The U.S. cannabis industry has a new king. This new royalty is a product of a $2.1 billion merger, the largest buyout in the history of the young U.S. cannabis industry.
So which company has quickly jumped to the top of the sector?
Trulieve Cannabis (OTC: TCNNF) just announced that it closed this incredible deal, purchasing Harvest Health and Recreation (OTC: HRVSF).
The combination of these two industry leaders has created the largest cannabis company in the U.S. by revenue. Last quarter, Trulieve and Harvest combined to deliver revenue of $317 million.
That is $5 million better than the $312 million generated by Curaleaf Holdings (OTC: CURLF). These numbers put the new Trulieve on pace to generate more than $1.5 billion in revenue in the next 12 months when including growth potential.
This impressive sales growth is being driven by one of the best portfolios of cannabis permits, dispensations, and cultivation facilities in the industry. That includes:
- A retail network of 149 dispensaries across 11 states.
- 22 cultivation facilities.
- 3 strategic regional hubs.
- Market-leading positions in Arizona, Florida, and Pennsylvania.
Looking forward, this deal puts Trulieve in a solid position to keep growing.
The company just secured a $350 million loan that it will be pouring into growth. Here are some more details from the press release.
“Trulieve’s strength in the capital markets provides us access to capital for strategic growth plans. Closing on the $350 million debt issuance, which we believe to be the largest debt financing to date of any public multi-state operator, combined with our cash position and continued cash flow from operations, has us well-positioned for our future goals in terms of expansion in key markets,” stated Trulieve Chief Executive Officer, Kim Rivers.
For example, Trulieve just announced plans to build one of the largest cannabis cultivation facilities in Pennsylvania. Here are some more details from mjbizdaily.
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 Pennsylvania project also reflects an emerging trend in which marijuana multistate operators obtain government incentives to revitalize economically distressed areas.
Illinois-based Green Thumb Industries is receiving tax incentives to build out a $50 million marijuana cultivation and processing facility at a former prison in Warwick, New York.
Trulieve Looks Undervalued
Despite the impressive sales growth, Trulieve shares look undervalued relative to the last twelve months and other sectors. Trulieve has a price-to-sales ratio of 5, a 50% discount to 12 months ago when its P/S ratio was over 10.
Trulieve also looks undervalued relative to other growth sectors and stocks. For example, Tesla shares are valued at 20 times sales, a massive premium to Trulieve even though Trulieve is growing at a much faster pace.
Shares are Down 50% from the 52-Week High
This looks like a great time to take a look at Trulieve shares. Trulieve has been weak with the broader cannabis sector in 2021 and shares are down 45% from the 52-week.
More recently, I see evidence that Trulieve has bottomed out and that shares are in the early stages of recovery. Trulieve shares bounced sharply from $25 and a key level of support has developed between $25 and $30. Look for strong support from this area moving forward.
The Big Picture on Trulieve
Trulieve just became the largest cannabis company in the world after closing its acquisition of Harvest Health and Recreation.
The new combined company is already delivering impressive sales growth and is poised to invest hundreds of millions more into new growth.
Shares are down 45% from the 52-week high and showing signs of a reversal out of the downtrend and into a new bull market.
Author Michael Vodicka owns shares of Trulieve Cannabis (TCNNF).
About the Author & Cannabis Stock Trades
Michael Vodicka is an equity analyst with more than 20 years of experience trading and investing. His research has been featured in some of the industry’s most respected publications. He has been investing and leading investors in the cannabis sector since 2013.
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