Once deemed as illicit, cannabis consumption is now well on its way to the mainstream. More than a dozen states have already legalized marijuana for recreational use. And last month, Gov. Andrew Cuomo signed legislation passed by state lawmakers to legalize recreational marijuana in New York. The legislation will expand New York’s existing medical, adult-use marijuana and cannabinoid hemp programs and formulate licensing for cannabis producers.
The Virginia legislature recently passed a bill to legalize simple possession of marijuana and limited home growth, effective July 1, 2021. This makes it the first state in the South and the 17th state overall to legalize recreational cannabis. Although under federal government guidelines cannabis is still considered a controlled substance. But changing societal attitudes towards it, particularly due to its medicinal benefits, have buttressed the widespread legalization push.
This, along with the advocacy of federal decriminalization by governors of many states, makes Wall Street analysts optimistic about the industry’s prospects. Based on consensus price targets, Trulieve Cannabis Corp. (TCNNF), Cresco Labs Inc. (CRLBF), and KushCo Holdings, Inc. (KSHB) are expected to rally at least 25% over the next 12 months.
Trulieve Cannabis Corp. (TCNNF)
TCNNF is a medical cannabis operator, based in Quincy, Fla. It cultivates and produces products in-house and distributes its products to Trulieve branded stores in California, Massachusetts, Connecticut, Pennsylvania, Florida, and West Virginia. The company also sells its products directly to patients through home delivery.
This month, TCNNF acquired Solevo Wellness West Virginia LLC and its three West Virginia dispensary permits for $650,000. This should solidify the company’s position in the West Virginia Market. On April 12, the company administered public offering of five million subordinate voting shares in the United States and Canada. TCNNF plans to use the offering’s proceeds to fund business development and for general working capital purposes.
TCNNF’s total revenue increased 111% year-over-year to $168.4 million in the fourth quarter, ended December 31, 2020. Its gross profit was $119.9 million compared to $64.7 million in the fourth quarter of 2019. The company’s adjusted EBITDA increased 79% from its year-ago value to $78.2 million.
A consensus EPS estimate of $0.24 for the quarter ending June 30, 2021 represents a 300% improvement year-over-year. The consensus revenue estimate of $853.21 million for the current year represents a 63.6% increase from the same period last year. TCNNF’s stock has gained 311.2% over the past year.
Nine Wall Street analysts have provided ratings for the stock and all have rated it Strong Buy. Closing yesterday’s trading session at $40.60, the consensus price target of $67.44 represents a potential upside of 66.1%.
Cresco Labs Inc. (CRLBF)
Headquartered in Chicago, Ill., CRLBF is a manufacturer and cultivator of medical cannabis products in the United States. The company sells vape pens, live resins, disposable pens, cannabis in flowers and extracts under the Cresco brand. It also produces cannabis infused edibles, such as gummies, mints, and tarts.
This month, the company launched Wonder Wellness Gummies to expand its branded edibles portfolio. These innovative low-dose gummies are expected to address the consumer needs and allow CRLBF to capitalize on the white space for its edibles’ portfolio.
Last month, CRLBF agreed to acquire Cultivate Licensing LLC and BL Real Estate LLC, a Massachusetts-based vertically integrated operator. The strategic acquisition should allow the company to break into the top three market share positions in Massachusetts. Also, it will mark the fourth state in which CRLBF operates the maximum number of retail stores.
In the fourth quarter, ended December 31, 2020, CRLBF’s revenue has increased 292.2% year-over-year to $162.32 million. Its gross profit increased 13.1% sequentially to $95.70 million, while its gross margin was 59% compared to 55.2% in the third quarter. CRLBF’s income from operations was $21.98 million, compared to a loss from operations of $25.88 million in the prior-year quarter.
Analysts expect CRLBF’s revenue for the quarter ending June 30, 2021 to be $187.66 million, representing 99.1% year-over-year growth. The company’s EPS is likely to increase 146.2% for its fiscal year 2021. Over the past year, the stock has gained 299.4%.
Wall Street analysts are very bullish on CRLBF. Of eight analysts that rated the stock , seven have rated it a Strong Buy. The consensus price target of $20.13 represents a 63.9% increase from its last closing price of $12.29.
KushCo Holdings, Inc. (KSHB)
Founded in 2010, KSHB manufacturers and sells packaging products, solvents, accessories, vaporizers and branding solutions to customers operating in the medical and recreational cannabis and hemp-derived cannabidiol industries in the United States, Canada, and internationally. The Cypress, Calif.-based company offers its products to the business-to-business market, which includes farmers, growers, processors, and licensed retailers.
Last month, KSHB agreed to merge with Greenlane Holdings, Inc. Under the agreement, KSHB will become a wholly owned subsidiary of Greenlane. This transaction is expected to strengthen KSHB’s brand and allow it to achieve robust organic growth in the long run.
During the fiscal second quarter, ended February 28, 2020, KSHB’s revenue increased 23% sequentially to $32.9 million, attributable primarily to an increase in sales to the company’s MSO and LP customers. Its gross profit was $6.44 million compared to a gross loss of $8.91 million. Furthermore, KSHB generated cash of approximately $35.0 million as of February 28, compared to approximately $10.5 million as of August 31, 2020.
KSHB is expected to generate revenue growth of 48.9% for fiscal 2022. Its EPS is estimated to increase 83.3% in the next quarter and 118.2% in 2022. The stock has gained 64.7% over the past year.
Closing yesterday’s trading session at $1.19, the consensus price target of $1.50 represents a potential upside of 26.1%.
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TCNNF shares were trading at $41.17 per share on Wednesday morning, up $0.57 (+1.40%). Year-to-date, TCNNF has gained 30.20%, versus a 10.92% rise in the benchmark S&P 500 index during the same period.
About the Author: Imon Ghosh
Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization. More...
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