Green Thumb Industries Inc GTBIF shares traded lower by 1.5% on Thursday after the U.S. cannabis company reported impressive first-quarter sales growth on Wednesday.

Green Thumb reported GAAP net income of $10.4 million, or 5 cents per diluted share, in the first quarter. The company also reported $194.4 million in revenue, up 9.7% sequentially and 89.5% from a year ago.

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The Analyst: On Thursday, Cantor Fitzgerald analyst Pablo Zuanic reiterated his Overweight rating for Green Thumb but cut his price target from $46 to $43.

The Thesis: Zuanic said he is still bullish on Green Thumb’s growth outlook, but the company’s expansion into additional states will likely weigh on margin in the near term. Zuanic is projecting $1.28 billion in 2022 revenue, about 13% above consensus analyst estimates. However, his 37% EBITDA margin forecast is about 3% below consensus estimates.

“We continue to think the stock deserves a premium to peers due to depth in strategically attractive states, solid capital allocation track record, and optionality from states in the company’s portfolio going rec.,” Zuanic wrote.

In the near term, Green Thumb is in the process of adding cultivation in states such as Illinois, Pennsylvania, Massachusetts, New Jersey and New York. In addition, Zuanic said Green Thumb could pursue targeted acquisitions, and its partnerships with Cookies and CANN drinks could ultimately lead to buyouts down the road.

Zuanic said Green Thumb and Curaleaf Holdings Inc CURF remain his top two stock picks among U.S. MSOs. Looking ahead, he said news of additional states within Green Thumb’s footprint legalizing recreational cannabis could serve as bullish catalysts for the stock.

Benzinga’s Take: Cannabis stocks will likely continue to be volatile in the near term while the industry matures. Long-term investors should monitor the progress of U.S. state-by-state and federal legalization efforts and should consider diversifying into several different U.S. and Canadian names rather than putting all their cannabis eggs in one basket.