Based in Chicago, the cannabis company has two cultivation sites and five retail locations in the fifth-most populous US state

Green Thumb Industries ( ) (OTCMKTS:GTBIF) is expected to benefit from the state of Illinois’s decision to legalize recreational cannabis use, according to Roth Capital Partners.

On Monday the research firm reiterated a Buy rating on the stock and set a price target of C$31.50 on the Illinois-based multistate operator Green Thumb.

Based in Chicago, the cannabis company has two cultivation sites and five retail locations in the fifth-most populous US state.

“Green Thumb will surely benefit from five new stores being added, and a first mover competitive advantage to serve the entire Illinois recreation population prior to new licenses being issued in May 2020,” Roth analyst Scott Fortune wrote in a note.

Roth also expects the company to successfully build its in-house brand portfolio and sell into all the retail stores in Illinois, along with the opportunity to expand into the 185 new licensed stores in the future years.

“We believe Green Thumb is currently selling its house brands into 100% of the 56 licensed dispensaries in Illinois, with that opportunity tripling in the next two years,” Fortune wrote.

Market opportunity

Roth estimates that the cannabis retail market in Illinois could hit US$3 billion in the next few years, forecasting a “significant jump” in overall sales beginning in 2020.

The sales increase could result in a potential US$200 million in annual revenue from Green Thumb’s existing ten retails stores and an additional US$50-$100 million in wholesale sales, according to Roth.

“We are currently projecting US$2 million to $5 million average revenue per store in the current medical market, but a 5.5x jump can easily convert Rise stores into US$10 - $25M of annual sales per store,” noted Roth’s Fortune.

“As a large cultivator, Green Thumb also stands to benefit in Illinois on the likely limited supply production issues in the coming years, holding up pricing. We believe the recent Illinois legislation will act as a blueprint for other states looking to legalize recreationally, which only improves Green Thumb’s valuation with its national footprint and network building a large brand presence throughout the US.”

Shares of Green Thumb slipped 1.2% in Canada and 1% on OTC markets at Monday’s midday trading point.

Contact Angela at angela@proactiveinvestors.com

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