Green Thumb Industries Incorporated (OTCQX:GTBIF) is a Vancouver and Chicago-based company which specializes in the production of medical marijuana. It has stores in several States as well as Canada, including under its banner "Rise" brand.
This industry is just about a year old in Canada, and it is already seeing some great strides on the part of big players like GTBIF. As stock markets dive all over the world as a result of the economic impact from the coronavirus, share prices, including in the cannabis industry, have dropped. Is GTBIF and the pot industry immune from a prolonged recession? Perhaps.
Fundamental Analysis
The trending news for GTBIF is the release of its 4th quarter 2019 results. On Thursday March 26, 2020, the company reported a net loss per share of 6 cents, or $18.3 million. This loss was greater than that of the same period a year ago, where a loss per share of 2 cents or $3.1 million was registered.
However, the company was able to ramp up its 4th quarter 2019 revenue to $75.8 million, about triple the $20.9 million that was earned as revenue by the company for the same period a year ago. This translates to full year revenue growth of 246.3%, and quarter-on-quarter improvement at 11.5%. Full year revenue was $216.4 million.
Forward projection for the company for Q1 2020 is positive despite the coronavirus pandemic. This is because in some states, its medical marijuana product has been classified as an essential business and thus will not be affected by some of the shutdowns suffered by other companies. Analysts expect the company to register a loss per share of 1 cent in the first quarter of 2020.
Technical Analysis
Analysts were impressed by the company's growth in revenue. This has materialized in the form of bids for the stock, helping it recover to the 6.5349 critical resistance. This area is also close to the 6.6216 price level where the 23.6% Fibonacci retracement level is located. The Fibonacci level are derived from a trace that extends from the swing high of 8 April 2019 to the swing low of 16 March 2020.
As can be seen on the weekly chart below, this price move has taken the weekly candle above the ascending channel consolidation pattern. Presently, the only factor holding back price is the critical resistance previously identified.
GTBIF Weekly Chart: March 20, 2020
The daily chart shows the critical resistance very clearly at the 6.5249 price area. The previous price action is also shown, with price breaking out of the boundaries of the ascending channel as well as previous resistance areas before then.
GTBIF Daily Chart: March 20, 2020
A break of this critical resistance level to the upside could also draw in uncommitted traders into the fray, and this could set GTBIF on its way to targeting the next resistance target at 7.3521 (formed by the prior weekly low of 24 December 2018). Above this level, further targets can be seen at the 7.9024 price level (lower border of previous rectangle pattern). 8.5119 (38.2% Fibonacci retracement level).
On the flip side, rejection of price at the critical resistance level could send GTBIF back to the previous resistance levels that have now undergone role reversal to serve as support points. The initial support target would be at 6.1422, which also coincides with the previously broken upper barrier of the ascending channel. Further support points can be seen at 5.5451 and 4.9798. These will be targeted if price re-enters the channel space. 4.9798 corresponds to the lower barrier of the ascending channel and a breach of this area to the downside would take GTBIF stock down to the 4.4431 support level.
Market Sentiment
- Long-term: bearish
- Medium-term: bearish
- Short-term: bullish
Long term, the asset is theoretically still in a downtrend, as the price move from the rectangle's lower border is a continuation of the initial trend of GTBIF before it entered the triangle. This is visible on the weekly chart.
The short-term trend is bullish. This move is seen as a retracement to the upside, forming the secondary trend within the major downtrend. Such moves usually produce opportunities to sell on rallies once prices become cheap enough. Only a breach of the previous triangle's upper border will invalidate this view and bring about a trend reversal.
