Trulieve Cannabis Corp (TCNNF), a leading cannabis retailer and multi-state operator in the U.S., recently faced a hurdle as Florida failed to approve recreational cannabis, falling short of the required 60% voter support. Despite this setback, pro-cannabis activists in Florida, including Trulieve, are making renewed efforts to legalize recreational marijuana by the 2026 ballot. The company missed expectations on recent Q3 revenue and reported a net loss of $60 million. The company’s focus continues to be on growth and expansion in new and existing markets.
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The shares have decreased over 28% in the past year, trading at a relative discount. Analysts are bullish on the stock and anticipate a strong rebound over the next 12 months. However, Investors may want to wait for confirmation of a turn in price momentum before entering a position.
Leading a Market in Legal Limbo
Trulieve Cannabis is a leading vertically integrated cannabis company that operates in the retail sector. It markets its products under multiple brands, including Avenue, Cultivar Collection, Muse, Modern Flower, Alchemy, Momenta, Sweet Talk, Co2lors, Loveli, Trekkers, and Roll One.
The company has dispensaries in various states, including Florida, Arizona, Georgia, Ohio, Maryland, West Virginia, Connecticut, and Pennsylvania. As a multi-state operator in the U.S., with firm positions in Arizona, Florida, and Pennsylvania, Trulieve is primed for accelerated growth and expansion. Through its hub strategy, it focuses on building scale in retail and distribution in new and existing markets.
A historic hearing that could potentially reclassify marijuana under federal law has been indefinitely postponed following a granted request for an interlocutory appeal. With the proceedings on pause, the future course of action remains uncertain, particularly with the upcoming change in administration and the forthcoming selection of a new DEA administrator.
Disappointing Recent Results
In Q3 2024, the company reported revenue of $284 million, a 3% increase from the previous year. Most (95%) of this revenue was generated from retail sales. Gross margin was 61%, producing a GAAP gross profit of $173 million. However, a net loss of $60 million was reported. Adjustments to this net loss excluded $48 million in campaign support, non-recurring charges, asset impairments, disposals, and discontinued operations, resulting in an adjusted net loss of $12 million.
The company performed well in adjusted EBITDA, which was $96 million, or 34% of revenue. This was a 24% uptick from the previous year. While this generated a cash flow of $30 million from operations, the free cash flow was negative at—$7 million. Non-GAAP earnings per share (EPS) of—$0.06 beat by $0.06.
The quarter ended with cash and short-term investments totaling $319 million.
Strong Upside Potential
The failure of legalization efforts in Florida at the poll booth in November was a catalyst for the drop in the shares, as they cascaded over 60% since. The stock trades at the low end of its 52-week price range of $4.44 – $14.50 and shows ongoing negative price momentum as it trades below the major moving averages. The stock looks relatively undervalued, with a P/S ratio of 0.79x compared to the Health Care sector average of 3.6x.
Analysts following the company have been bullish on TCNNF stock, though they have tempered short-term expectations. For instance, Alliance Global Partners analyst Aaron Grey recently lowered the share price target to $113.25 (from $16.04) while maintaining a Buy rating, noting a lack of progress on federal reform.
Based on the most recent recommendations of five analysts, Trulieve Cannabis is rated a strong buy overall. The The average price target for TCNNF is $18.18, which represents a potential upside of 276.94% from current levels. However, I expect further price target downgrades if a path to Federal reclassification remains elusive.
See more TCCNF analyst ratings
Final Thoughts on TCCNF
Trulieve experienced a challenging year in 2024, punctuated by the failure to legalize recreational cannabis in Florida. Despite this, it emphasizes growth and expansion in new and existing markets, and most analysts remain bullish on the stock’s future. While the future of cannabis reclassification at the federal level remains uncertain, Trulieve’s diverse product range, multi-state presence, and adjusted EBITDA growth provide promise.
The shares currently trade at a discount, which could offer an attractive entry point for investors, provided price momentum turns. The company’s focus on its growth strategy hints at promising potential, but investors should remain vigilant of the broader legislative landscape.
