Trulieve Cannabis is a double, GMP Securities says

After reporting its third quarter earnings, the outlook for Trulieve Cannabis Corporation (Trulieve Cannabis Stock Quote, Chart: CSE:TRUL) appears solid, says analyst Robert Fagan with GMP Securities, who on Wednesday maintained his “Buy” rating and C$26.00 target for TRUL, representing a projected 12-month return of 104 per cent.

Florida-based vertically-integrated cannabis company Trulieve announced its 2018 third quarter on Monday, producing revenue of $28.3 million, a 22 per cent increase over the previous quarter and an Adjusted EBITDA that went from $11.7 million in Q2 to $12.6 million in Q3. (All figures in US dollars unless noted otherwise.)

CEO Kim Rivers said the company’s brand experience and quality products has helped them produce high patient retention in Florida’s medical cannabis space.

“These outstanding results in Q3 demonstrate the meaningful progress we’ve made on our strategic plan since becoming a publicly-traded company in September,” said Rivers in a press release. “Looking ahead, we remain focused on scalable growth, including multi-state operational expansion.”

Fagan says TRUL’s quarterly results were slightly ahead of his estimate on revenue (his forecast was $27 million) but slightly lower on Adj. EBITDA (his was $13.3 million). He says the company’s aggressive store expansion plans will push up its selling, general and administrative expenses over upcoming quarters.

“TRUL has accelerated its store openings following Q3/18 with five new Florida locations, bringing its total network to 22 stores, and matching the pace of growth of its closest competitors in the state,” says Fagan in a client update. “Our prior forecasts called for TRUL to reach 22 stores only by end of Q4/18, hence we have slightly boosted our forecasts to reflect this more rapid growth. TRUL’s speedy network expansion highlights continuing solid execution in our view, and could put the company in a position to reach its goal of 30 Florida stores by January 2019.”

“While TRUL’s market share lost some ground in Q3/18, this was expected and therefore does not change our outlook. Q3 EBITDA margins of 44.4 per cent still make TRUL the most profitable public US cannabis operator and reinforce the company’s strong execution by demonstrating it can expand operations and maintain strong profitability,” says Fagan. “Lastly with TRUL’s store rollout accelerating post Q3, the company is well positioned to capitalize on the high growth of the Florida market.”