This Marijuana stock Could Be Special
Compared to the buying frenzy that pot stocks enjoyed earlier this year, the current market doesn’t seem very enthusiastic about the sector.
However, that’s exactly why this could be the right time to check out some solid pot stocks. After all, it was Warren Buffett who famously said, “Be fearful when others are greedy and greedy when others are fearful.”
So let’s take a look at one of the most solid pot stocks on the market: Trulieve Cannabis Corp (CNSX:TRUL, OTCMKTS:TCNNF).
No. 1 Player in Sunshine State
The first reason to consider TCNNF stock is the company’s leading position in the state of Florida.
Trulieve won the first medical marijuana application in Florida in 2015, opened its first dispensary there in 2016, and won the ability to grandfather in 14 stores above the Florida cap in 2017. (Source: “Investor Presentation: June 2021,” Trulieve Cannabis Corp, last accessed August 24, 2021.)
In 2018, the company went public on the Canadian Securities Exchange through a reverse takeover. It also made several acquisitions during that year.
In 2019, Trulieve became the first company to sell smokable marijuana flower in Florida. It then went on to become the first company to sell edibles in the state.
Today, Trulieve Cannabis Corp has more than 80 dispensaries in the Sunshine State, with a growing customer database of more than 567,000. The company estimates that it has a 48% share of the medical cannabis market in Florida.
Other than being the most dominant player in Florida’s pot market, Trulieve has licenses in California, Massachusetts, Connecticut, Pennsylvania, West Virginia, and Georgia.
Growth in Both Top and Bottom Lines
The second reason to consider Trulieve stock is that the company has been growing rapidly.
In 2020, the company’s revenue increased by 106% year-over-year to $521.5 million. (Source: “Trulieve Reports Fourth Quarter and Full-Year 2020 Results and Announces Full-Year 2021 Guidance,” Trulieve Cannabis Corp, March 23, 2021.)
Its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) also nearly doubled, from $126.4 million in 2019 to $251.0 million in 2020.
That growth momentum has continued in 2021. In the first six months of this year, Trulieve generated $408.9 million of total revenue, marking another 89% increase year-over-year. (Source: “Trulieve Reports Record Second Quarter 2021 Earnings and Expansion into New Markets,” Trulieve Cannabis Corp, August 12, 2021.)
Its adjusted EBITDA came in at $185.7 million during this period, up by 69% from a year earlier.
Trulieve Cannabis Corp is profitable, which isn’t usually the case for most pot companies. 2020 marked Trulieve’s third straight year of profitability.
And considering that the company’s net income of $71.0 million in the first six months of 2021 was 67% higher than what it earned in the year-ago period, it’s on track to deliver another year of strong bottom-line growth.
Trulieve Stock Appears to be Oversold
As mentioned earlier, pot stocks aren’t exactly hot commodities at the moment.
Looking at Trulieve Cannabis Corp, we see that its share price reached new highs in January, February, and March, but it wasn’t able to continue that momentum.
In fact, the pullback was so strong that TCNNF stock is currently trading around 50% of where it was during its March peak.
One consequence of this sell-off is that, based on its relative strength index (RSI), Trulieve stock is quite oversold.
RSI is calculated based on the closing prices of a recent trading period and compares the magnitude of recent gains to recent losses in order to measure the momentum in a stock. It ranges from zero to 100. A stock is considered to be overbought once the RSI approaches 70 and oversold if the RSI approaches 30.
As you can see from the top of the below chart, the 14-day RSI of TCNNF stock has fallen to 25.7, meaning it’s extremely oversold. Considering that RSI is an oscillator—meaning it moves between two extremes—we could see a bounce in Trulieve stock in the near future.
Trulieve Cannabis Corp (OTCMKTS:TCNNF) Stock Chart
Chart courtesy of StockCharts.com
As I always say, pot stocks are some of the most volatile tickers in the market, so beware of the risks before you make any decision about Trulieve Cannabis Corp. In the marijuana sector, share prices don’t move like those of companies like Procter & Gamble Co (NYSE:PG) or Coca-Cola Co (NYSE:KO).
That said, for investors who understand the underlying risks with pot stocks, TCNNF stock could be one of the best plays in the field.