U.S. states and is continuing its march to new jurisdictions with a growing vertically integrated portfolio of strong brands and cultivation properties. Stifel GMP analyst Rob Fagan said he was particularly attracted to Curaleaf’s financial position, fueling its ability to enter new markets and strengthen its position in established ones quickly through acquisition. “We view the company’s fortified balance sheet as a clear competitive advantage to fuel future value creation,” Fagan emphasized. Curaleaf shares have been on the rise since the company announced its new non-dilutive financing deal on December 20, 2019. Curaleaf closed on its upsized $300 million loan facility yesterday allowing shareholders to rest easy knowing the company won’t have to dilute anytime soon.

In Canada, Fire & Flower Holdings (TSX: FAF) (OTCPK: FFLWF) is a favourite of Stifel’s, which has it pegged to rise 116.35% from today’s closing price of $1.04 to reach his Price Target of $2.25 per share. Stifel analysts think that unlike Aurora, which was just downgraded to ‘Sell’ by Piper Sandler, Toronto-based Fire & Flower can move nimbly in Ontario, which recently announced plans to fix its poor retail cannabis system. Rob Fagan and Justin Keywood of Stifel GMP expect to see Fire & Flower’s Ontario retail store count grow from 30 to over 100 by 2021. This growth in Ontario’s retail space is expected to help the company reach profitability.

[FUNMAN]

Chicago marijuana users will pay up to 41.5% in taxes on legal cannabis purchases

By Andrew Blake - The Washington Times - Friday, January 17, 2020

https://www.washingtontimes.com/news/2020/jan/17/cook-county-clears-way-for-415-tax-on-strongest-re/

Some recreational marijuana sold by licensed retailers in Chicago will be taxed at upwards of 40% following a ruling Thursday from the Cook County Board of Commissioners.

Commissioners voted 13-0 to enact a 3% percent “Cannabis Retailers’ Occupation Tax” on the gross receipts of recreational marijuana sold within Cook County effective July 1.

Although technically imposed on all persons engaged in the business of selling recreational marijuana, The Chicago Sun-Times reported that commissioners expect the new tax to be passed by sellers on to their customers.

Recreational marijuana products sold in Chicago are already subject to the city’s combined sales tax rate of 10.25%, and the Chicago City Council has approved an additional 3% city tax also slated to take effect in July.

Illinois separately taxes recreational marijuana on a three-tier system depending on product and potency. Cannabis-infused products including edibles are taxed by the state at 20%, while other goods are taxed at either 10% or 25% depending on their concentration of THC, the plant’s main psychoactive ingredient.

Taken all together, starting this summer the most potent recreational marijuana products available for sale in the Windy City will be subjected to several taxes totaling 41.5%.

“The potential financial impact to Cook County from the legalization of cannabis could be significant,” a spokesman for Cook County Board President Toni Preckwinkle said in a statement, NBC Chicago reported.

[FUNMAN]

Vaping may still having issues to overcome.

Uh-Oh! 1 in 6 Vape-Related Lung Illnesses Were Caused by a Legal-Market Purchase

New information from the CDC is bad news for the cannabis industry.

By: Sean Williams
Jan 19, 2020 at 9:06AM

https://www.fool.com/investing/2020/01/19/uh-oh-1-in-6-vape-related-lung-illnesses-was-cause.aspx

Marijuana stocks have had quite the tumultuous past year. Near the beginning of 2019, the industry was viewed as being on the cusp of profitability, with sales ramping up in Canada, derivative products set to hit the market later in the year, and legalization momentum building in the United States. But by year's end, cannabis stocks had endured a steep nine-month downtrend once a fiery first quarter ended.

To our north, Canada has been contending with supply issues since day one of legalization in October of 2018, with the country's most populous province, Ontario, having only 24 dispensaries open on the one-year anniversary of adult-use sales commencing. Furthermore, the launch of high-margin derivative products was delayed by two months. Meanwhile, select U.S. states have been hurt by high tax rates on cannabis products and a resilient black market.

Unfortunately for the pot industry, the hits just keep on coming.

Vape-related lung illnesses put a serious scare in the cannabis industry in 2019
During late spring and early summer, the Centers for Disease Control and Prevention (CDC) began reporting on a mysterious lung disease that was cropping up throughout the U.S. and was associated with vape users. Initially confined to a few states and a few dozen cases, e-cigarette, or vaping, product use-associated lung injury (EVALI) would wind up being diagnosed in 2,602 hospitalized patients by Jan. 7, 2020, with 57 people having died from these vape-related illnesses.

Aside from the obviously terrible news of nearly five dozen people losing their lives, there's the fact that vaping is viewed as the single greatest revenue generator of the derivative industry. Although dried cannabis flower is expected to remain the leading dollar generator among cannabis product sales, estimates from Cowen Group in March 2019 suggest that vaping could account for nearly a quarter of all U.S. weed sales. I'd figure that Canada's sales breakdown would be pretty similar. Since derivatives are a much higher-margin product than dried flower, growers in Canada and in select U.S. states are expected to lean on vape sales (among other derivatives) to drive top- and bottom-line growth.

Late last year, after months of research, the CDC unveiled findings that appeared to be somewhat of a positive for the legalized cannabis industry. The agency reported the findings of a study on Dec. 20 that examined bronchoalveolar lavage (BAL) fluid samples from 51 EVALI patients in 16 states, as well as 99 healthy people. In 48 of the 51 EVALI patients, vitamin E acetate was identified in the BAL sample. Not surprisingly, none of the healthy patients had any signs of vitamin E acetate in their BAL sample. This led the CDC to conclude that vitamin E acetate was a likely culprit in EVALI, although the agency still cautioned that other substances and product sources may be risk factors.

Since vitamin E acetate is found in unregulated products, this would mean consumers simply need to shift their vape-liquid buying to legal channels. Problem solved for both the consumer and pot stocks, right? Well, not so fast.

Select legal products have also been responsible for EVALI
On Jan. 14, the CDC provided data from a new study that revealed some unsettling evidence. It found that 82% of EVALI patients had used a liquid containing tetrahydrocannabinol (THC), the cannabinoid that gets users high. Of these patients, half were willing to share where they purchased their THC-containing products.

As you might have expected, 78% reported acquiring their THC-containing vape product from informal sources, such as a friend, family member, or the black market. But 16% reported purchasing these products from legal channels, such as an adult-use dispensary or medical marijuana dispensary. Another 6% reported acquiring these products from informal and commercial sources. So at least 1 in 6 EVALI patients in the new study bought their vape products from a legal source.

This finding allowed the CDC to double down on two key points that it's been trying to drive home with vape users for months. First, even though it's identified vitamin E acetate as a likely cause of EVALI, the agency's research is nowhere near complete on other substances and product sources that may be at fault.

Second, and more important, the CDC's recommendation continues to be that users not vape products that contain THC, whether purchased from legal channels or acquired from informal sources. This latter point could prove damning to North American cannabis companies that are leaning heavily on high-margin vaporizers and vape accessories to drive near-term sales.

Vape-focused cannabis stocks feel the pinch
Whether the companies are direct or ancillary players, there's no doubt that the CDC's ongoing findings on EVALI are liable to hurt near-term sales.

For instance, nearly two weeks ago, we saw ancillary player KushCo Holdings (OTC:KSHB) report weaker-than-expected fiscal first-quarter sales. Even though year-over-year sales improved by 38% to $35 million, this was about $6 million below what Wall Street had forecast for KushCo in the first quarter.

What makes this sales miss notable is that KushCo generates most of its revenue from the sale of vaporizers. Though KushCo does have a burgeoning business in packaging and branding solutions, and will see growth from its hydrocarbon gas operations as demand for cannabis oils increases, vaporizers are its top seller for the foreseeable future. For what it's worth, KushCo has cautioned that sales would be weak in the first half due to the EVALI scare, but anticipates them picking back up in the second half of its fiscal 2020.

As for direct players, a company like Cronos Group (NASDAQ:CRON) is arguably the most exposed to this new data from the CDC.

Last March, Cronos Group closed an equity investment from tobacco giant Altria Group (NYSE:MO) that sent $1.8 billion in cash to Cronos in exchange for a 45% equity stake. Given Altria's prowess in navigating vice industries, and its ownership stake in vaping device maker Juul, it was a logical partner to work with in terms of rolling out vape products in Canada. But it's quite possible that Cronos could encounter weakness, even with Altria's expertise, due to the CDC's latest findings.

What's more, Canada's fourth-most-populous province, Alberta, enacted a ban on vaping products in mid-December, just as derivatives were set to roll out. Alberta wants to review the safety of vaping products containing THC before approving them for sale. This is just another way that Cronos Group's near-term growth could be constrained.

Suffice it to say that this vape-related lung disease scare isn't going away anytime soon.

[FUNMAN]

Major Tax Changes Are in the Works for the Biggest Marijuana Market in the World

Regulatory and tax reforms have been proposed to tip the scale in favor of legal cannabis operators.

By: Sean Williams
Jan 19, 2020 at 11:41AM

https://www.fool.com/investing/2020/01/19/major-tax-changes-are-in-the-works-for-the-biggest.aspx

Although 2019 began well for cannabis stocks and industry hopes were (pardon the pun) high, it ended in disaster.

With Canada having legalized recreational pot in October 2018, growers on track to launch derivative products later in 2019, and legalization momentum remaining strong in the U.S., the forecast was for marijuana stocks to push toward profitability by year's end. However, this didn't happen.

In Canada, supply issues have been persistent since day one of legalization, and the launch of derivatives wound up being delayed by at least two months, until mid-December. Meanwhile, select U.S. states that have legalized recreational pot have been taxing the daylights out of consumers, which has made it virtually impossible to compete with black-market producers on price. In short, illicit growers have been thriving throughout North America.

Cannabis sales are stagnant in the largest pot market, California
Perhaps no disappointment has been greater than that of California, the biggest marijuana market in the world by annual sales. According to an estimate in the "State of the Legal Cannabis Markets" report by Arcview Market Research and BDS Analytics, California was on track for $3.1 billion in legal weed sales in 2019, which is practically quadruple what Canada sold in trailing-first-year sales following the legalization of adult-use weed.

Although $3.1 billion probably sounds like a lot of cannabis being sold, it's best to understand the context of this figure. Total weed sales in 2017 in California were $3 billion. Mind you, recreational pot sales weren't yet legal in 2017, meaning this was being driven entirely by legal medical marijuana sales. In 2018, once the doors were open to adult-use weed, total state sales fell (yes, fell) to $2.5 billion, and are expected to have increased to $3.1 billion in 2019.

How, exactly, does the most lucrative marijuana market in the world stumble so badly in the sales department when there's obvious demand for pot products? All you have to do is look at the state's exorbitant tax rate on cannabis.

On top of already high state and local sales tax rates, California tacks on a 15% excise tax and a wholesale tax that's dependent on the state of the product (i.e., whether it's leaves or flower). Additional expenses, such as laboratory testing, are also factored into the final price of the product. As a result, black-market sales are nearly three times higher than legal sales in the Golden State at the moment.

However, Governor Gavin Newsom, a Democrat, hopes to change this.

California has proposed significant regulatory and tax reforms
A little more than a week ago, Newsom's administration unveiled a number of provisions in the state's annual budget proposal that are designed to simplify the regulatory and tax structure on the pot industry.

For example, Newsom's proposal would create the Department of Cannabis Control by July 2021. This would take three existing licensing entities -- the Bureau of Cannabis Control, the Department of Public Health, and the Department of Food and Agriculture -- and place them all under one roof, the hope here being that a single entity with enforcement and licensing power will more effectively help establish a legal presence and drive illicit producers out of business.

Newsom also aims to simplify the tax-collection process on marijuana. As noted in the released provisions, the administration wants to "move the responsibility for the cultivation excise tax from the final distributor to the first, and for the retail excise tax from the distributor to the retailer." Doing this would mean the California Department of Tax and Fee Administration wouldn't have to adjust the markup rate for cannabis products every six months.

But the most exciting change might just be that Newsom and his team are taking into consideration the idea of lowering existing tax rates on legal pot products. Right now California-focused pot businesses simply have no chance of competing on price with black-market growers. Substantially lowering the aggregate tax on legal weed would be viewed as a major step in the right direction.

A big hill to climb

Of course, while an exorbitant tax rate on legal weed is a big problem for California, it's not the only issue.

Like most states that have given the green light to recreational marijuana, California's jurisdictions have the right to decide whether or not to allow cannabis retailers a presence. A little over 80% of the Golden State's jurisdictions have denied retailers the option of selling legal weed in their towns, making it doubly difficult for regulators to effectively drive out the as-of-now dominant illicit presence. As a result, it's the state's retailers that are paying the price.

Perhaps no multistate operator has paid a steeper price for California's struggles than MedMen Enterprises (OTC:MMNFF). MedMen, which has more than a dozen open retail locations in California, has seen sequential quarterly sales growth slow in recent quarters. These slowing sales, coupled with MedMen's aggressive expansion tactics in and outside of California, pushed its operating loss in fiscal 2019 to a staggering $231.7 million.

If California doesn't fix its problems soon, Cresco Labs (OTC:CRLBF) might also regret its acquisition of Origin House, which recently closed. Origin House is one of a select few holders of cannabis distribution licenses in the Golden State. Cresco Labs' all-stock purchase of Origin House gives the company access to approximately 575 dispensaries in the state with which to sell its products. However, if pricing remains a concern due to high tax rates on cannabis, Cresco's ambitions may need to be tempered a bit.

The prospect of regulatory changes being on the horizon is certainly a step in the right direction for California. But I'm not going to be convinced that California-focused marijuana stocks will be better off until the state tackles its ridiculously high tax rates on marijuana.

[FUNMAN]

GTI - Early Warning Report in Connection With an Internal Distribution of Shares of Green Thumb Industries Inc.

GlobeNewswire
January 20, 2020

CHICAGO, Jan. 20, 2020 (GLOBE NEWSWIRE) -- On January 17, 2020, 9,463,700 Subordinate Voting Shares and 65,363 Super Voting Shares of Green Thumb Industries Inc. (the “Issuer”) were distributed to investors of RCP23, LLC and GTI II, LLC, private investment holding companies controlled by Benjamin Kovler, CEO and Chairman of Issuer, together with his joint actors which include RCP23, LLC and GTI II, LLC (collectively, the “Acquiror”). Neither Mr. Kovler nor, to Mr. Kovler’s knowledge, any other member of the Issuer’s management team, anticipates selling any shares of the Issuer as a result of this distribution.

This is not an issuance of new shares by the Issuer. Instead, this reflects a distribution of Issuer shares that had previously been issued and outstanding. These Issuer shares were previously held by RCP23, LLC and GTI II, LLC and are now held by the members of those entities in accordance with their respective operating agreements.

Following such distributions, the Acquiror, together with his joint actors, holds beneficial ownership or control or direction over 270,655 Super Voting Shares, which represent 67.7% of the class, 140,419 Multiple Voting Shares, which represent 56.6% of the class, and 77,618 Subordinate Voting Shares, which represent less than 0.1% of the class. Each Super Voting Share carries 1,000 votes and is convertible into one Multiple Voting Share and each Multiple Voting Share carries 100 votes and is convertible into 100 Subordinate Voting Shares (each of which carries one vote).

For further information, please contact Investor Relations, Green Thumb Industries Inc., [e-mail], Phone: [phone].

This press release is issued pursuant to National Instrument 62-103 – The Early Warning System and Related Take-Over Bid and Insider Reporting Issues, which requires an early warning report to be filed on SEDAR (www.sedar.com) containing additional information with respect to the foregoing matters. A copy of this report may be obtained by contacting Investor Relations, Green Thumb Industries Inc., [e-mail], Phone: [phone].