Its debut on the Canadian stock market signaled a new era for this vertically integrated seed to sale leader.
A lot of the air has been let out of the marijuana market’s balloon since the heady, early days of the Canadian green rush. The legalization of cannabis in Canada failed to supercharge growth in the way that was expected, and the patchwork, state-by-state efforts in the U.S. still leave pot producers caught up in a limbo of regulation and taxation that undermines their potential.
Yet one marijuana company still rises to the top despite the proliferation of competitors, and Trulieve Cannabis (OTC:TCNNF) remains one of the best-performing pot stocks on the market, even after seeing its own valuation cut by a third from the all-time high hit in March.
An investor who put $1,000 into Trulieve’s reverse merger in 2018 would be doing quite well today, especially in comparison with other pot stocks available at the time. Let’s see why the vertically integrated “seed to sale” medical marijuana company was such a good investment, and if it remains so today.
A budding giant
Trulieve is the largest multistate operator (MSO) in Florida, with 105 operating marijuana dispensaries. By blanketing the Sunshine State with a retail presence, it has helped the company effectively build its brand by leveraging its marketing budget.
Having achieved economies of scale in one state, Trulieve is now using that dominant position to replicate its growth trajectory in other states and has a presence in 11 states. As of Oct. 1, it had almost 150 operating dispensaries.
In the second quarter, Trulieve had combined revenue of $318 million and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $123 million, the most for any U.S. MSO.
Smoking the competition
It’s easy to see why Trulieve is doing so well. By targeting its initial growth phase, it created a dominant presence in Florida, where it has a 28% share based on the number of retail dispensaries and a 50% share of the dried-flower market.
It notes that 95% of the nearly 620,000 registered medical marijuana patients in the state have visited a Trulieve dispensary, giving it incredible mindshare among the population.
By operating in states that limit the number of licenses available to be issued, Trulieve’s competition will be limited, though rivals such as Curaleaf, which lost out to Trulieve, are protesting the awards, and that may delay expansion. The only other competitor granted a Class 1 license is a company called Botanical Sciences. Should the award stand the challenge, Trulieve could become the dominant MSO in the Peach State as well.
Risks do exist
Trulieve does have some headwinds that have held it back from reaching its full potential, most notably the conviction on fraud and bribery charges of the MSO’s founder’s husband. Although the charges were unrelated to Trulieve’s business, that cloud has hung over Trulieve since it went public, and it could hinder the MSO’s ability to garner additional licenses in other states it wants to expand into.
How much is that worth?
Despite that, Trulieve has still been a winning stock for investors. How much so? If an investor had put $1,000 into the medical marijuana stock when it went public in September, 2018 at $7.50 per share, he would have $3,975 today, a nearly fourfold increase in a little more than three years.
Credit:Source link