Trulieve Cannabis Corp: Up 216% Since March But Still Undervalued

TCNNF StockTrulieve Cannabis Corp Soars on Strong Financials, New Dispensaries

Trulieve Cannabis Corp (OTCMKTS:TCNNF, CNSX:TRUL) is without a doubt one of the best U.S. cannabis plays out there. For that matter, it’s one of the best pot stocks in North America.

Trulieve Cannabis Corp stock has surged 113% year-over-year, is up 68.7% year-to-date, and has advanced 216% since hitting March lows.

By comparison, the ETFMG Alternative Harvest ETF (NYSEARCA:MJ), which is the world’s largest cannabis exchange-traded fund (ETF), is down 40% year-over-year and 32% in 2020.

If any pot stock deserves to be uplisted to the Nasdaq it’s TCNNF. Trulieve has a strong balance sheet and a huge cash position, and it reported its 10th consecutive quarter of profitability and revenue growth, raised its full-year guidance, is launching new products, and continues to dominate the Florida market with new dispensaries. Trulieve is also expanding its presence outside Florida.

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TCNNF Stock Overview

Trulieve Cannabis Corp is the first and leading medical cannabis company in the State of Florida, the third most populous state in the country. The seed-to-scale cannabis firm has captured approximately 51% of the Florida market. It also operates in California, Massachusetts, Connecticut, and Pennsylvania. (Source: “Overview,” Trulieve Cannabis Corp, last accessed October 8, 2020.)

Trulieve currently offers more than 500 different products (flower, CBD, tinctures, capsules, and topical ointments), and is regularly adding to its product line.

One reason why Trulieve Cannabis Corp is so popular is that it’s easy to find one of its dispensaries.

On October 6, it opened its 60th dispensary in the Sunshine State and 62nd nationwide: a brand-new, 6,500-square-foot location in Merritt Island. (Source: “Trulieve Reaches 60 Florida Stores, Announces Third Brevard County Location,” Trulieve Cannabis Corp, August 6, 2020.)

More dispensaries are slated to open in Florida and elsewhere in the U.S.

In September, Trulieve announced that it entered its fifth state with two acquisitions in Pennsylvania. The company entered a definitive agreement to acquire pot cultivator and producer PurePenn LLC and Pioneer Leasing & Consulting LLC (collectively known as PurePenn), a premier cultivation and production company putting out pharmaceutical-grade medical marijuana products. (Source: “Trulieve Enters 5th State with Two Acquisitions in Pennsylvania, Creating a Vertically Integrated Operation,” Trulieve Cannabis Corp, September 16, 2020.)

It also acquired dispensary operator Keystone Relief Centers LLC, which conducts business under the Solevo Wellness banner. Solevo owns and operates three dispensaries located in the Pittsburgh area, including the first dispensary to open in Allegheny County.

These acquisitions expand Trulieve’s retail presence into the fifth-most populated state in the U.S., with approximately 13 million people and an expanding medical marijuana patient base of 330,000 patients as of June 30, 2020.

The medical marijuana market in Pennsylvania, which was estimated to be $420.0 million in 2019, is expected to hit $575.0 million by the end of 2020.

As of the end of the second quarter of 2020, only 87 of the potential 198 dispensary locations were operational and servicing the 330,000 patients in the state.

Kim Rivers, Trulieve’s CEO, noted, “We are extremely excited to announce the acquisition of PurePenn and Solevo as these companies are proven and profitable operators with strong management teams, state of the art facilities, a premium product portfolio, and strong patient base.”

Rivers added, “We believe Pennsylvania is one of the most attractive cannabis markets in the United States and these acquisitions align with our focus on expanding within the northeast. The combination of these companies, coupled with Trulieve’s supply chain expertise, customer and brand-centric approach, and ability to profitably grow will propel us into a strong leadership position in the state.”

Record Q2 Revenue

On August 12, Trulieve Cannabis Corp announced that revenue for the second quarter ended June 30 increased 109% year-over-year and 26% sequentially to a record $120.8 million. (Source: “Trulieve Reports Strong Consecutive Growth and Raises Guidance,” Trulieve Cannabis Corp, August 12, 2020.)

Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) were $60.5 million, or 50% of revenue, up 92% year-over-year and 23% quarter-over-quarter. This also represents the 10th quarter of consecutive growth and profitability. The company achieved free cash flow of $39.6 million and ended the second quarter with a strong cash position of $150.3 million.

During the quarter, Trulieve opened five new stores in Florida, finishing the quarter with 52 stores nationwide. It has since opened eight more dispensaries.

Kim Rivers, the company’s CEO, commented, “Once again our financial results reflect our exceptional ability to grow our business quarter over quarter, through continued organic expansion of our retail footprint, while maintaining industry leading profitability. We are pleased to be able to demonstrate strong financial performance in revenue, adjusted EBITDA and free cash flow while pivoting our business to meet the changing behaviors and needs due to COVID.”

“Looking ahead, we are excited about the second half of the year and will continue focusing on execution and expansion. We anticipate exceeding our goal of 68 stores and will continue our strong growth in Florida. Massachusetts is getting closer to completion and we are excited to enter that market in 2021,” Rivers concluded.

Trulieve Raised Guidance

Thanks to the strong financial performance in the first half of 2020, Trulieve raised its full-year guidance. It now expects to report:

  • Total revenue in the range of $465.0 million to $485.0 million, up from previous guidance of $380.0 million to $400.0 million. At the mid-point, this new guidance represents year-over-year growth of 87.5%.
  • Adjusted EBITDA in a range of $205.0 million to $225.0 million, up from a previous guidance range of $140.0 million to $160.0 million. At the mid-point, this represents a year-over-year gain of 62.0%.

Analyst Take

Again, I think Trulieve Cannabis Corp is one of the best pot stocks out there right now. Wall Street concurs; of the 13 analysts following Trulieve, all 13 say TCNNF is a “Buy.” And for good reason. It just reported its 10th consecutive quarter of revenue growth and profitability, and it’s launching new products, opening new dispensaries, and expanding its national footprint.