The popularity of cannabis for medicinal and recreational use continues to rise as there is an untapped market waiting to be captured. In the United States, 35 states and the District of Columbia have legalized marijuana for medical use. There is an increasingly loud clamor to legalize medical marijuana in more states in the U.S.
According to a Fortune Business Insights report, the global cannabis market was worth $20.5 billion in 2020. The report estimates that the market will grow from $28.26 billion last year to $197.7 billion by 2028 at a Compounded Annual Growth Rate (CAGR) of 32% between 2021 and 2028.
Considering the size of this market, let us compare two of the best cannabis stocks using the TipRanks stock comparison tool, and look at what Wall Street analysts are saying about these stocks.
Trulieve Cannabis Corp. (TCNNF) (TSE: TRUL)
Trulieve Cannabis is a multi-state medical cannabis company headquartered in Quincy, Florida that is licensed to operate in six states. Trulieve is mainly engaged in the cultivation, possession, marketing, and sale of medical cannabis, rarely exploring recreational products.
In the United States alone, Trulieve currently operates 155 retail dispensaries and has 3.5 million square feet of cultivation and processing capacity.
Shares of the medical cannabis company have tanked 60.5% in the past month even as the company had its fifteenth consecutive profitable quarter in Q3. In the third quarter, Trulieve’s revenues jumped 64% year-over-year to $224.1 million. Net income rose by 7% year-over-year to $18.6 million.
More importantly, Trulieve completed its acquisition of Harvest Health & Recreation for around $2.1 billion in October of last year. Harvest is a vertically integrated cannabis operator in the U.S. and is one of the largest operators in the state of Arizona. Arizona is considered one of the largest medical and recreational cannabis markets in the U.S.
Trulieve CEO Kim Rivers commented on the acquisition, “Our team closed the Harvest acquisition in under five months while simultaneously meeting expansion targets in several markets. We are excited to keep the momentum going into 2022 as we fully integrate Harvest while further building scale and depth in our cornerstone markets.”
The strong performance in the third quarter resulted in Stifel Nicolaus analyst Andrew Partheniou reiterating his bullishness on the stock with a Buy rating and a price target of C$135 (468.4% upside).
The analyst pointed out that TRUL’s fiscal performance in Q3 resulted in expansion of its margins. That, in turn, sets it up for better performance in Q4 due to a “better inventory and labour position that matches with a targeted pricing strategy to defend margins and drive volumes in FL [Florida].”
Partheniou’s positive stance on the stock is due to the analyst’s belief that the company has “the strongest profitability among all public peers.” Its profitability provides TRUL with the flexibility to reinvest its profits, as well as “a strong balance sheet the company can leverage to drive growth CAPEX and diversify its footprint.”
Besides for Partheniou, six other analysts are also upbeat about the stock with a Strong Buy consensus rating. The average Trulieve stock prediction of C$84.97 implies upside potential of approximately 257.8% to current levels for this stock. The significant upside implies that TRUL could be undervalued by the market currently.
Green Thumb Industries (TSE: GTII) (GTBIF)
Green Thumb, established in 2014, is a cannabis consumer packaged goods company and retailer. The company is a manufacturer and distributor of a portfolio of branded cannabis products including Beboe, Dogwalkers, Dr. Solomon’s, Good Green, Incredibles, and Rythm. The company boasts 16 manufacturing facilities feeding product to 66 open retail stores across 14 U.S. markets.
Green Thumb is also an owner and operator of a chain of retail cannabis stores called Rise. The company’s recreational products include pre-rolled cannabis cigarettes, vapes, edibles, and even ‘social dosing’ cakes, designed for smoking in groups.
The company is following an organic and M&A (mergers and acquisitions) strategy for growth. Late last year, the company closed in on the acquisition of LeafLine Industries for an undisclosed amount. Leafline Industries is one among only two licensed cultivators in the Minnesota medical cannabis market.
With this acquisition, Green Thumb’s cannabis operations will now serve half of the population in the U.S., increasing its national presence to 15 states with 73 open retail locations.
Even the company’s fiscal performance in the third quarter was reassuring for investors. Revenues increased 48.7% year-over-year to $233.7 million. The company reported the fifth consecutive quarter of profit, as net income came in at $20.2 million versus $9.6 million in the same period a year back.
Green Thumb Chairman, Founder, and CEO Ben Kovler commented, “Green Thumb is laying tracks for strong growth in 2022, 2023 and beyond. Our net capital expenditures exceeded $70 million in the third quarter bringing year-to-date net capex to over $115 million. Today, the U.S. cannabis market is a $24 billion industry and we believe as new states, new products and new consumers come into the market, it can triple over the next decade.”
The company is expected to announce its Q4 results on March 1.
Stifel Nicolaus analyst Andrew Partheniou approved of the company’s growth trajectory and stated that GTII’s platform focused “on state markets with limited competition, high barriers to entry [and] robust demand profile.”
The analyst was also bullish about GTII’s financial profile which he considers “one of the fastest growth profiles in the US cannabis industry,” with the discipline to control its costs to generate the “most EBITDA as compared to its MSO [multiple state operators] peers.”
As a result, the analyst has rated the stock a Buy with a price target of C$80 (266.1% upside) on the stock.
Other analysts are also bullish about the stock with a Strong Buy consensus rating based on 8 Buys. The average Green Thumb Industries stock prediction of C$60.78 implies upside potential of approximately 178.2% to current levels for this stock.
Bottom Line
While analysts are bullish about both stocks, based on the upside potential over the next 12 months, TRUL truly seems to be a better Buy.
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