Cantor Lowers Price Target On Trulieve But The Stock Is Still Their Top Pick Among MSOs

Trulieve Cannabis Corp. TCNNF revealed its Q3 financial results last month reporting net revenue of $224.1 million, up by 64% from the same period in 2020. Adjusted EBITDA was $98.0 million, or 43.7% of revenue.

Net income was $18.6 million, impacted by $16.4 million of one-time compensation and transaction costs primarily associated with the Harvest acquisition. Trulieve and Harvest combined third-quarter revenue amounting to around $316 million, net loss to approximately $9.8 million and adjusted EBITDA to $121 million.

Soon after the company announced the news of TruTonic, its new drink powder, and that it was soon to launch Bhang BHNGF edibles in Florida, making these award-winning gourmet chocolates available exclusively in Trulieve's 108 Florida dispensaries.

Year-to-date, the stock is down around 20.86%. 

The Analyst

Cantor Fitzgerald’s Pablo Zuanic kept an ‘Overweight’ rating on Trulieve’s stock but lowered the price target to $72 from $73. 

The Thesis 

The analyst said that lowering the price target was to address reduced 2023 EBITDA estimates.

The transition issues connected to the company’s merger with Harvest, combined with evident flower share loss in October/November in Florida, and “lingering macro pressures” may cause weak growth in the fourth quarter, said Zuanic projecting sales of $318.2 million after $316 million proforma in Q3, noting FactSet consensus is at $333.5 million.

Trulieve can count on several tailwinds in 2022, he noted, such as advanced assortment at Harvest locations, cultivation and retail network expansions as well as market development in Massachusetts and other new states.

Zuanic offered EBITDA margin projections of 36% for Q4 in line with consensus and for the full-year 2022, his estimates are only 100bp below.

“All this said, Trulieve remains a top pick for us,” Zuanic said, further adding that he prefers to concentrate on businesses with scale and when looking at Q3 proforma metrics, Trulieve was the biggest multi-state operator with franchise power in key states such as Florida, Arizona and Pennsylvania having “established operations and track record.”

The Price Action

 Trulieve’s shares closed Friday market session 1.03% higher at $26.45 per share. 

Photo: Courtesy of Esteban Lopez on Unsplash