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Watch As Trulieve Moves From Being The Pot Sector Exception To Becoming The Rule

By Investing.com (Brenda O'Farrell/Investing.com)ETFsDec 10, 2019 05:43
ca.investing.com/analysis/watch-as-trulieve-moves-from-being-the-pot-sector-exception-to-becoming-the-rule-200432017
Watch As Trulieve Moves From Being The Pot Sector Exception To Becoming The Rule
By Investing.com (Brenda O'Farrell/Investing.com)   |  Dec 10, 2019 05:43
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In life, as in the cannabis investment sector, there are accepted rules and then there are the exceptions that prove those rules. In the cannabis space one such exception is Trulieve Cannabis Corp (OTC:TCNNF), (CSE:TRUL), an expanding, Florida-based cannabis grower. But here’s the twist: This exception could emerge as an indication of a broader trend that will soon shed its exceptional status and actually become the new rule.

So first, let’s get to the widely accepted rule: Most cannabis stocks have lost much of their value in the second half of 2019. Indeed, the stock performances of the big names in the sector have been disastrous. Just look at the year-over-year statistics: Canopy Growth Corp (NYSE:CGC), (TSX:WEED) –40%, Cronos Group Inc (NASDAQ:CRON), (TSX:CRON) –47%, Aurora Cannabis Inc (NYSE:ACB), (TSX:ACB) –57%, Aphria Inc (NYSE:APHA), (TSX:APHA) –10%, Tilray Inc (NASDAQ:TLRY) –81%.

Trulieve is a standout exception to this rule. With a market capitalization of US$1.93 billion, this vertically integrated, medical cannabis grower has seen its stock price increase by 60.73% through 2019.

Trulieve Weekly Price Chart
Trulieve Weekly Price Chart

The upward trajectory has actually picked up its pace in the last three months as the company’s share price has jumped from US$7.88 (C$10.44) on Aug. 30 to close down slightly yesterday at US$13.09 (C$17.27), an approximate 66% increase.

Trulieve claims to have 55% of the medical marijuana market in Florida, the third most populous state in the U.S. Its patient base is growing at about 10% per month, and it has about 40 dispensaries in the state, with a plan to expand that network. It offers a wide range of cannabis-based merchandise that comprises almost 300 products.

The company is also moving into other markets. It has obtained licences to open dispensaries in Connecticut, California and Massachusetts. It has grown slowly and steadily since 2015, and has avoided the huge, rapid-expansion pitfalls other larger cannabis companies are suffering now. And although it is traded on both the OTC markets in the U.S. and the Canadian Stock Exchange, it has limited its footprint to a comparatively smaller playing field focused only on the States. This could be the trend that emerges as the most successful route that will allow Trulieve to be seen as one of the few short-term, big winners as the calendar flips to 2020.

Not All 2.0 Products Will Be Out For Christmas

Some cannabis 2.0 products will be available for sale before Christmas in Canada, but not all.

Last week, the Auxly Cannabis Group Inc (OTC:CBWTF), (TSXV:XLY) said its infused products will be available for retail sale beginning Dec. 16. In a statement issued by the Vancouver-based company, Auxly announced it has reached agreements with nine of the 10 Canadian provinces and will launch 83 derivative products that include vapes, chocolates, chewables and topicals.

“This is a major milestone for us,” said Hugo Alves, CEO of Auxly. He expanded, saying:


“Our team has been working toward the launch of our derivative product portfolio for over 20 months and seeing the hugely positive reactions to our thoughtfully developed brands and products from provincial purchasers, our distribution partner, Kindred, and consumer focus groups has been immensely satisfying and motivating for the entire Auxly family. It is a huge accomplishment to be ready for commercialization on day one, right across the country – it speaks to the talent and dedication of our people and our organization-wide focus on winning in the cannabis 2.0 market.”

Shares of Auxly were unaffected by the announcement last Thursday, dipping slightly since then to close up slightly yesterday at US$0.4680 (C$0.63). It will be interesting to see if early entry into the 2.0 market will move the needle on the stock price.

While a smaller producer like Auxly is pushing ahead on 2.0 products, the cannabis giant, Canopy Growth, has announced it will not be offering its array of 2.0 products until January 2020. Canopy will start with marketing its cannabis chocolate bars and infused drinks.

New CEO Named At Canopy

Meanwhile, Canopy shares made a substantial jump yesterday, gaining about 14% on the day on the news that David Klein was appointed CEO effective January. The move is being viewed as the company’s major share holder, U.S.-based beer-maker Constellation Brands (NYSE:STZ), taking a firmer grasp of the reins of the Canadian pot producer. Last October, Klein, who had been in charge of finance at Constellation, was named chairman of the board at Canopy. Next month, he will replace Mark Zekulin who had been the sole chief executive after co-CEO Bruce Linton was ousted last summer.

Canopy shares closed yesterday at US$21.29 (C$28.16).

Watch As Trulieve Moves From Being The Pot Sector Exception To Becoming The Rule
 

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Watch As Trulieve Moves From Being The Pot Sector Exception To Becoming The Rule

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