Cantor Fitzgerald Lowers Price Target On Trulieve Post Earnings, Here's Why

Trulieve Cannabis Corp. (TCNNF) released its financial and operational results on Wednesday for the quarter and full year ended December 31, 2021.

Q4 2021 Financial Summary

• Revenue increased 81% in the fourth quarter compared to the fourth quarter of 2020 and 36% sequentially to $305.3 million.
• Gross profit of $132.4 million and gross margin of 43.4% in the fourth quarter of 2021 compared to gross profit of $119.9 million and gross margin of 71.2% in the fourth quarter of 2020.
• Net loss of $71.5 million and adjusted net income of $1.8 million, which excludes $73.3 million of non-recurring fair value of inventory step up and transaction, acquisition and integration charges primarily associated with the Harvest acquisition.
• Adjusted EBITDA of $100.9 million, or 33.0% of revenue in the fourth quarter of 2021 compared to adjusted EBITDA of $81.4 million or 48.3% of revenue in the same period of the prior year.

The Analyst

Cantor Fitzgerald’s analyst Pablo Zuanic kept an ‘Overweight’ rating on Trulieve's stock, lowering its price target to $59 from $60.

The Thesis

Zuanic said he lowered the price target to address reduced EBITDA projections.

The company’s quarterly sales came in line with the latest management commentary, but margins were below the analyst’s estimates. For the full year 2022, Trulieve projects EBITDA 13% to 21% below FactSet consensus, the analyst added.

“We stay Overweight and realize the stock is inexpensive (8x our CY23 EBITDA estimate) vs. similar sized Multi-state operators, but we do worry about a lack of key company-specific catalysts in the year ahead. Also of concern, while historically an “under promiser”, we would characterize the 3-year EBITDA margin outlook of 40%  as ambitious, especially as medical markets such as Florida and Pennsylvania (without rec) become more competitive.”

Zuanic stressed that the most important upside for Trulieve would be the legalization of recreational cannabis in Florida, but the state ballot for this, projected for Nov. 2024, is still uncertain.

The Price Action

Trulieve shares were trading 0.68% higher at $20.83 per share at the time of writing Thursday morning.