PI Financial: Trulieve, Cresco Labs Top Cannabis Picks For 2020

This morning PI Financial came out with their mid-year top picks for 2020. Among the picks were two cannabis stocks, both of whom are multi-state operators: Trulieve Inc (CSE: TRUL) and Cresco Labs (CSE: CL). They named these issues the “ones to own” saying that they have two different strategies. Trulieve is exceptionally focused and dominating Florida, while Cresco Labs has built out market share in multiple states with the most success being found in Illinois, Pennsylvania, and California.

In their note, they highlight that 2020 is turning out to be a massive year for multi-state operators, stating that “Legal Cannabis = Tax Revenue.” This is predicated on the currently ongoing COVID-19 epidemic, an event that will create massive revenue shortfalls for many US states that rely on sales and income tax for a majority of their revenue. Cannabis sales tax revenue has exceeded alcohol tax revenue in many states that have legalized THC. They also note that six states are voting on cannabis reform in November, four being adult-use (New Jersey, Arizona, Montana, and South Dakota) and two being medical cannabis (Mississippi and South Dakota)

PI Financial currently has a C$28 price target and a buy rating on Trulieve, which offers a ~41% upside but is actually below the mean price target of C$30.25 or a ~52% upside.

The firm calls Trulieve the “undisputed leader in Florida,” saying that they regularly hold a +50% market share in both THC products and smokables year to date. At the same time, Trulieve owns 20% of the dispensaries in the state and grew their patient base from 261,000 to 300,000 in just five months. For comparison, since December 31st, 2019 Florida has added +50,000 patients total and currently has over 350,000 patients or ~2% of the entire Florida population – signifying that Trulieve is capturing a significant amount of new patients.

They also note that Trulieve has been cash-flow positive since Q4’FY17, last quarter revenue grew at 21% and had a strong balance sheet that boasts $100.8m in cash. The analyst goes on to state that even though Trulieve is guiding for FY20 revenue of $380 – 400 million and EBITDA of $140 – $160 million, the company has beaten its guidance in the past and as a result PI expects Trulieve to beat those numbers easily.

PI Financial has FY20 and FY21 revenue estimates at $415 million and $530.8 million, while EBITDA forecasts are at $179.2 million and $230.3 million respectively for Trulieve.

With respect to Cresco Labs, PI Financial currently has a price target of $11.50 and a Buy rating. Chief among their investment thesis is that Cresco is “poised to capitalize on the budding Illinois adult-use market.” This compares to a mean average price target of $11.53 per share.

PI analyst Jason Zanderberg states that more dispensaries opening across Illinois should in theory translate to more sales. As of June 2020, sales of $239.2 million in adult use and $171.1 million in medical cannabis sales had been generated since the start of the year. Cresco is the market leader here, with six dispensaries and four more additional retail locations on the way. The company also has 3 cultivation and manufacturing licenses in the state, out of a total of 21 issued.

Zanderberg goes on to state that the company thus far has secured a 21% wholesale market share within Illinois, which proves fruitful for the company as more dispensaries open and limited supply exists in the state.

PI Financial is currently forecasting for FY20 and FY21 revenues of $363.1 million and $636.4 million, while EBITDA estimates are currently sitting at -$1.2 million and $137.5 million respectively.


Information for this briefing was found via PI Financial, Cresco Labs and Trulieve Cannabis Corp. 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.

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