I am bullish on Trulieve Cannabis (TCNNF) as it enjoys massive growth potential and momentum, its price target implies outstanding total return potential, and Wall Street analysts are unanimously bullish on it.
Trulieve Cannabis is a medical cannabis company based in Canada and the United States. It maintains a significant presence across the U.S., with headquarters in Florida. Trulieve is mainly engaged in the cultivation, possession, marketing, and sale of medical cannabis, rarely exploring recreational products.
With that said, Trulieve has come under regulatory scrutiny because of a recent conversation between Halsey Beshears, a former state representative; and JT Burnette, the husband of Trulieve’s CEO, Kim Rivers. Burnette was found guilty of five charges, including extortion and lying to the FBI, in a case unrelated to Trulieve.
Strengths
The cannabis industry is growing at a rapid pace, whether it is for recreational use or medical reasons, and there is an untapped market waiting to be captured.
TCNNF has very few close competitors right now. At its current growth rate, Trulieve is poised for an excellent decade. What stands out about Trulieve is its complete devotion to Florida, with a total of 102 stores, which includes the acquisition and subsequent rebranding of Harvest Health stores.
Trulieve does provide recreational cannabis products in states where recreational use is legal. The company offers a variety of low-THC cannabis products, ranging from vaporizers and edibles to liquids and capsules. Trulieve currently holds the dominant position in the medical marijuana industry in Florida, operating in nearly 88 stores. It has a near 50% market share in Florida.
Recent Results
Trulieve reported a 64% increase in revenue, year-over-year, as demand continued to increase for cannabis products, despite pandemic-led restrictions. Its revenue increased to $224.1 million, and the company had also completed the $2.1 billion acquisition of rival company Harvest Health & Recreation Inc.
However, operating expenses more than doubled, year-over-year, to $87.7 million.
Valuation Metrics
TCNNF stock looks attractively priced here, as it trades below its historical averages on an enterprise value to EBITDA ratio basis. Its enterprise value to EBITDA ratio is 7.5x, compared to its historical average of 11.12x.
Meanwhile, analysts expect revenue to grow by a whopping 61% in 2022, and EBITDA to grow by 46.6% in 2022.
Wall Street’s Take
According to Wall Street analysts, TCNNF earns a Strong Buy analyst consensus based on seven Buy ratings, zero Hold Ratings and zero Sell ratings in the past three months. Additionally, the average TCNFF price target of $67.40 puts the upside potential at 221.86%.
Summary and Conclusions
TCNNF stock is bolstered by a very reasonable valuation, with its EV/EBITDA ratio sitting in the single digits even as its growth momentum and outlook are very impressive. On top of that, Wall Street analysts are unanimously bullish on the stock here and assign it an average price target that indicates the stock could appreciate by well over 150% in the next twelve months.
While regulatory risks remain in an immature industry such as medical cannabis, this stock looks like it has a wide margin of safety. Therefore, investors might want to add shares while the stock remains so inexpensively priced.
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