3 Retail Cannabis Stocks to Watch Now That You Can Smoke Medical Marijuana in Florida

3 Retail Medical Marijuana Stocks Poised for Growth in Florida

Florida House Ends Ban on Smoking Medical Marijuana

Against the wishes of the U.S. federal government, a growing number of states are legalizing medical and recreational marijuana. Florida is the latest U.S. state to green-light the smoking of medical marijuana.

In a landslide vote (101-11), the Florida House passed the proposal on March 13. Governor Ron DeSantis is expected to sign the bill into law by March 15. (Source: “In landslide vote, Florida House agrees to end ban on smoking medical marijuana,” Miami Herald, March 13, 2019.)

This will obviously be a boon for cannabis companies with operations in Florida. According to one projection, Florida’s cannabis market should hit $1.3 billion by 2021. (Source: “Florida’s marijuana forecast: Hazy, with chances for growth high,” Tampa Bay Times, December 20, 2018.)

In light of this news, we take a look at three retail marijuana stocks that should profit now that smoking medical marijuana is legal in the Sunshine State.

Floridians Can Now Spark It Up

In January, Florida Governor DeSantis gave the House a deadline of March 15 to repeal the state’s ban on smokable medical marijuana. If it wasn’t repealed by then, he would simply remove the appeal that was supported by the previous governor, Rick Scott.

Back in 2017, more than 70% of Florida voters approved a constitutional amendment to legalize medical marijuana. The bill was signed into law, but Governor Scott limited medical marijuana use to pill, oil, edible, and vape form. Therefore, it was illegal to smoke medical marijuana.

As expected, the smoking ban was challenged in court. In May 2018, the ban was ruled to be unconstitutional, but the Department of Health appealed the ruling. Shortly after taking office this past January, DeSantis issued an ultimatum to the legislature, threatening to drop the state’s appeal.

Not everyone was in favor of lifting the smoking ban, but failing to do so could have led to having medical marijuana legal without any restrictions.

And there are some rules when it comes to smoking medical marijuana in Florida. For one thing, it can only be smoked by those 18 years of age and up.

That said, anyone under 18 who is terminally ill can smoke medical marijuana if two doctors (one must be a board-certified pediatrician) confirm that it is the most effective form of treatment.

Also, medical marijuana cannot be smoked in public or at private businesses subject to Florida’s cigarette smoking ban.

In addition to allowing Floridians to smoke medical marijuana, the bill establishes the Medical Marijuana Research and Education Board, open to all universities that wish to participate in the $1.5-million program. (Source: Miami Herald, op cit.)

3 Cannabis Stocks With Retail Operations in Florida

Company Stock Tickers
Trulieve Cannabis Corp OTCMKTS:TCNNF, CNSX:TRUL
Liberty Health Sciences Inc OTCMKTS:LHSIF, CNSX:LHS
Curaleaf Holdings Inc OTCMKTS:CURLF, CNSX:CURA

Trulieve Cannabis Corp

Trulieve Cannabis Corp (OTCMKTS:TCNNF, CNSX:TRUL) is a medical marijuana company that was the first—and currently the leading—medical cannabis company in Florida, the third most populous state in the country.

Currently it offers over 150 different products and is always adding new ones. The company’s products include flower, cannabidiol (CBD), tinctures, capsules, and topical ointments. (Source: “Investors,” Trulieve Cannabis Corp, last accessed March 15, 2019.)

The Quincy, Florida-based company has capitalized on its first-mover advantage, capturing roughly 67% market share. According to the Florida Department of Health, the company consistently sells between 60% and 80% of the state’s overall volume.

Since first opening, Trulieve has served nearly 170,000 medical patients. And that number continues to grow at a rate of approximately 10% month-to-month. It also serves patients with a home delivery service.

Between September 30, 2017 and September 30, 2018, Trulieve opened 10 additional dispensary locations.

In January, Trulieve announced that it was opening its 24th location in Florida. (Source: “Trulieve Opens Doors of 24th Location in Florida,” Cision, January 14, 2019.)

In November 2018, Trulieve announced the acquisition of Life Essence, Inc. (based in Massachusetts) and Leef Industries, LLC (based in California). These mark the company’s first operational initiatives beyond Florida. (Sources: “Trulieve Completes Acquisition of Life Essence, Inc.,” Cision, December 13, 2018; Trulieve Receives Approval from the City of Palm Springs for the Transfer of Leef Industries’ Dispensary Permits,” Trulieve Cannabis Corp, November 30, 2018.)

Chart courtesy of StockCharts.com

Trulieve Cannabis Corp Reports Record Q3 Results

For the three months ended September 30, 2018, Trulieve announced that revenue soared 739% year-over-year from $3.4 to $28.3 million.(Source: “Interim MD&A Trulieve Cannabis Corp.,” Trulieve Cannabis Corp, last accessed March 15, 2019.)

Net income for the third quarter was $17.5 million, up significantly from $462,234 for the three months ended September 30, 2017. Year-to-date net income was $32.2 million, compared to $3.2 million for the nine months ended September 30, 2017.

Revenue for the nine months ended September 30, 2018 was up 923% year-over-year from $6.5 million to $66.9 million.

As of September 30, 2018, the company had total current liabilities of $23.1 million and cash of $42.1 million. On December 31, 2017, it had current liabilities of $7.6 million and cash equivalents of $1.4 million.

Liberty Health Sciences Inc

Liberty Health Sciences Inc (OTCMKTS:LHSIF, CNSX:LHS) is engaged in the production and distribution of medical marijuana, primarily in Florida.

The company recently completed the first phase of construction at its “Liberty 360° Innovation Campus” in Gainesville, Florida. This will provide the company with an additional 80,000 square feet of cultivation space, for a current total of 150,000 square feet in its facilities in Alachua and Gainesville. (Source: “liberty announces 11th dispensary opening in florida, completion of phase 1 construction at liberty 360 and strategic changes,” Liberty Health Sciences Inc, February 28, 2019.)

The second phase of construction is expected to be completed in April. Once completed, it will contain 225,000 square feet of cannabis greenhouse space.

On March 1, Liberty Health opened its 11th dispensary in Florida.

Chart courtesy of StockCharts.com

Liberty Health Sciences Inc Reports Solid Q3 Results

On December 7, 2018, Liberty announced its financial results for the third quarter ended November 30, 2018.

Third-quarter revenue increased 45% year-over-year to approximately CA$3.2 million.

During the quarter, the company harvested 583,246 grams (about 1,286 pounds) of cannabis, compared with 132,074 grams (about 291 pounds) in the same prior-year period. It also increased its number of stock keeping units (SKUs) from 27 to 70. (Source: “Liberty Health Sciences Inc. Management’s Discussion & Analysis,” Liberty Health Sciences Inc, January 25, 2019.)

Liberty’s patient count increased by 46% during the quarter to approximately 14,500.

The company also opened three additional dispensaries, for a then-total of seven dispensaries and six delivery hubs.

The company recorded a third-quarter net loss of CA$9.7 million (CA$0.028 per share), compared with CA$1.1 million (CA$0.004 per share) in the same prior-year period.

Year-to-date revenue was up significantly at CA$6.5 million, compared with CA$173,024 in the first nine months of 2017.

The net loss for the first three quarters was CA$18.5 million (CA$0.056 per share), compared with CA$24.8 million (CA$0.104 per share) for the three months ended November 30, 2017.

The improvement in year-to-date net income was due primarily to the ramp-up in sales revenue at the company’s operations in Florida, as well as the significant one-time transaction costs incurred in 2017.

Curaleaf Holdings Inc

Curaleaf Holdings Inc (OTCMKTS:CURLF, CNSX:CURA) is an integrated medical and wellness cannabis operator in the United States.

The company cultivates, processes, markets, and dispenses a range of cannabis products in various operating markets, including flower, pre-rolls, dry-herb vaporizer cartridges, tinctures, lozenges, capsules, and edibles. (Source: “Company Presentation February 2019,” Curaleaf Holdings Inc, last accessed March 15, 2019.)

The Wakefield, Massachusetts-based company has operations in 13 key states, owns and operates 42 dispensaries, 12 cultivation sites, and 10 processing sites.

The company’s 12 cultivation sites total approximately 650,000 square feet, with current production capacity of 63,000 pounds of dry flower.

By 2020, the company expects to expand its cultivation capacity to more than one million square feet, producing over 290,000 pounds of dry flower.

Curaleaf ‘s efforts are focused on highly populated, limited-license states, including Florida, California, Massachusetts, Nevada, New Jersey, and New York. The company actually has the largest footprint of branded marijuana retail stores in the U.S., covering 70% of the U.S. cannabis market and reaching 146 million of its target audience. (Source: Ibid.)

Chart courtesy of StockCharts.com

Curaleaf Holdings Inc Q3 Revenue Up 289%

On November 26, Curaleaf announced its financial results for its third quarter ended September 30, 2018.

Third-quarter revenue increased 289% year-over-year and 47% sequentially to $21.4 million. (Source: “Curaleaf Reports Third Quarter 2018 Financial and Operational Results,” Curaleaf Holdings Inc, November 26, 2018.)

The company’s net loss in the quarter was $33.7 million—which included a $25.0-million, one-time, non-cash accounting entry related to the reverse takeover transaction and investments in new store openings and facilities—compared to a net income of $459,000 in the third quarter of 2017.

For the first nine months of 2018, revenue increased 247% year-over-year to $45.1 million. The net loss in that period was $40.8 million, compared to the net loss of $3.5 million for the same period in 2017.

Year-to-Date Activities:

  • In April, Curaleaf acquired Swell Farmacy, a vertically-integrated Arizona operator with four dispensaries.
  • In October, it acquired Midtown Roots, the only dispensary located in the heart of downtown Phoenix, Arizona.
  • As of September 30, 2018, Curaleaf had 29 branded dispensaries.
  • Curaleaf raised approximately $400.0 million in an oversubscribed private placement offering on October 25, 2018.
  • As of November 26, 2018, the company had a total of 33 locations.

Curaleaf will report its financial and operating results for the 2018 fourth quarter and full year after the market close on March 20, 2019.

Analyst Take

More than 30 U.S. states, as well as the District of Columbia, Guam, and Puerto Rico, have legalized medical cannabis. Ten U.S. states and the District of Columbia have legalized recreational cannabis.

And more states are looking at holding referendums to legalize weed.

Suffice it to say, the current and future market for medical and recreational cannabis in the U.S. is massive. While new pot growers can pop up and make headway in the crowded industry, it’s a totally different matter when it comes to establishing a retail presence.

With a high barrier to entry, the companies best prepared to capitalize on the retail end of legal medical and recreational marijuana are those that entered the market first.

While there are other players in the field, when it comes to major areas like Florida, New York, and California, it makes sense to keep a watchful eye on Trulieve Cannabis Corp, Liberty Health Sciences Inc, and Curaleaf Holdings Inc.