tiprankstipranks
Big Demand for Cannabis Gives Trulieve an Edge
Stock Analysis & Ideas

Big Demand for Cannabis Gives Trulieve an Edge

There’s a surging demand for marijuana and marijuana-related products. That’s the takeaway from Trulieve Cannabis (TCNNF), which revealed huge new gains as part of its earnings report. There’s a changing sentiment toward marijuana emerging in the U.S. and beyond. That provides reason to be bullish about Trulieve. It’s in a good position to take advantage of this shift.

The last 12 months for Trulieve Cannabis haven’t been positive overall. The company has lost over half its value since this time last year. While it’s seen some attempts at recovery in the meantime, the company’s overall trajectory has been downward. It’s gone from around $45 per share to about $21 per share today.

The latest news should perk up investors; the company reported that its fourth-quarter adjusted core profit was up 24%, thanks mainly to that surging demand.

Fourth-quarter revenue, meanwhile, was up in a big way, gaining 81% to hit $305.3 million. The recent purchase of Harvest Health for $2.1 billion lent some help to those growing numbers as well. The company also projects full-year revenue for 2022 to come in between $1.3 billion and $1.4 billion.

Wall Street’s Take

Turning to Wall Street, Trulieve has a Strong Buy consensus rating. That’s based on seven Buys assigned in the past three months. The average Trulieve Cannabis price target of $61.01 implies 193.7% upside potential.

Analyst price targets range from a low of $50 per share to a high of $72.03 per share.

Hedge Funds and Dividends Out of the Picture, for Now

Two of the biggest measures of how well the company is doing seem to be completely absent so far. The TipRanks 13-F Tracker notes that there’s no appreciable activity in the hedge fund sector for Trulieve Cannabis. That’s despite 203 separate 13-F filings to consider.

Moreover, Trulieve Cannabis’ dividend history is likewise nonexistent. There has been no dividend issued by the company to date, and there are no plans as yet to release one.

In the Right Place at the Right Time

Right now, Trulieve might seem like a good idea. After all, the company has lost about half its value over the last 12 months. That could open up a good buying point. There’s also a possibility that it could just continue to lose value until it ultimately closes, but that’s not likely.

Why? Demand is on the rise. The company has already posted significant growth in its core profit and revenue figures. Further, it’s likely to benefit from an upcoming vote in the U.S. House of Representatives to decriminalize marijuana on a federal level.

Currently, in the U.S., marijuana availability is something of a crazy quilt. Some places have it fully available within certain limits. Others restrict it to medicinal applications only. Meanwhile, others still refuse to allow the plant anywhere in the state.

The move by the U.S. House could take some of that pressure off. Better, it could open up access to marijuana throughout the United States. That’s a big market to open up. We’ve already seen the impact a partially-open U.S. market can have here. Imagine the potential impact if the whole thing were open.

Correspondingly, the bad news for Trulieve isn’t all that bad. Yes, it has a range of competitors out there. Places like Curaleaf (CURLF)—the largest cannabis company in the world by revenue—and Tilray (TLRY) are all ready to step in and take their pieces of the market. However, opening up a field like the entire United States represents one big play.

After all, there are already several major marijuana growers in North America already. The three largest are all in the United States; the largest, Ultra Health, contains just over 9.2 million square feet in its operation.

That beats its nearest competitor, Mammoth Farms, by a factor of nearly three to one. Fully opening up the market would represent a major opportunity for every company. There’s likely more market than any one company could ever address.

A good example of this is in Michigan, where the state’s largest marijuana operation is about to open in the little village of Lawrence. 305 Farms has already given Lawrence $141,000 in licensing and reservation fees. Once the facility is in place, that will increase to $200,000 annually. That’s cash sorely needed in little Lawrence.

Additionally, the state’s pot market stands at around $3 billion annually. However, this development operates under a handicap: 80% of Michigan counties opted out of state permissions, forbidding marijuana operations in their counties.

Concluding Views

We’ve already seen what Trulieve Cannabis can do with the market it already has. Opening up the market still further could mean a real edge for Trulieve.

Moreover, it’s trading well below its lowest price targets, having trimmed about half of its value in the last year. There’s substantial upside potential here. Throw in a market that may open up further still. Potentially, that adds up to good news for investors.

With this in mind, the biggest days for the marijuana industry may be yet to come. Buying in on a comparatively inexpensive firm like Trulieve, which has already done well with what it has to work with, could be an excellent move for investors.

Download the TipRanks mobile app now

​To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.

Read full Disclaimer & Disclosure

Trending

Name
Price
Price Change
S&P 500
Dow Jones
Nasdaq 100
Bitcoin

Popular Articles