The last two weeks have been quite an enjoyable time for U.S cannabis sector investors. On January 5th, we had the Georgia run-offs. Roughly three days later, we found out that both Democratic party members won their reelection campaigns. Although still going on, many analysts have already come out with their 2021 outlooks, including updated forward-looking guidance for many of the U.S companies. Finally, in the last two weeks, U.S cannabis companies have raised close to C$1 billion in sales from issuing stock. To most, this shows that there is true institutional investor demand for these sorts of companies.
This morning, Canaccord came out with their updated valuations for three large multi-state operators. Within the note, they raised their 12-month price target on Trulieve Cannabis (CSE: TRUL) to C$75 from C$60, while reiterating their Speculative Buy rating on the company.
Trulieve currently has 14 analysts covering the company with a weighted 12-month price target of C$55.83. This is up from the average at the start of the month, which was C$53.27. Two analysts have strong buys, while the remaining 12 have buy ratings on the company.
Derek Daly, Canaccord U.S cannabis analyst, said the primary reason for the price target increase is due to “the recent Democratic Senate win in Georgia and what we believe will be an acceleration of pro-cannabis legislation over the medium term.” He reiterates his claim that Trulieve is one of the best positioned MSO’s to capitalize on this regulatory move.
For the balance sheet, Dley says Trulieve has industry-leading EBITDA and EBITDA margins at $67.5 million and 49.5%, respectively. The company boasts $193 million in cash and generates continual free cash flow, which Dley writes, “leaves the company well-positioned to accelerate growth within its core markets in 2021.”
Trulieve maintains a dominant ~50% market share in its core market of Florida. Daly says that there was a 9% increase in patient count quarter over quarter. This increase “should allow Trulieve to continue to accelerate its revenue and EBITDA growth into 2021.”
Daly says that 2021 will be an exciting year for Trulieve, as the company gains exposure into Pennsylvania by acquiring PurePenn and Solevo. He writes Pennsylvania “is one of our preferred medical markets within the US. and expects the state to become the next of many fast-growing medical markets alongside the potential of the state approving recreational cannabis in the medium term.”
He ends the note by writing, “With Trulieve currently trading at 10.8x our 2022 EBITDA estimate and given Trulieve’s dominant and growing position in the attractive Florida market, and exposure to the high growth Pennsylvania and Massachusetts markets, we believe the shares are undervalued at current levels.”
Information for this briefing was found via Sedar and Refinitiv. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
