Florida-based cannabis operation Trulieve Cannabis (Trulieve Cannabis Stock Quote, Chart, News CSE:TRUL) keeps ticking all the right boxes for PI Financial analyst Jason Zandberg, who recently toured the company’s Tallahassee facilities and came away a believer that Trulieve has what it takes to not only scale its business in Florida but to replicate that success in other jurisdictions across the United States.
In an update to clients on Thursday, Zandberg reiterated his “Buy” rating and C$20.00 price target, which at press time represented a projected 12-month return of 45.4 per cent.
Vertically-integrated cannabis company Trulieve has 43 dispensaries in the state of Florida and is the state’s leading medical cannabis provider, with operations also in California, Massachusetts and Connecticut.
Trulieve currently sells 51 per cent of the total milligrams of THC and CBD dispensed in Florida and 46 per cent of the total smokable flower sold. Where smokable flower has only been available since the second half of 2019, Trulieve sold 9,600 lbs for the year —by comparison, the entire cannabis market in Ohio sold 7,000 lbs of all types of cannabis for 2019.
By store count, Trulieve’s 43 dispensaries put it ahead of nearest competitor Surterra at 37 stores with Curaleaf and Liberty Health Sciences at 28 and 23, respectively, and the rest of the field trailing off from there. But Trulieve’s 51-per-cent market share of THC and CBD puts it head and shoulders above its rivals, with Surterra at 11 per cent and Curaleaf at 13 per cent.
A similar scenario exists for smokables where Trulieve’s 46 per cent compares to Surterra’s 13 per cent and Curaleaf’s four per cent.
From his visit, Zandberg said his main takeaway was that TRUL has been able to efficiently scale its operations, anticipate and prepare for market changes and to understand patient needs better than its competition.
“Clearly, Trulieve is doing something right in Florida so we travelled to Tallahassee to get an update on the company,” wrote Zandberg in his update.
“We believe management has effectively anticipated market changes in the past and quickly executed (smokable flower for instance). We believe that the next phase in the Florida market will likely be the introduction of edibles which TRUL is currently prepared to commence manufacturing for this product category. Lastly, TRUL’s rapid expansion of its retail footprint has left its competition in its rear view mirror. Although we expect its competition to build more dispensaries within this lucrative market, TRUL’s first moving advantage will likely enable it to secure the best locations and build long-term brand awareness,” Zandberg said.
The analyst expects TRUL to report what he calls another strong quarter of revenue in its fourth quarter fiscal 2019, due in April.
He is calling for sales of $82.2 million and EBITDA of $31.2 million.
For fiscal 2020, Zandberg thinks that Trulieve will generate revenue of $400 million and EBITDA of $153 million, respectively, and for fiscal 2021, revenue of $516 million and EBITDA of $211 million. (All figures in US dollars except where noted otherwise.)