3 Retail Medical Marijuana Stocks Poised for Growth in Florida

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3 Retail Medical Marijuana Stocks Poised for Growth in Florida
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Florida House Ends Ban on Smoking Medical Marijuana

Against the wishes of the Federal government, a growing number of states are legalizing medical and recreational marijuana. Florida is the latest state to greenlight the smoking of medical marijuana.

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In a landslide vote (101-11), the House passed the proposal on March 13. Governor Ron DeSantis is expected to sign the bill into law by March 15. This will obviously be a boon for cannabis companies with operations in Florida. (Source: “In landslide vote, Florida House agrees to end ban on smoking medical marijuana,” Miami Herald, March 14, 2019.)

According to one projection, Florida’s cannabis market should hit $1.3 billion by 2021. (Source: “Florida’s marijuana forecast: Hazy, with chances for growth high,” Tampa Bay Times, December 20, 2018.)

In light of this news, we take a look at three retail marijuana stocks that should profit now that smoking medical marijuana is legal in the Sunshine State.

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Floridians Can Now Spark It Up

In January, Florida Governor DeSantis gave the House a deadline to repeal the state’s ban on smokeable medical marijuana. He gave them a deadline of March 15; if it wasn’t repealed by then, he would simply remove the appeal that was supported by the previous governor, Rick Scott.

Back in 2017, more than 70% of Florida voters approved a constitutional amendment to legalize medical marijuana. The bill was signed into law, but Governor Scott limited medical marijuana use to pill, oil, edible, and vape form. It was illegal to smoke medical marijuana.

As expected, the smoking ban was challenged in court. In May 2018, the ban was ruled to be unconstitutional, but the Department of Health appealed the ruling. Shortly after taking office this past January, DeSantis issued an ultimatum to the Legislature, threatening to drop the state’s appeal.

Not everyone was in favor of lifting the smoking ban, but failing to do so could have led to having medical marijuana legal without any restriction.

And there are some rules when it comes to smoking medical marijuana in Florida. Medical marijuana can only be smoked by those 18 years of age and up.

That said, anyone under 18 who is terminally ill can smoke medical marijuana if two doctors (one must be a board-certified pediatrician) confirm that it is the most effective form of treatment.

Medical marijuana cannot be smoked in public or at private businesses subject to Florida’s cigarette smoking ban.

In addition to allowing Floridians to smoke medical marijuana, the bill establishes a Medical Marijuana Research and Education Board, open to all universities that wish to participate in the $1.5-million program. (Source: Miami Herald, op cit.)

3 Cannabis Stocks With Retail Operations in Florida

Company Ticker
Trulieve Cannabis Corp OTCMKTS:TCNNF
CNSX:TRUL
Liberty Health Sciences Inc OTCMKTS:LHSIF
CNSX:LHS
Curaleaf Holdings Inc OTCMKTS:CURLF
CNSX:CURA

Trulieve Cannabis Corp

Trulieve Cannabis Corp (OTCMKTS:TCNNF, CNSX:TRUL) is a medical marijuana company that was the first—and is the leading—medical cannabis company in the state of Florida, the third most populous state in the country.

Currently, it has over 150 different products and is always adding new ones. The company’s products include flower, cannabidiol (CBD), tinctures, capsules, and topical ointments. (Source: “Investor Presentation,” Trulieve Cannabis Corp, last accessed March 15, 2019.)

The Quincy, Florida-based company has capitalized on its first-mover advantage, capturing roughly 67% market share. According to the Florida Department of Health, the company also consistently sells between 60% and 80% of the state’s overall volume.

In January, Trulieve announced that it was opening its 24th location in Florida. Since first opening, Trulieve has served nearly 170,000 medical patients. And that number continues to grow at a rate of approximately 10% month-to-month. It also serves patients with a home delivery service. (Source: “Trulieve Opens Doors of 24th Location in Florida,” Cision, January 14, 2019.)

In November 2018 Trulieve announced the acquisition of Life Essence, Inc. (based in Massachusetts) and Leef Industries, LLC (based in California). These mark the company’s first operational initiatives beyond Florida. (Sources: “Trulieve Completes Acquisition of Life Essence, Inc.,” Cision, December 13, 2018. and “Trulieve Receives Approval from the City of Palm Springs for the Transfer of Leef Industries’ Dispensary Permits,” Trulieve Cannabis Corp, November 30, 2018.)

Chart courtesy of StockCharts.com

Trulieve Cannabis Corp Reports Record Q3 Results

For the three months ended September 30, 2018, Trulieve announced that revenue soared 739% year-over-year to $28.3 million, compared to $3.4 million in the same prior-year period. Between September 30, 2017 and September 30, 2018, Trulieve opened 10 additional dispensary locations. (Source: “Interim MD&A Trulieve Cannabis Corp.,” Trulieve Cannabis Corp, November 19, 2018.)

Net income for the third quarter was $17.5 million, up significantly from net income of $462,234 for the three months ended September 30, 2017. Year-to-date net income was $32.2 million, compared to $3.2 million for the nine months ended September 30, 2017.

Revenue for the nine months ended September 30, 2018, was $66.9 million, up 923% from $6.5 million for the nine months ended September 30, 2017.

As at September 30, 2018, the company had total current liabilities of $23.1 million and cash of $42.1 million compared to December 31, 2017, which had current liabilities of $7.6 million and cash equivalents of $1.4 million.

Liberty Health Sciences Inc

Liberty Health Sciences Inc (OTCMKTS:LHSIF, CNSX:LHS) is engaged in the production and distribution of medical marijuana, primarily in the state of Florida.

The company recently completed the first phase of construction at its Liberty 360° Innovation Campus in Gainesville, Florida. This provides the company with an additional 80,000 square feet of cultivation space, for a current total of 150,000 square feet across its facilities in Alachua and Gainesville. (Source: “liberty announces 11th dispensary opening in florida, completion of phase 1 construction at liberty 360 and strategic changes,” Liberty Health Sciences Inc, February 28, 2019.)

The second phase of construction is expected to be completed in April 2019. Once completed, it will contain 225,000 square feet of cannabis greenhouse space.

On March 1, Liberty Health opened its 11th dispensary in Florida. In addition to the Orange Park facility, Liberty operates dispensaries in Dania Beach, Merritt Island, Miami, North Miami, Palm Harbor, Port St. Lucie, St. Petersburg, Summerfield, Tampa, and Winter Haven.

Chart courtesy of StockCharts.com

Liberty Health Sciences Inc Reports Solid Q3 Results

On December 7, 2018, Liberty announced its financial results for the third quarter ended November 30, 2018.

Third-quarter revenue increased 45% year-over-year to approximately CA$3.2 million. During the quarter, the company harvested 583,246 grams (~1,286 pounds) of cannabis, compared with 132,074 grams (~291 pounds) in the same prior-year period. It also increased its number of stock keeping units (SKUs) to 70 from 27. (Source: “Liberty Health Sciences Inc. Management Discussion & Analysis,” Liberty Health Sciences Inc, January 25, 2019.)

Liberty’s patient count increased by 46% during the quarter to approximately 14,500 patients. It also opened three additional dispensaries for a then-total of seven dispensaries and six delivery hubs. Liberty expects to open another seven dispensaries by the end of February 2019 to a total of 14 dispensaries across Florida.

The company recorded a third-quarter net loss of CA$9.7 million (CA$0.028 per share) compared with CA$1.1 million (CA$0.004 per share) in the same prior-year period.

Year-to-date revenue was up significantly at CA$6.5 million, compared with CA$173,024 in the first nine months of 2017. Net loss for the first three quarters was CA$18.5 million (CA$0.056 per share) compared with CA$24.8 million (CA$0.104 per share) for the three months ended November 30, 2017.

The improvement in year-to-date net income was due primarily to the ramp-up in sales revenues at the company’s operations in Florida as well as the significant one-time transaction costs incurred in 2017.

Curaleaf Holdings Inc

Curaleaf Holdings Inc (OTCMKTS:CURLF, CNSX:CURA) is an integrated medical and wellness cannabis operator in the United States.

The company cultivates, processes, markets, and dispenses a range of cannabis products in various operating markets, including flower, pre-rolls, dry-herb vaporizer cartridges, tinctures, lozenges, capsules, and edibles. (Source: “Investor Presentation – February 2019,” Curaleaf Holdings Inc, last accessed March 14, 2019.)

The Wakefield, Massachusetts-based company has operations in 13 key states, owns and operates 42 dispensaries, 12 cultivation sites, and 10 processing sites.

The company’s 12 cultivation sites total approximately 650,000 square feet, with current production capacity of 63,000 pounds of dry flower. By 2020, the company expects to expand its cultivation capacity to more than one million square feet, producing over 290,000 pounds of dry flower.

Its efforts are focused on highly populated, limited-license states, including Florida, California, Massachusetts, Nevada, New Jersey, and New York. Curaleaf actually has the largest footprint of branded retail stores in the U.S., covering 70% of the U.S. cannabis market, reaching 146 million of its target audience. (Source: Ibid.)

Chart courtesy of StockCharts.com

Curaleaf Holdings Inc Q3 Revenue Up 289%

On November 26, Curaleaf announced its financial results for the third quarter ended September 30, 2018.

Third-quarter revenue increased 289% year-over-year and 47% sequentially to $21.4 million. (Source: “Curaleaf Reports Third Quarter 2018 Financial and Operational Results,” Curaleaf Holdings Inc, November 26, 2018.)

Net loss was $33.7 million—which included a $25.0-million, one-time, non-cash, accounting entry related to the reverse takeover transaction and investments in new store openings and facilities—compared to a net income of $459,000 in the third quarter of 2017.

For the first nine months of 2018, revenue increased 247% year-over-year to $45.1 million. Net loss was $40.8 million, compared to net loss of $3.5 million for the same period in 2017.

Year-to-Date Activities:

  • In April, the company acquired Swell Farmacy, a vertically-integrated Arizona operator with four dispensaries.
  • In October, it acquired Midtown Roots, the only dispensary located in the heart of downtown Phoenix, Arizona.
  • As of September 30, 2018, Curaleaf had 29 branded dispensaries.
  • Curaleaf raised approximately $400.0 million in an oversubscribed private placement offering on October 25, 2018.
  • As of November 26, 2018, there are a total of 33 locations including new stores in Tallahassee, Florida; Tampa; North Miami; and a new store in downtown Phoenix.

Curaleaf will report its financial and operating results for the fourth quarter and full year ended December 31, 2018 after the market close on March 20, 2019.

Analyst Take

More than 30 states, as well as the District of Columbia, Guam, and Puerto Rico, have legalized medical cannabis. 10 states and the District of Columbia have legalized adult-use recreational cannabis. And more states are looking at holding referendums to legalize weed.

Suffice it to say, the current and future market for medical and recreational cannabis use in the U.S. is massive. While new pot growers can pop up and make headway in the crowded industry, it’s a totally different matter when it comes to establishing a retail presence.

With a high barrier to entry, the cannabis companies best prepared to capitalize on the retail end of legalized medical and recreational marijuana are those that entered the market first.

While there are other players in the field, when it comes to major areas like Florida, New York, and California, it makes sense to keep a watchful eye on Trulieve Cannabis Corp, Liberty Health Sciences Inc, and Curaleaf Holdings Inc.

Check out the original article here.
Author: John Whitefoot, BA

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