Proactive Investors - Analysts at Stifel GMP have repeated their ‘Buy’ rating for Trulieve Cannabis (CSE:TRUL) with a lowered price target after the multi-state operator posted mixed first quarter results.
For the quarter ended March 31, 2023, Trulieve posted revenue of $289 million, down from $318 million in the year-ago quarter, and a net loss of $64 million, up from a loss of $32 million in 1Q 2022.
The analysts noted that Trulieve’s operating cash flow was a bright spot, with the company reiterating its $100 million 2023 operating cash flow target.
They also pointed out that the company’s 1Q results showed good selling, general, and administrative cost reduction while its large-scale Florida facility (JeffCo) performed ahead of internal expectations, possibly pointing to progress in lowering production expenses.
“However, this outperformance also caused inventory levels to remain stable quarter-over-quarter, a contrast to management's previous guidance of rationalization,” the analysts wrote in a note to clients.
“We believe this remains a focus for investors given limited visibility on gross margin erosion until inventory stabilizes and JeffCo's lower production cost could offset competitive forces, potentially in 2024, in our view.
“Overall, we believe this level of uncertainty is currently captured in TRUL's valuation with shares trading at about 9% 2023e operating cash flow yield versus close peers at about 7%.”
The analysts wrote they were lowering their forecasts for revenue and margins, which drive their price target, but wrote that they retained a positive bias. They lowered their price target from C$25 to C$20.
“With no Maryland recreation or Florida telehealth inclusion, the revenue decline and margin erosion mainly in Florida drive our lower target price,” they wrote.
Trulieve shares tumbled following the release of its results, down 8.7% at C$6.39 on Thursday afternoon.