As Covid-19 began to clobber the U.S. in February, sales of medical cannabis jumped at Trulieve Cannabis. The Florida-based chain sold 50% more smokable stuff in the month’s third week than in the same week of January. By March’s third week, new Covid cases in the state were soaring and Trulieve’s sales had jumped another 50%, to more than 21 thousand ounces in the week ended March 19. Medical-marijuana customers were loading up on a product they thought essential in a disaster.
“We are very accustomed to hurricanes here,” says Kim Rivers, chief executive officer of Trulieve (ticker: TRUL.Canada). “There was a rush of activity prior to any potential stay-in-place order.”
Cannabis operations in every state that allows them to operate are reporting a rush on dispensaries, which have been deemed “essential services” as states close other retail activities. Recreational sales are up, too. “Like alcohol, people cope with stress by using cannabis,” says Matt Hawkins, who runs $165 million in cannabis private-equity investments at Entourage Effect Capital.
The burst of pandemic panic complements a steady rise in U.S. cannabis sales that investors have largely overlooked amid the financial debacles of better-known Canadian names like Aurora Cannabis (ACB) and Canopy Growth (CGC). Aurora’s NYSE-listed stock sank 90% in the past year as the company blew billions of dollars on production for Canada’s nationally legal—but feeble—market. Meanwhile, cannabis's illegality under U.S. federal law has consigned U.S. operators like Trulieve to the obscure Canadian Securities Exchange. So, Trulieve and U.S. rivals like Curaleaf Holdings (CURA.Canada) and Green Thumb Industries (GTII.Canada) trade at discounts to their unprofitable Canadian counterparts, even though U.S. operators are producing positive cash flow on sales that dwarf Canada’s. This backwards valuation makes these decently well-funded U.S. outfits look like bargains.
Read more at barrons.com
