MSOs Cannabis ETF Manager Weighs In On Green Thumb Industries, Trulieve & Cresco Labs Post Earnings

After an earnings-heavy week, where many of the largest cannabis companies reported their quarterly results, Benzinga caught up with Dan Ahrens, portfolio manager of the AdvisorShares Pure US Cannabis ETF MSOS and the AdvisorShares Pure Cannabis ETF YOLO.

Following their respective earnings releases, Ahrens shared his thoughts on Green Thumb Industries GTBIF, Trulieve TCNNF and Cresco Labs CRLBF.

Check out his comments below:

Green Thumb Industries released earnings after the close on 8/11.

• Absolute blowout earnings exceeding almost all analyst expectations, which were already very aggressive overall.
• Rapidly growing sales and revenue, profitability and a strong cash balance sheet. All quite different than better know Canadian cannabis companies as a group, which released mediocre earnings in the past two weeks.
• Green Thumb is easily the #1 holding in MSOs, AdvisorShares Pure US Cannabis ETF.
• It's not the largest cannabis multi-state operator (MSO) in the United States, but hand-selected by AdvisorShares to be #1 since the fund is actively managed.

Highlights:

• Revenue increased 14.1% sequentially and 85.4% year-over-year to $221.87 million. (a beat of analyst avg. by $15.24 M)
• Fourth consecutive quarter of positive GAAP net income of $22.1 million
• EPS of $0.10 beats by $0.02
• Sixth consecutive quarter of positive cash flow from operations
• As of June 30, 2021, cash and equivalents of $359.3 million on hand.

Trulieve came out with strong earnings on 8/12.

• As investors look under the hood of their earnings, it needs to be remembered that the company has been through many changes recently related to expansion and Trulieve remains the world's most profitable cannabis company. Its continued dominance in the strong Florida market is what now enables it to make aggressive investments in expansion to other markets.
• Sales were $215 million, up 11% quarter over quarter slightly beating most forecasts. Adjusted net income was $45.4m, and up over 34% quarter over quarter and also above forecasts.
• Adjusted EBITDA was either in-line or a slight miss versus analyst forecast, but as everyone expected, gross margins decreased with increased competition and labor costs in Florida, plus understandable margin impact as TRUL expands in new states.

• As Ahrens has stated about other U.S.- based multi-state operators recently, they enjoy rapidly growing sales revenue, strong profitability and solid cash balance sheets, which are all very different than many of the better known Canadian companies that, as a group, have released rather mediocre earnings over the past two weeks.

• In looking at TRUL earnings, investors should also take into account Harvest Health HRVSF HARV. The Trulieve/Harvest deal is being approved with overwhelming support. Harvest reported earnings on August 10 that solidly beat street estimates for the 2nd quarter with sales of $102.5M, positive adjusted EBITDA of $28M and strong forward sales guidance keyed by adult-use sales in their top market of Arizona. 
• When TRUL and HARV are combined, total sales owned would make it the top-weighted holding in the MSOs fund.

Cresco Labs posted earnings on 8/13.

• Cresco Labs, like basically all the other major U.S. MSOs, reported very solid earnings. As a group, it could be said that their earnings have been quite spectacular. On the other hand, Canadian cannabis earnings were mediocre to weak, though they talk a big game about future expectations. Ahrens would prefer actual present-day great execution, like what he sees with U.S. operators.
• It's too simplistic to say the market does not care about the great earnings, but in the short term, other market forces are at work, weighing on stock prices, including trading and custody limitations. Government inaction with U.S. cannabis reform also hampers the trading of U.S. cannabis stocks. A great deal of cannabis reform was promised by elected officials such as banking reform, removal of tax issues and potentially major U.S. stock exchange listing. Politicians are politicians and slow to act.
• Regardless of the timing, any expected Federal Reform, in Ahrens’ opinion, U.S. MSO stock prices are becoming more and more undervalued when the stagnant prices are compared to revenue and profitability growth, especially when compared to their Canadian cannabis counterparts. Fundamentally, he expects a strong bounce back at some point in the near future.

Cresco:

• Revenues of $210 million well-exceeded consensus estimates. Strong growth in both retail sales and wholesale.
• Cresco is the country's largest cannabis wholesaler.
• Adjusted net income $14 million, up from a loss of –$21 million the prior quarter. Again, better than estimates.
• Maintained 2021 guidance, calling for annual of $1 billion.

• Más contenido sobre cannabis en Español en El Planteo.