Trulieve Cannabis is kicking butt, M Partners says

Ahead of first quarter results due next week from US cannabis play Trulieve Cannabis (Trulieve Cannabis Stock Quote, Chart, News CSE:TRUL), M Partners analyst Paul Piotrowski issued an update on Wednesday, May 13, saying he expects revenue to grow but for profit to be slimmer.

Tallahassee, Florida’s Trulieve is a multi-state operator with core business in Florida’s medical marijuana market, along with operations in California, Massachusetts and Connecticut.

For an indication of Trulieve’s strength in Florida, Piotrowski pointed to new data from the Florida Department of Health, which issues regular updates on marijuana in the state. The latest saw significant spikes in sales due to the COVID-19 era but overall an increase in TRUL’s business over the Q1: Trulieve saw a nine per cent rise in THC oil sales, a 13 per cent decline in CBD oil sales and a 59 per cent increase in dried flower sales for the quarter.

The analyst noted that TRUL’s peak was in the week ending March 20 where the Florida market grew by a whopping 38 per cent and Trulieve accounted for 48 per cent of oil sales in the state and 59 per cent of flower sales over that time. Piotrowski also pointed out that Florida’s market, while normalizing after that spike, didn’t see the substantial declines witnessed in other jurisdictions.

As for the upcoming quarter, Piotrowski is expecting revenue up 16 per cent sequentially to $92.3 million, gross profit of $61.9 million (a 67 per cent margin) compared to $51.5 million for the previous quarter and adjusted EBITDA of $38.8 million compared to $45.0 million for Q4 2019. (All figures in US dollars except where noted otherwise.)

“The Company has managed to increase its market share during the pandemic due to its robust supply chain and connectivity to its patients (aided by its expansive home delivery program),” wrote Piotrowski.

“In early March, the Company noticed an uptick in demand for delivery, and management decided to exponentially increase its vehicle fleet leading to an increase in delivery volume (as a percentage of all sales volume), from 6 per cent to ~20 per cent at peak (from the second week of March until the third week of April),” he said.

“Despite concerns regarding the upcoming unlocks of shares held by founders (11.2 million on May 15 and 54.1 million on July 25), Kim Rivers has said she has no intention to sell (Kim Rivers owns ~17 million shares). The remaining founders also sit on the Board of Directors and are in ongoing discussions with regards to the July unlock,” Piotrowski said.

Looking ahead, the analyst is calling for TRUL to generate fiscal 2020 revenue and adjusted EBITDA of $400.4 million and $165.6 million, respectively, and fiscal 2021 revenue and adjusted EBITDA of $489.7 million and $200.8 million, respectively.

With the update, Piotrowski is retaining his “Buy” recommendation and $31.00 per share target, which at the time of publication represented a projected one-year return of 96 per cent.

Like the rest of the market, TRUL saw its share price fall in late February and March, but the stock has regained all of that ground and now sits at even for the year so far.