Florida’s cannabis market is heating up, but the battle is still largely lopsided. After posting Q3 revenue, Trulieve Cannabis Corp. is once again showing why it might be one of the few cannabis stocks to own right now.
In Q3, the company increased patient growth in Florida by 19% to 214,827 opening their 38th dispensary in the state this month. Trulieve also booked record revenues of $70.7 million an increase of 22% sequentially quarter-to-quarter. Trulieve is trailing only GW Pharmaceuticals in quarterly sales, and the company is truly a bright spot in a sector that just saw its four largest operators miss estimates.
Yes, Canopy Growth, Tilray, Aurora Cannabis and Cronos Group all missed estimates blaming their shortfalls on the slow rollout of dispensaries and licensing across Canada. Even after those blowout results, Trulieve is still cheaper than Canopy Growth and Tilray, and is approaching its high from earlier in the year around the $14-mark (it is currently trading at $12.05 at the time of writing).
Over a 365-day period, the stock is up 25% over that time, while Canopy, Tilray and Aurora Cannabis are all down more -25% with Tilray down as much 78%. The company’s deep focus on Florida has paid off allowing it to learn a landscape, understand the politics of a state and focus on distribution channels in an isolated area. This focused business model is in stark contrast to other companies that have cast a wide net, and really struggled to make headway in expanding competition. Finally, the company has a healthy reserve of cash, so its expansion plans do not seem like they will be stalling anytime soon.
Chasing Trulieve in the Florida cannabis market is Curaleaf Holdings (Surterra Wellness is technically the second largest operator in the state, but they are currently a private company). Curaleaf similarly reported record revenues in Q3 of $61.8 million, which was an increase of 27% from the Q2 2019. In addition, the company’s retail arm booked $51 million, a 34% increase quarter-over-quarter. Curaleaf’s Q3 2019’s net loss was $6.8 million, or $0.01 per share.
While there is a lot to like in Curaleaf’s results (the stock is up 16% on the year), the company is more spread out than Trulieve with dispensaries and operations in New York, Arizona, Maryland and Massachusetts. The company is trailing in dispensary count in Florida by almost double-digits, but they may have an ace up their sleeve with the Select and Grassroots acquisitions. The two deals, when they are complete, will add operational capacity to Curaleaf’s key markets, according to the company. However, like all things in the cannabis market, this should be more wait-and-see before investors believe the hype.
“I look forward to welcoming the outstanding team members of both Select and Grassroots in early 2020. Curaleaf, Select, and Grassroots combined will create the most accessible cannabis company in the country, and set a national standard for excellence in cannabis,” President and CEO Joe Lusardi said on the recent conference call.
Equities Contributor: Stephen L. Kanaval
Source: Equities News