The stock remains a “Buy” but Haywood Capital Markets analyst Neal Gilmer is lowering his target price on US cannabis play Trulieve Cannabis (Trulieve Cannabis Stock Quote, Charts, News, Analysts, Financials CSE:TRUL) after just-published quarterly earnings from the company. Gilmer provided an update to clients on Thursday where he took his target from C$26 to C$22 per share, which at press time represented a projected one-year return of 153 per cent.
Florida-based Trulieve announced its fourth quarter and 2022 financials on Wednesday, with revenue of $302 million compared to $305 million a year earlier. Gross profit was up 12 per cent year-over-year to $150 million, while adjusted EBITDA was down 16 per cent to $85 million. (All figures in US dollars except where noted otherwise.)
For the full year, Trulieve’s revenue was up 32 per cent to $1.2 billion and adjusted EBITDA was up four per cent to $400 million.
“With increasing mainstream support and meaningful regulatory reform on the horizon, tremendous growth opportunities lie ahead for US legal cannabis,” said CEO Kim Rivers in a press release. “In 2023, we are laser focused on cash generation while investing to build a sustainable company designed to thrive in an integrated commerce environment.”
Looking at the Q4 results, Gilmer said the $302.2 million topline compared to his estimate at $299.2 million and the consensus at $306.4 million, while adjusted EBITDA at $84.7 million was below his estimate at $97.7 million as well as the Street at $97.8 million.
Gilmer noted that management declined to provide specific revenue and EBITDA guidance for the 2023 year and instead focused on its cash generation and preservation efforts. TRUL’s aim is for operating cash flow to reach $100 million this year and, with its capex budget projected to be about 50 per cent lower than 2022 levels, management is expecting to achieve positive cash flow. The company is also expecting to open between 15 and 20 new stores over the year and relocate six locations.
“We continue to view Trulieve favourably in the US market. The company has strategically expanded its footprint to attractive markets. A shifting of focus towards cash generation should position Trulieve to navigate near-term headwinds and execute on growth initiatives,” Gilmer wrote.
Trulieve recently announced three new dispensaries, two in Florida and one in West Virginia, to bring its nationwide footprint to 184 retail outlets and over 4.0 million sq ft of cultivation and processing, together representing the largest footprint across the US.
Gilmer said as a result of the company’s stated plans to focus on cash generation through inventory reduction, he has lowered his margin assumptions which impacted his EBITDA estimates for 2023 and 2024 and thus his lowered target. The analyst is now calling for 2023 revenue and EBITDA of $1,264.3 million and $373.2 million, respectively, and 2024 revenue and EBITDA of $1,355.4 million and $419.3 million, respectively.