This Pot Stock Deserves a Look
The legal cannabis industry has grown tremendously over the past few years, and dozens of cannabis companies are now publicly traded. Picking the best pot stocks is no easy feat, as the industry is still at a nascent stage. Today, we are going to take a look at a Tallahassee, Florida-based marijuana company that could deliver big returns to investors.
The company in question is Trulieve Cannabis Corp (OTCMKTS:TCNNF, CNSX:TRUL), a vertically integrated “seed-to-sale” cannabis operator.
I should point out, that despite its stock being listed north of the border, Trulieve is very, very American. In fact, it is the first fully licensed medical cannabis company in Florida.
The first-mover advantage has served the company well in the Sunshine State. The company opened its first dispensary in 2016. Today, it has 48 dispensaries in the state, totaling 145,505 square feet of retail space. (Source: “Investor Presentation | June 2020,” Trulieve Cannabis Corp, last accessed June 30, 2020.)
Trulieve serves approximately 7,300 patients in its stores every day and also offers an efficient statewide home delivery service. The company has by far the largest dispensary network in Florida.
Trulieve is also expanding its presence outside Florida. In particular, it has made strategic acquisitions in Massachusetts, California, and Connecticut.
Recently, the company announced that it had received unanimous approval for its Adult-Use/Recreational Provisional License from the Massachusetts Cannabis Control Commission. (Source: “Trulieve Receives Provisional Adult-Use Cannabis License Approval in Massachusetts,” Trulieve Cannabis Corp, June 4, 2020.)
Investors are forward-looking, so Trulieve’s expansion plan certainly looks exciting. Moreover, the company has a solid track record of growing its business.
Consider this: in 2017, Trulieve Cannabis Corp generated $19.8 million of revenue. The number rose to $102.8 million in 2018 and to $252.8 million in 2019. Taking into account the company’s expansion into Massachusetts and continued growth in Florida, Connecticut, and California, management projects that Trulieve will deliver $380.0 to $400.0 million of revenue in full-year 2020.
(Source: “Investor Presentation | June 2020,” Trulieve Cannabis Corp, op. cit.)
Trulieve’s latest earnings report suggests that the company is indeed traveling on a nice growth path.
In the first quarter of 2020, Trulieve generated $96.1 million of revenue, marking a new record for the company. To be specific, the top-line number represented a 21% increase quarter-over-quarter and a whopping 116% increase year-over-year. (Source: “Trulieve Reports Strong Operational Results and Record Revenue in the First Quarter of 2020,” Trulieve Cannabis Corp, May 20, 2020.)
As I said earlier, the pot industry is just getting started, so it shouldn’t come as a surprise that some companies are still recording losses. Not Trulieve, though. Last year, the company generated $178.0 million in net income. In the first quarter of this year, it reported a net income of $14.0 million.
Another thing that makes TCNNF stock stand out is that the company has a very loyal customer base. Comparing the first quarter of 2020 with the fourth quarter of 2019, Trulieve achieved a customer retention rate of 74%.
For those concerned about how the COVID-19 pandemic will impact Trulieve stock, don’t worry.
In a conference call in May, the company’s Chief Executive Officer Kim Rivers said that they have actually seen increased demand for cannabis products:
Analyzing the post COVID environment beginning the week ending March 13th, Florida’s demand over the last 8 weeks have increased by approximately 32% in oil and 39% in flower compared to the weekly average for the 8 weeks leading up to COVID. Trulieve outperformed the competition by achieving 39% growth in oil and 59% growth in flower during the same period.
(Source: “Trulieve Cannabis Corporation (TCNNF) CEO Kim Rivers on Q1 2020 Results – Earnings Call Transcript,” Seeking Alpha, May 20, 2020.)
Trulieve Cannabis Corp (OTCMKTS:TCNNF) Stock Chart
Chart courtesy of StockCharts.com
Pot stocks are known for being volatile, and Trulieve Cannabis Corp is no exception. As the market plunged in March due to the coronavirus outbreak, TCNNF tumbled with it.
However, as the above chart shows, Trulieve stock was quick to recover. In fact, since hitting a low on March 18, this pot stock has already doubled.
If the company can keep growing its business during this uncertain environment, its investors could see further returns down the road.