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Trulieve: This Top Cannabis Stock Is On Sale

Apr. 05, 2021 9:32 AM ETTrulieve Cannabis Corp. (TCNNF)55 Comments
Cornerstone Investments profile picture
Cornerstone Investments


  • Trulieve reported Q4 2020 results to cap off a strong year that saw both revenue and EBITDA roughly doubling from the prior year.
  • Management is guiding for 2021 revenue and EBITDA to grow +50%, which is hard to find in any other CPG or retail business.
  • We continue to view Trulieve and Green Thumb as our top 2 cannabis picks due to a combination of revenue growth and strong margin.

Trulieve (OTCQX:TCNNF) posted impressive Q4 results to finish 2020. The stock is up nearly 300% since the beginning of 2020 including 40% gains YTD in 2021. However, we believe the valuation remains cheap based on its growth outlook and massive catalysts still remain including the passage of the SAFE Banking Act and legalization of recreational cannabis in Florida.

(Company Logo)

Fabulous 2020

Trulieve delivered an impeccable performance in 2020 as the company continues to grow quickly while maintaining industry-leading profitability. The recent Q4 results highlighted the attractiveness of the Florida market and Trulieve's dominance in the state. Revenue grew 24% from the previous quarter to $168M while EBITDA margin remains healthy at 46%. EBITDA margin has declined in the last quarters likely a result of the contribution of lower-margin revenue from Pennsylvania and start-up costs in Massachusetts. The ~50% EBITDA margin is truly impressive in the CPG industry. Trulieve is an example of the power of scale and market dominance.

(Source: Author)

Trulieve's profitability remains one of the highest in the industry which is driven by its unparalleled scale in Florida. The company had 75 locations in Florida by the end of 2020 which is unmatched by any other markets in the U.S. Most states limit the number of retail stores per license holder and restrict cultivation capacity as well. For example, Massachusetts and New Jersey currently allow a max of 3 retail stores per operator whereas Illinois allows 10 and Pennsylvania allows 15. California has no cap but the free-for-all market has a low barrier to entry and extremely high competition. Moreover, most states do not require vertical integration which means that there are a wholesale market and higher competition. Whereas in Florida, the barrier to entry is high because each license holder is only allowed to sell products produced by itself. Trulieve has reached a level of scale

This article was written by

Cornerstone Investments profile picture
We are your best guide to cannabis investing. Read our 2021 Cannabis Sector Outlook here. We also provide in-depth industry analysis and coverage of 70+ cannabis stocks to help you get started.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (55)

How about a follow up.
EricRyan profile picture
Long Trulieve and Terrascend. Find them similar in many ways.
Kiril Kapital profile picture
Thanks for the article.

How does Trulieve compare valuation-wise on NOPAT level? Not sure if it makes sense to use EBITDA figures if they get taxed differently than other CPG businesses.
I guess on April 5th when this Article was Published maybe TCNNF at $43 (U.S.) was considered “On Sale” by the Author, so 2 days later and almost 6 million share dilution later, the Author would really subscribe to the notion that TCNNF is REALLY ON SALE at $38.12 (U.S.)?

I actually thought TCNNF looked appealing on Friday, April 23 and loaded up at $38.34. All other Cannabis companies (both Canadian and U.S.) were up rather substantially for the day and TCNNF was the laggard Closing at $38.12 U.S. (-.38 cents). I figured that Florida Senator Gaetz being scrutinized for his participation in Cannabis Industry in Florida knocked the stock down (price action for the day) as well as kept it down into the Close. It was just too tempting “not to take a bite of the Apple)” as it appeared to be low hanging fruit. Any weakness on the Open Monday Morning (April 26) should be viewed as an opportunity to initiate a purchase for either the first time or for existing shareholders to add on to what they have. This is just an add on for Me, but I do like it at $38 (U.S.) and the sting from the Dilution is now over. Sad that Shareholders have to get knocked down by Dilutions, so that the Company can get working Capital as opposed to being able to borrow from a Major Bank. It has become OK for them to Deal in Crypto Currency, but they cannot make Legal Loans or Handle money directly touched by Cannabis Companies. Hopefully, that will change in 2021 (Safe Banking Act) and these Dilutions will no longer be necessary?

Wishing Well To The Author And TCNNF Shareholders!
Cornerstone Investments profile picture
@Retired One certainly frustrating and who knew a large equity offering was coming. However, this is why there are massive upsides to MSOs once tax and banking rules change. Hopefully sooner than later!
@Cornerstone Investments & Retired One

I have a different take on the TCNNF SPO.........

Cannabis in the US is a strong growth industry.
TCNNF is FCF positive from its very profitable Florida
medical cannabis franchise. (FL best of breed)

TCNNF is rolling out its US expansion.
TCNNF has strong management.

TCNNF management will be able to deliver larger
EBITDA/FCF as they roll out MSO operations in
their other target states.

IMO.......The SPO will be highly accredtive for
all common shareholders who are long term investors.

The SPO proceeds will go to build new EBITDA streams
in the future in other states..

I only have a small initial sleeve long TCNNF and
will look to add as opportunities present themselves.

Mebarrett3 profile picture
Why in the heck can’t they get the signatures in Florida to get legalization on the. Ballot for 2022? I bet if Trul and others made the effort they could get the signatures.
OneStrawRevolutionFarming2023 profile picture
Hype about FL might be diminished :-(

@ChemicalFreeNaturalFarming2021 ,
Medicinal stays strong ... Yes ....
Medicinal MJ. is more profitable ..
OneStrawRevolutionFarming2023 profile picture
@Balaland Fair enough and thank you :-)

It is almost all medicinal Boss Hoss :-)

Nearly all roads lead back to the medicinal value of the plant :-)

Not "binary" as many seem to think; there probably is Adult Use Titration and nothing else once people get knowledgeable and educated about how to titrate :-)
Mebarrett3 profile picture
Does anyone know about any lockup period for the new shares just issued? Perhaps the investors are dumping?
Cornerstone Investments profile picture
@Mebarrett3 it's not logical that new investors who bought in at C$50 would sell at a loss just a few days later. The broader sector has been under pressure as part of a normal cycle. Trulieve still up 200%+ since 2020 and up double digits in 2021
Truth_AndMovement profile picture
"Trulieve only reported GAPP pre-tax income of $157M which implies an effective tax rate of a ridiculous 67%. Trulieve is getting punished so hard and one could only hope one day the system could be fixed."

With dems in power one would hope this will be taken care of sooner than later, but theyre busy with all the terrible ideas first. Maybe in the second half of the year we can get some real legislative traction. In any case Ive started building back a big Trulieve position these days. Adding to Cresco and Green Thumb also. Great article
Initiated position at $ 39.20 (3 buys) this morning.
Will there be more selling...? Might
Strong MSO getting put on sale this month.

''industry leading profitability''.......I like those words

Long term holder of all my MSO positions.
@jackmaster20 My initial position was $5.80. Thousand shares. I’m a strong hold and getting ready to buy a lot more

TCNNF closed at $37.50 today.
$36.25 intra-day

I think TCNNF can go down to $32-30
during this current down-draft.

Great MSO getting cheaper by the day...!

I added to my existing TCNNF position yesterday at $30.94.
Could TCNNF go lower near term....?
Who really knows for sure.

The big dip after earnings is not warranted.

PA AZ and MA will soon be big contributors to TCNNF profits.
VW and GA will follow later with more profits.
I’m ready to buy more just watching. I think it’s the best run medical cannabis company in the US.
Gordon Z profile picture
The market ain't liking the dilution
@Gordon Z true. There’s a signal of uncertainty across the sector as well. No one knows what to think of the looming legislation, what it includes, and who the outcome will actually benefit. This “long” just got longer. Not necessarily a bad thing. I’m optimistic and confident the big 4 will continue to execute effectively.
@Gordon Z That is the case they don’t understand business
bazooooka profile picture
This is one for the basket.
Who will benefit most in NY and NJ?
Any thoughts on their long term position once more regulation falls into place. Looking at New York as the model, feel like wholesale is going to be the future for these MSOs. No doubt Trulieve is best in class presently, worried once the state barriers fall they won’t be as well positioned as GTBIF and cresco who have a better mix between retail/wholesale.
@Eric Pritchett But there will be minimal margin in Wholessale.....
@JackCr agreed margins are as high as they will be with full vertical as it is now. No doubt there will be lower margins down the line as scale picks up and business modes evolve. Regardless, if states come on like with limited retail caps, and a tier model like New York, wholesale will be the only viable choice.
Mebarrett3 profile picture
Please comment on yesterday’s announcement about the stock offering.
Cornerstone Investments profile picture
@Mebarrett3 there is nothing really to comment on, companies sell shares all the time and seems like a normal course issuance
Mebarrett3 profile picture
@Cornerstone Investments yeah it makes sense to raise at this level.
Cornerstone Investments profile picture
@Mebarrett3 the priced at 8% below market, wow that's no good
Excellent review. Any comment re 225m stock offering?
Cornerstone Investments profile picture
@rahalpha good price to issue shares, TCNNF one of the best performing U.S. cannabis stocks this year
Thank you for an excellent overview. Exciting times.
Cornerstone Investments profile picture
@Could Be could be nice if they get into IL or NJ but these assets must be very expensive
Love Love Love this article. Long Truelieve in for $10K at $22.88. May add more.
Gordon Z profile picture
What is meant by "$66 million in upfront payment plus $75 million of the additional earnout"? We're these amounts paid in cash or taken out in a loan?
@Gordon Z if the acquired assets meet certain financial milestones, Trulieve will pay a bonus for them.
Agreed. I bought in about a year ago sub 20. Couldn't believe people overlooked it at those prices. Was the only profitable (very) weed stock I could find and was at bargain prices. Made it my 2nd largest position behind AMZN. Still love it.
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