Analyst: M&A Opportunities And Florida Cannabis Legalization Initiative Make This Pot Stock Attractive

Trulieve Cannabis Corp. TCNNF revenue in 2022 was $1.2 billion, a 32% increase compared to $938 million in 2021. In the fourth quarter of 2022, the company had a revenue of $302 million, a 1% decrease compared to $305 million in the same period of 2021, and a net loss of $77 million, compared to a net loss of $72 million in the same quarter of 2021.

One of the largest multi-state cannabis operators achieved a positive adjusted EBITDA of $85 million in the quarter, representing a 16% decrease compared to $101 million in Q4 2021.

The Analyst

Cantor Fitzgerald’s analyst Pablo Zuanic, kept an ‘Overweight’ rating and lowered the price target on Trulieve stock to $37 from $41 to address lower profit margin trends.

The Thesis

The company’s sales improved only 0.5% sequentially compared to the 4% the analyst predicted, due to the unexpected change in prices. Its adjusted gross margins were mostly affected by price competition, mix, and consumer trade down, according to Zuanic.

“With $219 million in cash, below average cost of debt, and unencumbered assets, we believe Trulieve is well-placed to benefit from merger and acquisition opportunities in the year ahead (assets, spin-offs, as well as companies). The latter combined with ongoing good progress on putting recreational legalization in the Florida Nov’24 ballot, bode well for the stock, in our opinion,” said Zuanic who is a speaker at April’s Benzinga Cannabis Capital Conference in Miami.

Trulieve is projecting a slight sequential sales decline for the first quarter of 2023, around $300 million, compared to FactSet consensus of $310 million. This year, the focus will be on preserving cash, profitability, and cash flow.

Price Action

Trulieve shares were trading 0.64% higher at $6.31 at the time of writing Thursday.

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