Cannabis investors have once again gotten a mixed earnings season from Canadian legal producers and US multi-state operators.
Cantor Fitzgerald analyst Pablo Zuanic updated his outlook for Trulieve Cannabis Corp (OTC: TCNNF) and Green Thumb Industries Inc (MKTS: GTBIF) on Thursday following each company's second-quarter reports.
Trulieve's Numbers: Trulieve reported second-quarter sales of $120.8 million, up 26% sequentially and ahead of consensus analyst estimates of $106.8 million. Trulieve reported a second consecutive quarter of positive cash flow, which jumped from $11 million in the first quarter to $40 million in the second quarter. Adjusted EBITDA for the quarter was $60.5 million, well ahead of analyst estimates of $45 million.
Finally, Trulieve raised its fiscal 2020 sales guidance from a previous range of between $380 million and $400 million to a new range of between $465 million and $485 million.
Zuanic said Thursday that much of Trulieve’s strong performance was driven by the Florida market.
“We think a fact being missed by investors is the uncapped nature of the FL market (re stores and cultivation) for current players; in most other ‘restricted’ states, given caps, we see share dilution risk as licenses expand,” he said.
Green Thumb's Report: Zuanic is also bullish on Green Thumb following its report. Green Thumb reported second-quarter sales of $119.6 million, up 17% compared to the first quarter and ahead of analyst estimates of $102.6 million. EBITDA margins also improved from 25% in the first quarter to 30% in the second quarter. Green Thumb reported a net loss of $12.9 million for the quarter.
Looking ahead, management guided for third-quarter sequential sales growth of between 10% and 15%.
“Green Thumb remains our top pick among US cannabis stocks, together with Trulieve,” he said.
Cantor reiterated Overweight ratings for both Trulieve and Green Thumb. Zuanic raised his Trulieve price target from $47 to $50 and raised his Green Thumb price target from $21 to $27.
Benzinga’s Take: Given all the uncertainty that remains in the cannabis space in the near-term, it may be wise for cannabis bulls to take a diversified approach to investing.
Consider buying a basket of Canadian legal producers as well as US multi-state operators, such as Trulieve and Green Thumb, that have high-quality balance sheets and leading market shares.
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