Trulieve Is No Longer A Sell (Rating Upgrade)

seekingalpha06-20

Trulieve stock, downgraded from Strong Buy to Sell after rally, dropped 27% despite positive news.Trulieve valuation decent compared to other Tier 1 MSOs, target price increased to $15.26 based on ...

Source Link

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

We need your insight to fill this gap

Leave a comment

{"i18n":{"language":"en_US"},"isChannel":false,"data":{"share":"https://ttm.financial/m/news/2444252092?lang=en_US&edition=fundamental","thumbnail":"https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1156171259/image_1156171259.jpg","is_english":true,"pubTime":"2024-06-20 11:13","share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","id":"2444252092","market":"fut","top_or_hot":-1,"title":"Trulieve Is No Longer A Sell (Rating Upgrade)","media":"seekingalpha","content":"<div>\n<p>Trulieve stock, downgraded from Strong Buy to Sell after rally, dropped 27% despite positive news.Trulieve valuation decent compared to other Tier 1 MSOs, target price increased to $15.26 based on ...</p>\n\n<a href=\"https://seekingalpha.com/article/4700048-trulieve-stock-no-longer-sell-rating-upgrade\">Source Link</a>\n\n</div>\n","source":"seekingalpha","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Trulieve Is No Longer A Sell (Rating Upgrade)</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nTrulieve Is No Longer A Sell (Rating Upgrade)\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-06-20 11:13 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4700048-trulieve-stock-no-longer-sell-rating-upgrade><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Trulieve stock, downgraded from Strong Buy to Sell after rally, dropped 27% despite positive news.Trulieve valuation decent compared to other Tier 1 MSOs, target price increased to $15.26 based on ...</p>\n\n<a href=\"https://seekingalpha.com/article/4700048-trulieve-stock-no-longer-sell-rating-upgrade\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"AAWH","symbol_name":"Ascend Wellness Holdings, Inc.","start_time":0,"source_url":"https://seekingalpha.com/article/4700048-trulieve-stock-no-longer-sell-rating-upgrade","article_id":"2444252092","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1156171259/image_1156171259.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2444252092","pubTimestamp":1718853208,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Nope. The number of shares outstanding of MSOS has increased 38.3%. The average increase in the shares held among t","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"AAWH":"Ascend Wellness Holdings, Inc.","BK4007":"制药","MSOS":"AdvisorShares Pure US Cannabis ETF","BK4023":"应用软件","PLNH":"Planet 13 Holdings Inc.","CURLF":"Curaleaf Hldgs Inc.","BK4183":"个人用品","BK4557":"大麻股","MAPS":"WM Technology, Inc.","CRLBF":"Cresco Labs Inc.","GTBIF":"Green Thumb Industries Inc.","VRNOF":"Verano Holdings Corp.","TCNNF":"Trulieve Cannabis Corporation"},"translate_title":"Trulieve不再是卖出（评级升级）","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"AAWH":1,"CRLBF":1,"CURLF":1,"GTBIF":1,"MAPS":1,"MSOS":1,"PLNH":1,"TCNNF":1,"VRNOF":1},"content_text":"Trulieve stock, downgraded from Strong Buy to Sell after rally, dropped 27% despite positive news.Trulieve valuation decent compared to other Tier 1 MSOs, target price increased to $15.26 based on 2025 projections.We are more optimistic about cannabis stocks and recommend other investment opportunities like Cresco Labs and WM Technology.   Darren415I had a Strong Buy on Trulieve (OTCQX:TCNNF) a year ago and then downgraded it to Neutral in January. In late March, I downgraded it to Sell after a massive rally, suggesting that the valuation relative to peers was too high. Since March 24th, the stock has dropped almost 27% despite two pieces of very good news. The Supreme Court of Florida approved the legalization for adult-use initiative being on the ballot in the state in November, and the DEA moved forward on the rescheduling that was recommended by the Department of Health & Human Services:   YChartsThe large collapse in the share price was not all by itself, as the New Cannabis Ventures Global Cannabis Stock Index has declined by 8% since then. MSOs have had a much tougher time, as the NCV American Cannabis Operator Index has dropped 23.1%. The five Tier 1 MSOs have declined by 26.9% on average, with Trulieve the second worst performer. The best performer has been Green Thumb Industries (OTCQX:GTBIF), which I upgraded from Sell to Neutral on May 5th. The worst performer has been Verano Holdings (OTCQX:VRNOF), which I still have as a Sell rating, though the price has declined by 33% since I last wrote about it in mid-April. In early June, I reiterated my negativity on this stock, which had declined to $9.78 from the $11.85 when I downgraded it to Sell. Today, I explain why I am now Neutral on TCNNF. Trulieve Has Plunged After A Massive Rally Looking at the 1-year chart, one can see how volatile the stock has been:   SchwabTrulieve ended 2023 at $5.21, so it is up 66.4% year-to-date. It closed on April 30th at $14.37, so it is down 39.7% from the peak. In the reiteration of my Sell rating earlier this month, I suggested that it could bottom in the 8s, which is where it is now. I pointed out then that there is still an open gap that was created in early January. This chart is a good reminder that stock prices don't always follow the news. The news got better, as did the estimates for Trulieve. Yet, the stock is below the midpoint of the 52-week low and the 52-week high. So is AdvisorShares Pure US Cannabis ETF (MSOS). Speaking of MSOS, I continue to think that it is a poorly run ETF. The allegedly actively managed fund is not really actively managed, and it is undiversified. The top 6 holdings total 89.1%. TCNNF is the third-largest at 17.2%, which is behind Curaleaf (OTCPK:CURLF) at 20.4% and GTBIF at 28.4%. MSOS holds 17.2 million shares of TCNNF, which is up 34% from its year-end holdings. Has MSOS bought a lot of TCNNF by design? Nope. The number of shares outstanding of MSOS has increased 38.3%. The average increase in the shares held among the largest 6 positions has been 39.7%. Trulieve Valuation Is Decent In the piece I wrote earlier this month, I discussed the improving outlook and how the Trulieve stock valuation had gotten better. My target for year-end was $14.90 based on an enterprise value to projected adjusted EBITDA for 2025 of 8X, which is still pretty low historically. At the time, the estimate for 2025 adjusted EBITDA was $383 million. I was using Sentieo estimates, but Sentieo is no longer available. The company was acquired by AlphaSense, which has slightly different numbers due to its methodology. The numbers were similar for each of the large MSOs, and here is the table updated with the current prices and the current estimates:   Alan Brochstein, using AlphaSenseTrulieve has the lowest valuation of any Tier 1 MSO relative to 2024 projections, and it is the second cheapest for 2025. I continue to be wary of Curaleaf, and I like Cresco Labs (OTCQX:CRLBF). While Verano Holdings appears to be cheaper for 2025 estimates, I remain cautious that the estimates for the company are too high. The 2025 outlook for Trulieve is slightly higher than it was, though I think that this is entirely due to the switch from Sentieo to AlphaSense. Updating my year-end target, I now get $15.26, which is up 76%. Again, the estimates for adjusted EBITDA will not change if 280E goes away after cannabis is rescheduled from Schedule 1 to Schedule 3. The cash flow will get better due to the lower taxation. One big uncertainty for Trulieve, which is based in Florida and generates the majority of its revenue and adjusted EBITDA in the state, is the adult-use initiative. I don't believe that the analysts are factoring in the potentially higher revenue that is likely. To pass, 60% of voters must approve it. I remain cautious on Florida's medical cannabis market, which is maturing. The growth in patients is slowing, and there are signs of price compression. I remain concerned that Trulieve has been too aggressive on its balance sheet, as I detailed in early June. The big buildup in cash in Q1 was exaggerated in my view. Investors should understand the source of this improved cash flow, as it is more than just better profitability. Tax-related issues explain a lot of it, with \"uncertain tax position liabilities\" adding $97.6 million. Deferred income tax added $10 million. A year ago, it had reduced cash flow by $7.9 million. Income tax payable, deferred taxes, and uncertain taxes total almost $500 million. Conclusion I have become more optimistic about cannabis stocks with the advancement of rescheduling, which is not yet a done deal, and the lower prices of the stocks. I loved TCNNF when it was below $4, and I disliked it when it was near $12. With the stock now down so much from its peak and a decent valuation, I no longer fear a lower price, though it is up a lot in 2024 still. I own no Trulieve in my model portfolios that I share with my investing group. I see better valuations in a Tier 2 name, Ascend Wellness (OTCQX:AAWH), and in Planet 13 (OTCQX:PLNH). For investors in large MSOs, I like Cresco Labs more than Trulieve. I think that there are some strong opportunities in ancillary names, like WM Technology (MAPS), which has rallied since I wrote about it this past weekend. My target for that stock is above $2, and it is based on the same multiple of adjusted EBITDA as my Trulieve target. It is debt-free and trades on the NASDAQ. In this article, I have explained why I no longer would sell Trulieve if I owned it. My target is much higher than the current price, but there are risks of 280E remaining in effect and Florida not approving adult-use legalization. I think that Trulieve could do better than my expectation if Florida does approve the initiative, but I think that there are other ways to play that potential catalyst that make more sense.  Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.24.2","shortVersion":"4.24.2","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2444252092"}