Following financial results showing 14 consecutive quarters of profitability released by Trulieve Cannabis Corp. TRUL TCNNF, Cantor Fitzgerald released a report analyzing the company’s second quarter financials.
The firm maintained an Overweight rating but dropped its 12-month price target to $50.50, down from $56.
Trulieve's shares were trading at $31.62 at the time of this writing, mid-afternoon Thursday.
The Florida-based cannabis MSO posted sales and EBITDA ahead of consensus, but below Cantor’s estimates. While Trulieve announced positive sales numbers in its home state, analyst Pablo Zuanic sees several possible headwinds in that territory that could affect the company’s margins.
“We have trimmed our FL growth projections, as the current expansion run rate in patients of ~3,000 per week is seen as a normalized number by management,” Zuanic said.
Patient expansion rates were between 5,000 and 6,000 per week as recently as a couple of months ago, noted the report. This drop is happening as various competitors acquire
assets in the state, with the larger players adding capacity and stores.
Undisclosed (but likely negative) price mix could have caused a drop in gross margins, along with “ the dilutive margin impact from new states that are now part of the company’s footprint (as well as start-up costs in new markets).”
However, the analyst stated that consensus does not appear to capture many growth drivers in the year ahead, like the company’s expansions into Pennsylvania and Massachusetts, potential to win a cultivation license in Connecticut and an upcoming merger with Harvest Health & Recreation Inc. HARV HRVSF, expected for the beginning of 2022.
The merger should output the second largest multi-state cannabis operator in the country, ahead of Green Thumb Industries GTII GTBIF and below Curaleaf CURA CURLF.
“Sentiment now should not be driven just by Florida,” Zuanic said, as the company will likely be number one in Arizona, Pennsylvania and potentially Georgia.
Lead image by Ilona Szentivanyi. Copyright: Benzinga.
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