We recently published a list of 8 Most Undervalued Pot Stocks to Buy According to Analysts. In this article, we are going to take a look at where Green Thumb Industries Inc. (OTC:GTBIF) stands against other most undervalued pot stocks to buy according to analysts.

A decade ago, the cannabis industry was in full swing as stock valuations exploded to record highs in states across the country legalizing pot use for medicinal and recreational purposes. Fast forward, valuations have crashed as harsh realities set in. While legalization on the state level has gathered pace in recent years, marijuana remaining illegal on the federal level is turning out to be one of the biggest stumbling blocks.

Far higher taxes in handling federally prohibited cannabis and its products have hit the industry hard. Similarly, legal weed sales have faced stiff competition from the illegal market, something that has hurt companies’ ability to ramp up sales and generate significant shareholder value. The just concluded US election has added yet another layer of uncertainty for the pot industry. While Vice President Kamala Harris had given the clearest indication to legalize recreational use nationally, she lost the election waiting to see what is in store under the Donald Trump administration.

READ ALSO: 99% of Billionaire Abrams’ Portfolio is in These 11 Stocks and 10 Best Waste Management Stocks to Buy According to Analysts.

Nevertheless, it is a fact that the pot industry suffered its biggest blow yet on the ballot on state legalization referendums failing through. North Dakota, South Dakota, and Florida all had unsuccessful referendums to legalize recreational use. Only Nebraska’s medical use referendum was successful.

Twenty-four states in the United States have legalized marijuana for adult use, and Florida might have added a sizable market for the cannabis sector. According to marijuana analytics company Headset, recreational marijuana sales in the state could have reached between $4.9 billion and $6.1 billion in the first year after legalization.

Amid the setbacks, the cannabis sector outlook remains positive as the focus shifts to reclassifying marijuana as a less serious federal offence. President-elect Donald Trump has shown that he is open to supporting changes and new laws for marijuana. This could greatly help the struggling marijuana industry.

According to ATB Capital Markets analyst Frederico Gomes, reclassifying pot as a less federally severe crime would offset any effects of failure to pass substantial amendments during the referendum. Due to the harsh treatment of Cannabis under the so-called 280E tax code, pot businesses currently pay effective tax rates of over 70%.

The provision also prevents companies dealing in schedule one or two controlled substances from claiming tax credits. Consequently, reclassification would translate to about $3.5 billion being injected back into the sector, thus lowering the overall cost for capital and sparking a flurry of activities, according to Katan Associates International founder Seth Yakatan.

“I think the combination of the rescheduling [of Cannabis] to Schedule III, having businesses able to deduct their business expenses, is building momentum for other changes. I think in short order, after this happens, very likely [there will be a] change in federal policy regarding banking. As you know, it is very hard for state-legal cannabis businesses to have bank accounts. It’s also very expensive, and they are charged a premium,” said U.S. Rep. Earl Blumenauer in an interview with the Wall Street Journal.

The most undervalued pot stocks to buy could turn out to be big winners in the regulatory environment improving under the new administration come next year.

Our Methodology

To create a list of the most undervalued cannabis stocks to buy, we looked through different cannabis ETFs to find companies that are heavily involved in the cannabis industry. We then scanned for stocks that analysts believe are undervalued with a price to earnings multiples of less than 20 and well positioned to generate significant long-term value. Finally, we ranked the stocks in ascending order based on the stock’s upside potential as of November 26.

At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

Green Thumb Industries Inc. (OTC:GTBIF)

Stock Upside Potential: 74.95%

Forward Price to Earnings Ratio (P/E): 17.76

Number of Hedge Fund Holders as of Q3 2024: N/A

Green Thumb Industries Inc. (OTC:GTBIF) makes and sells cannabis products for both medical and recreational use. Its products include flowers, pre-rolled joints, concentrates, vapes, capsules, tinctures, and edibles. The company operates in 15 states with 18 production facilities and 77 stores, and has seven different brands. Green Thumb Industries Inc. (OTC:GTBIF) controls the entire process from growing to selling. In well-established markets, they buy cannabis from other producers to save on expansion costs.

Despite setbacks in legalizing adult-use cannabis in four states, Green Thumb Industries Inc. (OTC:GTBIF) is still in a strong position to benefit from the cannabis market, which is expected to double to around $31 billion. The company’s agreement with Magnolia Bakery, a cupcake and dessert chain that now sells THC-containing products made from hemp, is one factor driving its growth. On November 22, 2024, RISE Dispensaries, a cannabis retail chain owned by Green Thumb Industries, announced the opening of its 100th and 101st locations in Carson City, NV, and Brooklyn Park, MN. RISE Dispensaries sell cannabis products and now have 11 locations in Nevada and 8 in Minnesota.

Green Thumb Industries Inc. (OTC:GTBIF) delivered strong third-quarter results on November 7, 2024, with revenue up 4.2% year over year to $287 million, attributed to strong demand for its cannabis products. It also achieved an adjusted EBITDA of $89 million and a GAAP net income of $9 million. Additionally, GTBIF entered into a 5 year $150 million syndicated bank loan facility that strengthened its balance sheet, thus allowing it to retire a $225 million senior secured debt.

Overall, GTBIF ranks 1st on our list of most undervalued pot stocks to buy according to analysts. While we acknowledge the potential of GTBIF as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than GTBIF but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock

Disclosure: None. This article is originally published at Insider Monkey.