Trulieve Cannabis Corp: Will This Pot Stock Double Again?

pot stocksTCNNF Is a Top Pick for Pot Stock Investors

Pot stocks can be very volatile, and by “volatile,” I mean their prices often make big swings to either side. While that means risk-averse investors will probably look elsewhere for opportunities, it also implies that, if a pot company can grow rapidly, its investors might be able to see substantial gains in a very short period.

For instance, when I told Profit Confidential readers in July why Trulieve Cannabis Corp (CNSX:TRUL, OTCMKTS:TCNNF) could deliver big returns, the stock was trading around $12.50 apiece. As of this writing, Trulieve stock is at $28.96, marking a 131.7% increase in just a few months.

Obviously, that also means TCNNF stock is more expensive than before. However, based on what the pot company has been doing lately, I’d say its growth theme remains intact.

Trulieve Cannabis Corp is the first and largest fully licensed medical pot company in Florida.

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Headquartered in Tallahassee, the company is vertically integrated, cultivating and producing all of its products in-house. The products are then distributed to Trulieve-branded stores throughout the Sunshine State, as well as directly to patients through home delivery.

The company also has operations in California, Massachusetts, Connecticut, and Pennsylvania.

Like many pot stocks, Trulieve stock is listed north of the border on the Canadian Securities Exchange. But because the company also trades over the counter in the U.S., under the ticker symbol “TCNNF,” it’s very convenient for American investors to buy and sell its shares.

Trulieve’s story started in 2015, when the company won the first Medical Marijuana Application in the state of Florida. Its first dispensary opened in 2016.  Today, the company has 72 cannabis retail locations in the U.S., including 67 in Florida. (Source: “Investor Presentation | November 2020,” Trulieve Cannabis Corp, last accessed November 27, 2020.)

Other than being a retail giant, Trulieve is one of the larger pot producers in America. It has 1.9 million square feet of cultivation space in Florida, which is capable of producing 86,082 kilograms (189,778 pounds) of cannabis annually.

As you’d expect from such a quick expansion, the company’s financials have grown by a lot. In 2017, Trulieve’s revenue was $19.8 million. In 2019, the amount had shot up to $252.8 million. That’s a 12-fold increase in revenue in just two years!

And even though the COVID-19 pandemic has brought headwinds to virtually every industry except tech, the momentum in Trulieve’s business has carried on.

In the second quarter of 2020, the company generated $120.8 million in total revenue, which more than doubled the $57.9 million earned in the year-ago period. (Source: “Trulieve Reports Strong Consecutive Growth and Raises Guidance,” Trulieve Cannabis Corp, August 12, 2020.)

What really demonstrated the resilience in the business and continuation in growth was the sequential improvement: Trulieve’s second-quarter 2020 revenue was up 26% from the first quarter.

The company recently reported its third-quarter results, and they showed a similar pattern. For the quarter, Trulieve’s revenue totaled $136.3 million, marking a 93% increase year-over-year and a 13% increase quarter-over-quarter. (Source: “Trulieve Achieves Record Third Quarter Results, Enters 6th State,” Trulieve Cannabis Corp, November 17, 2020.)

And it’s not just the top line that has been going up. Trulieve’s adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) came in at $67.5 million in the third quarter of 2020, an increase of 83% year-over-year and 13% sequentially. This also marked the company’s 11th quarter of consecutive adjusted EBITDA growth and profitability.

Regarding outlook, here’s what Trulieve’s chief financial officer, Alex D’Amico, said in the company’s latest earnings conference call:

Last quarter, we raised guidance for revenues in the range of $465 million to $485 million and adjusted EBITDA of approximately $205 million to $225 million. While we are not adjusting guidance at the time, we do not expect declines in Q4. Please note that our guidance does not contemplate our recent acquisitions in Pennsylvania where we will have the benefit of approximately a month and a half of revenue in our consolidated year end results.

(Source: “Trulieve Cannabis Corp.’s (TCNNF) CEO Kim Rivers on Q3 2020 Results – Earnings Call Transcript,” Seeking Alpha, November 17, 2020.)

In other words, the actual results could be better than expected. And even if you take the conservative approach and assume that Trulieve will reach the low end of the revenue guidance range (meaning it earns $465.0 million in total revenue this year), it would still mark an 83.9% increase from 2019.

Trulieve Cannabis Corp (OTCMKTS:TCNNF) Stock Chart

Chart courtesy of StockCharts.com

Analyst Take

Looking at the Trulieve stock chart, we see that, after forming a V-bottom in the market sell-off in March, the shares have been steadily climbing.

If Trulieve Cannabis Corp can continue growing its business and financials, higher highs could be within reach for TCNNF stock.