This Cannabis MSO Stock Is Attractively Valued & Well Positioned To Capitalize On Market Opportunities, Analyst Explains Why

Trulieve Cannabis Corp. TCNNF TRUL reported its financial results for the first quarter on Thursday.

Kim Rivers, Trulieve's CEO, said that the Tallahassee, Florida-based company is "off to a great start in 2022."

The company delivered yet another record quarter, generating $318.3 million in revenue for the period.

"In 2022, we expect our strong balance sheet, access to capital, and financial discipline will uniquely position us to capitalize on market opportunities created by the macroeconomic factors impacting our industry," Rivers said.

The Analyst

Cantor Fitzgerald's Pablo Zuanic maintained an Overweight rating on the company's stock while lowering its price target to $57 from $59 on slightly reduced EBITDA estimates.

The Thesis

Zuanic said in his recent note that Trulieve beat FactSet consensus estimates for the quarter and reiterated guidance for fiscal 2022.

The company anticipates that the revenue for the full year will range from $1.3 billion to $1.4 billion. Adjusted EBITDA is expected to be in the range of $450 million to $500 million. 

The analyst said that "the high end of guidance both regarding top-line and EBITDA margins may be a stretch in the current environment," considering that it's not clear whether core markets will go recreational by the year-end or in 2023.

Based on its current forecasts, the company expects to boost performance in the second half of 2022 to higher than the first half of the year.

"Improving execution, more surgical promotions, and realization of efficiencies from the Harvest merger makes us confident of a stronger back half" for the company, Zuanic said.

The $2.1 billion merger of Trulieve and Harvest Health & Recreation Inc. was closed in October 2021.

The combined company is expected to become one of the most profitable multi-state cannabis operations reaching an estimated total addressable market of $19.3 billion in 2025, with leading market shares in Arizona and Florida.

"We believe the stock remains attractively valued in the group of larger MSOs, and we think the company has the balance sheet and cash flow generation to add depth and/or breadth to its footprint via M&A," Zuanic concluded.

Price Action

Trulieve's shares traded 4.39% higher at $14.51 per share at the time of writing on Friday morning.

Photo: Courtesy of Yiorgos Ntrahas on Unsplash