Trulieve Cannabis has an upside of 200%, Ventum says

Following the company’s fourth quarter results, Ventum Capital Markets analyst Andrew Semple has cut his price target on Trulieve Cannabis (Trulieve Cannabis Stock Quote, Chart, News, Analysts, Financials CSE:TRUL), but he also thinks investors can still make a ton of money on the stock.

On February 27, TRUL reported its Q4 and fiscal 2024 results. In the fourth quarter, the company posted Adjusted EBITDA of $111-million on revenue of $301-million, a topline that was up 5%, year-over-year.

“The team set the bar for operational excellence, delivering industry leading margins and record cash flow,” CEO Kim Rivers said. “With our scaled operations, financial strength, and loyal customer base, Trulieve stands out as an industry leader with a differentiated strategy.”

Semple says this was an impressive quarter.

“Trulieve Cannabis Corp. reported very strong Q4/24 results, even considering conservative guidance,” he wrote. “Adj. EBITDA was 19% better than our forecast, increasing by 27% YoY. Moreover, management stated that they expect to hold onto recent gross margin gains (up nearly 1200bps from the Q3/23 low) with structural improvements to the Company’s cost structure, cultivation productivity, and product quality. Trulieve’s Q4/24 results once again displayed the benefits of strategic investments in cultivation efficiency, operational optimizations, and enhancements to its loyalty program. Trulieve has now beat consensus adj. EBITDA estimates by >10% for five consecutive quarters.”

In a research update to clients February 27, the analyst maintained his “Buy” rating but cut his price target on the stock from $21.00 to $19.00, implying a return of 201.1% at the time of publication.

“We reiterate our BUY rating but lower our price target to C$19.00/shr based on a DCF valuation of C$18.99/shr (prev. C$20.45/shr), Semple explained. “Our DCF valuation is based on a 15% discount rate and a 22.5x (prev. 25.0x) terminal year FCF multiple. We previously bumped our terminal year FCF multiple ahead of the Florida adult-use vote, and are returning the terminal FCF multiple to pre-vote levels. Were we to leave our terminal year FCF multiple unchanged, our DCF valuation would be C$20.97/shr, higher than previously, driven by higher EBITDA forecasts and lower 2025 capex.”

Semple thinks TRUL will post Adjusted EBITDA of $408.3-million on revenue of $1.23-billion in fiscal 2025. He expects those numbers will improve to Adjusted EBITDA of $419.4-million on a topline of $1.28-billion in fiscal 2025.

“Despite strong recent financial results and operational execution, Trulieve’s stock was at a 52-week low and valued at just 2.5x 2024A EV/EBITDA (3.6x if including accrued tax liabilities) heading into the Q4/24 earning release. The earnings beat in a distressed capital markets environment leaves plenty of room for a relief rally in the weeks ahead. We see potential for a near-term tactical move higher of >30% (aiming to reclaim a 3.0x EV/EBITDA multiple, ex. tax liabilities, for starters), whereas shares traded up only 7.0% today,” the analyst added.