Our Trulieve Cannabis Stock Prediction in 2019 (Buy or Sell?)
Florida, with its growing population of retired baby boomers and easy-going subtropical culture, is a thriving mecca for marijuana companies. Cannabis sales are growing quickly throughout the U.S., but pot demand is especially strong in the Sunshine State.
This unstoppable multi-year trend explains why Trulieve Cannabis (CSE: TRUL, OTC: TCNNF) has captured Wall Street’s attention. Florida-centric Trulieve is a vertically integrated “seed-to-sale” operator of cannabis dispensaries throughout the state.
By virtue of its extensive Florida operations, Trulieve occupies a strategic foothold in the marijuana boom. Forget the usual pain remedies. Retired grandparents in Florida are clamoring for Mary Jane.
As laws legalizing marijuana spread across the U.S., the perception of risk associated with marijuana is decreasing, especially among the older adult population who came of age during the rebellious 1960s and 1970s.
As they retire, many of these senior citizens will either continue, restart, or initiate marijuana use. Trulieve is poised to cater to their cannabis needs. What’s more, the firm this year plans to aggressively expand operations to other regions.
Is Trulieve a distinctive play that stands out from the marijuana stock herd? Or is it just another media darling that doesn’t deserve the fawning attention from analysts?
Let’s roll up our sleeves and take a closer look at Trulieve. I’ll assess whether Trulieve stock will prove profitable, or a buzzkill, in 2019.
What Is Trulieve Cannabis?
Based in Quincy, Florida, Trulieve cultivates, distributes, and retails medical cannabis in the U.S., primarily in Florida.
With a market cap of $1.5 billion, the firm offers a suite of Trulieve branded products, including nasal sprays, capsules, concentrates, syringes, and cannabis flower in containers for vaporizers, topical creams, tinctures, and vape cartridges. The company distributes its products to 24 Trulieve branded dispensaries, 22 of which are in Florida.
Trulieve began trading publicly on the Canadian Stock Exchange (CSE) in late September, receiving $65.8 million in Canadian dollars as the result of a reverse takeover of Schyan Exploration, an Ontario, Canada, mining company.
How Has Trulieve Stock Performed?
Year to date, TRUL has gained 19.2% whereas the S&P 500 has gained 5.2%.
Since going public, TRUL has lost 27.9% whereas during the same period the S&P 500 has lost 8.5% (see chart).
Who Are Trulieve’s Rivals?
The dispensary market is riven by brutal competition, as procuring marijuana becomes as easy as walking into a retail outlet and plunking down your credit card. The vast opportunities of the “green rush” have spawned a slew of thinly capitalized, fly-by-night dispensaries, many of which are destined to go up in smoke.
Below are snapshots of financially stable dispensary players that are worthy competitors to Trulieve.
Curaleaf Holdings (CSE: CURA, OTC: CURLF)
Curaleaf Holdings, based in Wakefield, Mass., operates an integrated network of medical and wellness cannabis facilities throughout the U.S.
Curaleaf cultivates, processes, markets, and dispenses marijuana products in a range of forms, including flower, pre-rolls and flower pods, dry-herb vaporizer cartridges, concentrates for vaporizing, concentrates for dabbing, tinctures, lozenges, capsules, and edibles.
With a market cap of $3.7 billion, Curaleaf also provides non-cannabis management and consultative services to licensed cannabis operators, to assist with cultivation, extraction, production, and retailing.
Founded in 2010, Curaleaf currently operates a network of 34 dispensaries, 12 cultivation sites, and 10 processing sites in 12 states.
MedMen Enterprises (OTC: MMNFF)
Based in Culver City, California, MedMen cultivates, produces, distributes, and retails recreational and medicinal cannabis. Founded in 2010, the company recently expanded beyond its initial markets of California, Nevada, and New York.
With a market cap of $1.4 billion, MedMen currently operates 69 dispensaries and 17 cultivation and production facilities across 12 states.
Medical Marijuana (OTC: MJNA)
Medical Marijuana produces and markets patented medical marijuana and industrial hemp products for the pharmaceutical, nutritional, and cosmetics industries.
With a market cap of $283.4 million, Medical Marijuana provides management support and consulting services to dispensaries, cooperatives, collectives, wellness facilities, and medical clinics in the legal cannabis industry.
Will Trulieve Go Up In 2019 (Should You Buy)?
Due to its size and financial wherewithal, Curaleaf is Trulieve’s most formidable competitor. However, more than any other rival, Trulieve is leveraging the fast growth of medical marijuana demand in Florida.
Burdensome overhead is an Achilles’ heel for many dispensary operators. Retail establishments entail brick-and-mortar expenses that marijuana entrepreneurs tend to underestimate, which often results in razor-thin or non-existent profit margins, high debt, and eventual bankruptcy.
Trulieve, however, boasts a vertically integrated structure that allows it to contain costs, even as it expands to take advantage of Florida’s exploding demand.
Through passage of a 2016 ballot initiative, Florida became the first Southern state to legalize medical marijuana. Recreational pot remains illegal in the state but it’s widely expected to get legalized during the next national election in 2020.
This video explains the social and political dynamics behind the push to legalize recreational pot in Florida.
According to the latest statistics from Arcview Market Research and its research partner BDS Analytics, spending on legal cannabis worldwide is expected to hit $22.8 billion by 2020. The adult-use (recreational) market will account for 67% of spending; medical marijuana will take up the remaining 33%.
Arcview and BDS also report that the total economic output from legal cannabis will grow 150% from $16 billion in 2017 to $40 billion by 2021, through the “multiplier effect” of job creation in ancillary industries and greater tax revenue.
Florida alone is expected to generate $1.09 billion every year in medical marijuana sales. If the state legalizes recreational marijuana next year, Trulieve’s growth prospects as well as its stock should spike higher.
In November 2018, Trulieve made its first moves outside of Florida, by acquiring two dispensary operators: Life Essence in Massachusetts for $4.1 million and Leef Industries in California for $4 million. Both states loom large in marijuana demand.
Trulieve currently boasts half-a-million square feet of cultivation space and 1,300 employees. This year, the company is moving into a new 55,000-square-foot production facility. Every week, the company makes more than 55,000 cannabis products.
Trulieve has forged brand loyalty among its clients and possesses a large and valuable database of patients. TRUL stock appears poised for market-beating gains in 2019 and beyond.
Will Trulieve Go Down In 2019 (Should You Sell)?
Prudent investors must always weigh the pros and cons of any stock. Here’s the bear case against TRUL.
Marijuana is a growth industry, but dispensaries are a particularly risky aspect. They entail operational expenses, regulatory red tape, and they’re subject to the vagaries of foot traffic. As investors and entrepreneurs jump onto the marijuana bandwagon, a consolidation is looming in not just the dispensary business but the pot industry as a whole.
What’s more, marijuana stocks tend to move together. Bad news for one marijuana company often produces a downdraft for the entire sector. As froth accumulates in the cannabis industry, a shakeout could drag down even fundamentally strong companies.
Marijuana stocks that enjoy inherent strengths aren’t immune from severe sector volatility, especially amid these uncertain times on Wall Street and in Washington, DC.
Many analysts predict a correction in 2019, if not a full-blown bear market. We’re also overdue for a recession, which increasingly appears likely.
With headline risk growing worse and the major indices on a roller-coaster, now’s not the time to take a flyer on marijuana stocks.
Overall Trulieve Forecast And Prediction For 2019
Aging retirees in Florida who suffer myriad ailments that conventional medicines can’t treat — that’s Trulieve’s core constituency and it’s why the company’s positives outweigh the negatives.
Trulieve’s most recent operating results, for the third quarter of 2018, showed remarkable growth. Revenue grew from $23.3 million in the second quarter of 2018 to $28.3 million in Q3 2018, for a year-over-year growth rate of 21.5%.
Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) increased from $11.7 million in Q2 2018 to $12.6 million in Q3 2018.
Net income in the third quarter came in at $17.5 million, a record for the company, compared to $7.9 million in the second quarter of 2018 and $3.6 million in the same quarter a year ago.
Total cash on hand came in at $42.1 million, a tidy war chest for further expansion in Florida and other states.
If you’re interested in marijuana investing, here’s a reality check. Many of the popular marijuana stocks that I write about represent genuine growth opportunities worth buying.
But certain other marijuana stocks are dogs… with fleas. Their top executives talk a good game but if you dig into the financials, you’ll see red ink every quarter. It’s why I advise you to shun these equities.
Trulieve, on the other hand, is the real deal. Revenue is growing and yes, the company actually makes money. The firm’s expansion plans are ambitious but methodical. As weaker marijuana companies fall by the wayside, Trulieve will be there to pick up market share.
Every retirement portfolio should have at least one marijuana stock. Trulieve is an appealing candidate that’s poised to outperform its peers.
John Persinos is the managing editor of Investing Daily.