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It’s been quite a rut. The shares of Curaleaf Holdings, Green Thumb Industries and Trulieve Cannabis have plummeted more than 30% this year — much worse than the declines posted by benchmark indexes such as the S&P 500 and Dow Jones Industrial Average. Much of cannabis companies’ slide is due to the failure of reforms that investors had hoped for to materialize so far under U.S. President Joe Biden.
BTIG analyst Camilo Lyon calls it a “regulatory recession,” given that the stocks still trade at low multiples to their earnings, and many companies have seen growth rates of 60%.
Florida-based Trulieve Cannabis reportedly is planning to build a mammoth, half-million-square-foot cultivation and processing operation at a former steel mill in Pennsylvania with the help of a $2 million state redevelopment grant.
The plan, first reported by the Pittsburgh Post-Gazette, comes on the heels of Trulieve completing the acquisition of Arizona-based Harvest Health & Recreation and raising $350 million of capital at an 8% annual interest rate.
The financing deal closed on Wednesday.
Ample growth opportunities in the U.S.
In its second quarter, Curaleaf opened five new stores in Illinois, Pennsylvania, New Jersey, and Maine. This brings its total to 107 stores nationwide. Peers Trulieve and Green Thumb have 100 and 65 stores nationwide, respectively.
Case in point: Florida-based cannabis company Trulieve (TCNNF) set a new record Monday with its $2.1 billion all-stock deal to acquire Arizona-based Harvest Health. The combination sets Trulieve up to increase its national footprint from six states to 11, and sets it up to be the most profitable multi-state operator with adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) forecasted to top $460 million on the year.
U.S. pot stocks are doing much better
Unlike in Canada, where marijuana has been legal nationwide since October 2018, new markets are continuing to pop up in the U.S., and that is making it easier for cannabis companies to expand and boost their top lines.
Multistate operator Trulieve Cannabis (OTC:TCNNF) is coming off an impressive 2020 in which its revenue of $521.5 million grew 106%. And the company is still expanding into new markets, including Massachusetts, where it recently obtained approval to begin growing plants at its facility in Holyoke.
Florida-based medical cannabis company Trulieve is spending $60 million to buy more MMJ dispensaries in Pennsylvania.
The multistate operator said Monday it will be purchasing Keystone Shops, a medical cannabis company with retail locations in Philadelphia, Devon and King of Prussia.
The deal is comprised of $40 million in Trulieve subordinate voting shares and $20 million in cash.
Several MSOs, including Curaleaf, Green Thumb Industries and Trulieve, have spent tens of millions of dollars in the past two years to enter or expand in Connecticut’s MMJ market and position themselves for the possible legalization of recreational cannabis.
In addition, any adult-use market is expected to generate license and ancillary opportunities for a number of Connecticut-based enterprises, including social equity applicants and small businesses.
Florida’s fast-growing, three-quarters-of-a-billion-dollar medical cannabis market is about to experience another surge in sales – this time from edibles.
The state health department has issued long-awaited edible production rules, and medical cannabis operators already are champing at the bit.
The expected boost to the market comes less than 18 months after Florida allowed the sale of flower, which roughly doubled sales.
It’s important when looking at the numbers to understand that some of the growth is from acquisitions. Additionally, some of the companies were negatively impacted by closures in Massachusetts and Nevada during the quarter. Finally, any given quarter can be impacted by new dispensary openings or especially additional production capacity leading to more product availability. Some of the companies share “same-store sales” information, which helps to better understand the growth dynamics. GTI, for instance, saw 75% same-store sales growth from a year ago and 8% sequentially.
The cannabis sector appeared in a dire position heading into the coronavirus outbreak. The sector was generally unprofitable and needed additional capital to grow so an extended shutdown of retail stores would have crushed the stocks.
